Introduction, Review of Accounting Process and Financial Statements

Module 1 - Case

Introduction, Review of Accounting Process and Financial Statements

To introduce the review of accounting processes and the financial statements those companies may be using we will discuss what some of the terms used and some of the things they do for the company and those that are involved with the company.

The first term we are going to discuss are the Generally Accepted Accounting Principles. This term is used to describe how companies in the United States use specific rules to create a common set of accounting principles, standards and procedures. The GAAP sets up policy boards that help to create these basic rules for companies to record and report their companies accounting information. In this way it is easier for everyone to understand and use the same types of formats.

The Double Entry Accounting system is a method used in accounting systems to record income and expenses. It also shows companies assets and liabilities. Another name for it is Double Entry Bookkeeping.

Historical Cost is how a measure of value in the accounting process. This is done by using a company’s balance sheet as a base and using the original cost of an asset, things purchased by the company to record the value.

The historical cost usually applies to things like land, buildings and other physical assets that are purchased (Unknown, 2010).

The Accrual Basis vs. Cash Basis Accounting is the difference between when money or revenue is received and when the expenses are actually recognized. The Accrual Basis measures economic events. It does not depend on when a cash transaction happens but depends on when revenues are matched to expenses at the time that they occur. The Cash Basis method leans more to the actual receipt of cash when it is actually received or paid out. The Accrual Basis is used more by larger corporations and is considered to be the standard accounting method. Smaller companies usually use the Cash...