Principles of Accounting

Running head: Principles of Accounting

Principles of Accounting

Table of Contents

Abstract Page.......……………………………………………………………………………......3

Introduction of Accounting……………………………………..……………………………….4

Financial Reports……………………………………………………………………….……..4-6

GAAP & FASB………………………………………………………………………….…….6-7

Internal Control………………………………………………………………………………..7-8

SOX Act of 2002…………………………………………………………………………….…..8

Accounting Cycle……………………………………………………………………………...8-9

Conclusion…………………………………………………………………………………..….10

Abstract

Notable accounting scandals turned the world upside down and out raged the public. A few of the accounting scandals that occurred between 2001 and 2010 in the United States were Enron, Duke Energy, Freddie Mac, Kmart, WorldCom, Ben Madoff, and Lehman Brothers. These large corporations had a range of misleading accounting practices that included falsifying financial statements, failure to disclose, overstated cash flows, and understated earnings. The purpose of this paper is to explain basic principles of accounting and how it can be applied to your business.

Keywords: accounting, financial statements, GAAP, FASB, internal control, accounting cycle, and SOX Act of 2002

Principles of Accounting

Accounting is often referred to the language of business and is the method of recording, summarizing and analyzing the health of a business. The key to success is effectively communicating this information. Managers, employees, banks, investors, financial analysts, labor unions and governmental agencies rely on accurate information when making business decisions. Some financial questions that are often answered by accountants are:

* Is the company making a profit?

* What is the company’s debt analysis?

* Is there enough cash to pay debts?

* Should the company invest in expanding?

* How does net income compare to the budget?

The company’s financial reports must be flawless and concise...