Paper

The Role of Accounting on Business and

Our Society

James Allen

Accounting 100

Professor Mary Cedano

March 3, 2014

Accounting is a very important term to our modern society. Accounting is a basic need of every businessman, no matter the size of the company since a business must record the way that it has grown and to suggest the ways that it should behave in the future. No business organization can operate without some type of accounting. In small business, some people may use pen and ink to keep the records. In large business, modern accounting tools and software are used for accounting.

People who specialize in helping businesses with their accounting are known as CPAs and accountants. The functions of each appear very similar. The major difference is the education and certification. The one major difference is that only a CPA can give his opinions publically on financial statements in most states.

There are generally four types of financial statements that accountants and CPAs help businesses create to show what is happening in the business. These are the income statement, the retained earnings statement, the balance sheet, and the statement of cash flow.

The income statement is sometimes also referred to as a statement of operations, an earnings statement, or a profit loss statement and it is one of the three major financial statements of a business. The income statement gives a snap shot of a company’s financial position for a specified period of time such as for a fiscal quarter or a year (Investopedia). The income statement is divided into two sections operating and non-operating sections. This statement will show revenue and expenses tied to both the profit and loss of a business.

Secondly there is the retained earning’s statement of a business. This statement can appear either as a separate statement or as an inclusion on a balance sheet or an income statement. The statement of retained earnings may also be known as a statement of...