Accounting Concepts

Abstract

The purpose of this project is to define the primary objectives of accounting, discuss common terms used in accounting and how accounting can affect ones personal life financially and ethically. Accounting is used in all forms of businesses and also in personal banking whether it is realized or not.

Accounting Concepts

What is accounting? Accounting is a number of steps taken to record financial transactions for future reference to be processed to aid in business decision matters and project the financial status of the company for inside and outside users alike. All businesses utilize accounting to aid in their ability to steer the direction of the company in more profitable directions, having the ability to look and see what products or services were selling and what isn't is a large advantage so that the store managers do not continue to purchase stock that isn't selling from there wholesalers. Whether you realize it or not, the simple action of checking the price on a product you wish to purchase or balancing your personal banking accounts are all to some degree accounting actions. (Editorial Board, 2012).

The main objective of accounting is to record and project financial data in accordance with Generally Accepted Accounting Principles that sets the standards in which accounting must be done in an official capacity. Accounting must also be represented in a fashion that is easy to read and spot mistakes. There are two main users for this financial accounting information, insiders and outsiders. Insiders consist of individuals who run a company. These can be managers, or employees. Managers can utilize this information to make good product purchasing decisions, human resources can use it for the pay roll. Outside users are anyone who has interest in the company, whether financially or wishing to study a business' particular financing models. These people can be investors, creditors, or even people just interested in what the business' presence will mean for the community in which they live. (Editorial Board, 2012).

There are two types of accounting, financial and managerial accounting. Financial accounting is used by a business to project the company's financial information to interested outsider groups. This shows whether or not the company is doing well enough for creditors to be interested in lending financial resources or investors to invest. It is required by law that businesses utilize financial accounting to provide financial information to the public. Managerial accounting is information focused on how the business profits and its financial activity on a daily basis that managers can use to make informed decisions about what products are needed to restock and prices of stocked goods that need to be adjusted. These can come in the forms of daily sales reports, as an example of managerial accounting. (Editorial Board, 2012).

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