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The Overview Of Accounting Essay

1137 words - 5 pages

IntroductionAccounting provides information that is useful and relevant for interested parities when making decisions regarding the company and its operations. In order to do that effectively, a specific language and subsequent rules have been developed for users of the information. Accounting is a specialized language that describes the financial position of a company. Accounting, a required component of most companies is composed of three main categories; Operating information, financial accounting information, and managerial accounting information.Operating information describes what is needed on a daily basis to conduct business in an organization. It encompasses employee payroll, sales, ...view middle of the document...

The primary purpose of accounting is to help persons make economic decisions. Accounting information provides the basis for making decisions about resource allocation. To be useful, data must be identified, measured, recorded, classified, summarized and communicated to potential users.AudienceFinancial statements are necessary sources of information about companies for a wide variety of users. Those who use financial statement information include company management teams, investors, creditors, governmental oversight agencies and the Internal Revenue Service.The audience of financial statements will vary greatly because of the need and type of company that is involved. For instance a family business may not always need to issue formal financial statements. Without the need to report to others, a family business could probably use very simplistic methods of reporting and cash flow projections. If a family business's associates include outside shareholders and lenders, there may be a need to generate complex financial statements that consists of detailed disclosure remarks.NatureFinancial statements are used by managers, shareholders, banks, creditors, the government and the public to make decisions involving the organization and its operations. Shareholders make decisions based on information about their investment worth and whether they should buy or sell shares. Creditors and Bankers have to know whether an organization has the ability to pay back loans. Managers want to know how the company is doing compared to other companies. Financial statements make this information available to them.Ethical Business decisionsDecision making arises because of the need to choose between alternatives. Careful consideration must be given to all information available at the time because of the long-term consequences that can occur with decision making.. Business decisions and practices have become increasingly complicated through the years. There is diffusion in the responsibility of business decisions and society has become very sensitive to unethical practices in the business world. Negative publicity can hamper the growth of a business, damage relationships with customers and effect profitability of a company. Enron , considered one of the country's most innovative companies bought and sold gas and electricity futures and created whole new markets for broadcast time for advertisers, weather futures, and Internet bandwidth. At its peak, Enron was worth about $70 billion, its shares trading for about $90 each....

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