Accounting Basics

Accounting Basic - What is the Accounting Cycle?

2009-09-22T20:12:00.000-07:00

The accounting cycle is the series of steps that take place in order for financial statements to be accurately and uniformly produced at the end of an accounting period which is typically the length of one month, quarter of a year, or a whole year. Below is a list of the steps you would take to complete the accounting cycle, listed in the order that you would perform them, and with a brief summary of each step.

1. Identify the transaction. This transaction could be the revenue from the sale of a product or a payment to another business for services.

2. Analyze the transaction and how it related to the accounting balance sheet. For example, determine which accounts are affected by the transaction and how they are affected.

3. Record the transaction to a journal such as a sales journal. Journals are kept in chronological order and may be updated continuously, daily, or however often it is necessary.

4. Record the transaction to the general ledger. Take all of your entries and categorize them by the account.

5. Perform a trial balance. Debits and credits need to be equal at the end of an accounting cycle, so calculate the entries to ensure they match.

6. Prepare adjustments. Just because entries are recognized, does not mean the work has been performed. Revenue can only be recognized when the work has been completed, so adjust the entries accordingly.

7. Perform trial balance with adjustments. Take the adjustments from Step 6 and prepare a trial balance. If the debits and credits do not match, then you need to adjust them to make sure they do match.

8. Prepare financial statements. From the adjusted trial balance, these corrected balances are used to prepare the financial statements.

9. Close the accounts in preparation of the next accounting cycle. Revenues and expenses need to be closed out, which means they need to have zero balances. Balances are moved to the next cycle.

While the actual terminology, timeline, and other factors of the accounting cycle vary, the above steps represent the general steps included universally in the accounting cycle. In realistic scenarios, a streamlined process, aided by computer programs and other devices, allows an accountant to combine some of these steps and complete the process in less time and with less effort. For example, often, a computer program allows steps one and two to be combined and allows the steps to accurately appear on the journal or general ledger almost instantaneously. Also, calculations performed by a computer or calculator work to eliminate human errors.

Gold Coins

2009-09-22T20:09:00.000-07:00

American gold coins are America's only officially recognized gold bullion coins of investment grade gold guaranteed by the United States government. The real measure of any investment is it's ability to be converted into cash and the American gold eagle coins are able to be sold world wide at many dealers. In time of financial instability gold coins is seen as a safe haven, with many investment in stocks and shares you can lose everything, but gold always retains a value.

The perfect option for purchasing these gold coins is through online shopping through various online suppliers. You can choose from large number of coins variety which is present in the market like Chinese Pandas, American Eagles, South African Krugerrands, Sovereign (Australian and UK) and Canadian Maple Leafs and many more. But the gold coin prices of these above mentioned is totally dependent on the quality and quantity of them.

Homestake's main operation was in the heartland of the United States, mining gold from the hills of South Dakota. Most gold sector historians agree that Homestake serves as a fair representation for the entire gold mining industry at the time. One must note that the U.S. government passed the Gold Standard Act in 1900 which placed the entire country on the gold standard, creating a fixed exchange rate with all other countries whose currencies were fixed to the gold price.

Gold Coins

2009-06-17T10:16:00.000-07:00

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Using the most primitive of tools and working to an average depth of less than six feet, these first ?miners? pried an estimated one thousand tons of gold from this rich discovery. There are many Gold Bullion Coins such as Gold American Eagle, Gold Canadian Maple Leaf, Gold South African Krugerrand, American Buffalo, Australian Gold Nugget, Austrian Gold Philharmonic, Chinese Gold Panda. For example Gold South African Krugerrand is the world’s first gold bullion coin minted for investment, the Krugerrand is believed to be the most widely owned bullion coin in the world. So what are you waiting more. Find here now

Back Taxes

2009-06-17T10:13:00.000-07:00

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For this reason there are a large number of individuals who are making the decision to file their own federal and state tax returns. While it is possible to file tax returns the traditional way with paper tax forms there are now many taxpayers who are relying on tax preparation software to quickly and accurately prepare and file their back taxes. They do all the paperwork involved that the government requires of a Roth IRA account. You can benefit from the full advantage of a Roth IRA when you invest in real estate with this company without any of the headaches of managing the property. They do it for you. So what are you waiting more. Find here now.

Finance

2009-06-17T10:10:00.000-07:00

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Online Payment

2009-02-16T02:11:00.000-08:00

Credit cards are the most popular way to pay for products and services on the Internet. The majority of online customers will pay by credit card, debit card, electronic check, or PayPal. Very few people will mail in a check. Did you have a problem regarding payment to customers? Right now, all the payment processing you can do just the internet. It's easier and faster to use a third party payment provider. You don't have to qualify for a merchant account which typically involves having good credit. And you don't have to pay monthly fees for a merchant account or

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Who uses forensic accountants?

2008-12-30T20:36:00.000-08:00

Forensic accounting financial investigative specialists work with financial information for the purpose of conveying complicated issues in a manner that others can easily understand. While some forensic accountants and forensic accounting specialists are engaged in the public practice of forensic examination, others work in private industry for such entities as banks and insurance companies or governmental entities such as sheriff and police departments, the Federal Bureau of Investigation (FBI), and the Internal Revenue Service (IRS).

The occupational fraud committed by employees usually involves the theft of assets. Embezzlement has been the most often committed fraud for the last 30 years. Employees may be involved in kickback schemes, identity theft, or conversion of corporate assets for personal use. The forensic accountant couples observation of the suspected employees with physical examination of assets, invigilation, inspection of documents, and interviews of those involved. Experience on these types of engagements enables the forensic accountant to offer suggestions as to internal controls that owners could implement to reduce the likelihood of fraud.

At times, the forensic accountant may be hired by attorneys to investigate the financial trail of persons suspected of engaging in criminal activity. Information provided by the forensic accountant may be the most effective way of obtaining convictions. The forensic accountant may also be engaged by bankruptcy court when submitted financial information is suspect or if employees (including managers) are suspected of taking assets.

Opportunities for qualified forensic accounting professionals abound in private companies. CEOs must now certify that their financial statements are faithful representations of the financial position and results of operations of their companies and rely more heavily on internal controls to detect any misstatement that would otherwise be contained in these financials.
In addition to these activities, forensic accountants may be asked to determine the amount of the loss sustained by victims, testify in court as an expert witness and assist in the preparation of visual aids and written summaries for use in court.

What is price/earnings ratio

2008-06-08T02:38:00.000-07:00

The price/earning (P/E) ratio is another measurement that's of particular interest to investors in public businesses. The P/E ratio gives you an idea of how much you're paying in the current price for stock shares for each dollar of earning. Earnings prop up the market value of stock shares, not the book value of the stock shares that's reported in the balance sheet.

The P/E ratio is a reality check on just how high the current market price is in relation to the underlying profit that the business is earning. Extraordinarily high P/E ratios are justified only when investors think that the company's earnings per share (EPS) has a lot of upside potential in the future.

The P/E ratio is calculated dividing the current market price of the stock by the most recent trailing 12 months diluted EPS. Stock share prices bounce around day to day and are subject to big changes on short notice. The current P/E ratio should be compared with the average stock market P/E to gauge whether the business selling above or below the market average.

P/E ratios are currently running high, despite a four-year slump in the stock market. P/E ratios vary from industry to industry and from year to year. One dollar of EPS may command only a $10 market value for a mature business in a no-growth industry, while a dollar of EPS in a dynamic business in a growth industry may have a $30 market value per dollar of earnings, or net income.

To sum up, the price/earnings ratio, or P/E ratio is the current market price of a capital stock divided by its trailing 12 months' diluted earnings per share (EPS) or its basic earnings per share if the business does not report diluted EPS. A low P/E may signal an underbalued stock or a pessimistic forecast by investors. A high P/E may reveal an overvalued stock or might be based on an optimistic forecast by investors.

What does an audit report contain?

2008-06-08T02:21:00.000-07:00

Most audit reports on financial statements give the business a clean bill of health, or a clean opinion. At the other end of the spectrum, the auditor may state that the financial statements are misleading and should not be relied upon. This negative audit report is called an adverse opinion. That's the big stick that auditors carry. They have the power to give a company's financial statements an adverse opinion and no business wants that.

The threat of an adverse opinion almost always motivates a business to give way to the auditor and change its accounting or disclosure in order to avoid getting the kiss of death of an adverse opinion. An adverse audit opinion says that the financial statements of the business are misleading. The SEC does not tolerate adverse opinions by auditors of public businesses; it would suspend trading in a company's stock share if the company received an adverse opinion from its CPA auditor.

One modification to an auditor's report is very serious - when the CPA firm says that it has substantial doubts about the capability of the business to continue as a going concern. A going concern is a business that has sufficient financial wherewithal and momentum to continue it normal operations into the foreseeable future and would be able to absorb a bad turn of events without having to default on its liabilities.

A going concern does not face an imminent financial crisis or any pressing financial emergency. A business could be under some financial distress but overall still be judged a going concern. Unless there is evidence to the contrary, the CPA auditor assumes that the business is a going concern. If an auditor has serious concerns about whether the business is a going concern, these doubts are spelled out in the auditor's report.

Basic Accounting Principles

2008-03-14T13:03:00.000-07:00

Accounting has been defined as, by Professor of Accounting at the University of Michigan William A Paton as having one basic function: "facilitating the administration of economic activity. This function has two closely related phases: 1) measuring and arraying economic data; and 2) communicating the results of this process to interested parties."

As an example, a company's accountants periodically measure the profit and loss for a month, a quarter or a fiscal year and publish these results in a statement of profit and loss that's called an income statement. These statements include elements such as accounts receivable (what's owed to the company) and accounts payable (what the company owes). It can also get pretty complicated with subjects like retained earnings and accelerated depreciation. This at the higher levels of accounting and in the organization.

Much of accounting basics though, is also concerned with basic bookkeeping. This is the process that records every transaction; every bill paid, every dime owed, every dollar and cent spent and accumulated.

But the owners of the company, which can be individual owners or millions of shareholders are most concerned with the summaries of these transactions, contained in the financial statement. The financial statement summarizes a company's assets. A value of an asset is what it cost when it was first acquired. The financial statement also records what the sources of the assets were. Some assets are in the form of loans that have to be paid back. Profits are also an asset of the business.

In what's called double-entry bookkeeping, the liabilities are also summarized. Obviously, a company wants to show a higher amount of assets to offset the liabilities and show a profit. The management of these two elements is the essence of accounting.

There is a system for doing this; not every company or individual can devise their own systems for accounting; the result would be chaos!

What Is Accounting Anyway? (accounting basics)

2008-03-14T11:45:00.000-07:00

Anyone who's worked in an office at some point or another has had to go to accounting basics. They're the people who pay and send out the bills that keep the business running. They do a lot more than that, though. Sometimes referred to as "bean counters" they also keep their eye on profits, costs and losses. Unless you're running your own business and acting as your own accountant, you'd have no way of knowing just how profitable - or not - your business is without some form of accounting basics.

No matter what business you're in, even if all you do is balance a checkbook, that's still accounting basics. It's part of even a kid's life. Saving an allowance, spending it all at once - these are accounting principles.

What are some other businesses where accounting basics is critical? Well, farmers need to follow careful accounting procedures. Many of them run their farms year to year by taking loans to plant the crops. If it's a good year, a profitable one, then they can pay off their loan; if not, they might have to carry the loan over, and accrue more interest charges.

Every business and every individual needs to have some kind of accounting system in their lives. Otherwise, the finances can get away from them, they don't know what they've spent, or whether they can expect a profit or a loss from their business. Staying on top of accounting basics, whether it's for a multi-billion dollar business or for a personal checking account is a necessary activity on a daily basis if you're smart. Not doing so can mean anything from a bounced check or posting a loss to a company's shareholders. Both scenarios can be equally devastating.

Accounting is basically information, and this information is published periodically in business as a profit and loss statement, or an income statement.