ACC 280 Week 1 DQ 1, DQ 2 and DQ 3

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ACC 280 Week 1 DQ 1, DQ 2 and DQ 3

What are the four basic financial statements? What do the different financial statements tell you about a company? Which financial statement is the most useful? Why? What types of information is provided to managers in your department and how do managers in your organization use information presented in financial statements?

Accountants and managers use four basic financial statements in their organization to aid them in the organization’s financial stability; the four basic statements are the: Income Statement, Retained Earnings Statement, Balance Sheet, and the Statement of Cash Flows. Each of the four financial statements tells a different story of an organization. The Income Statement records the net increase or loss in a company’s income, due to money being paid out (expenses), and money being earned (revenues). The Retained Earnings Statement records the change in a particular time period of the retained earnings. The Balance Sheet records the financial transactions of an organization in a specified time period; equity, liabilities, and assets are in involved in this statement. This statement balances assets with liabilities and equity. The Statement of Cash Flows does exactly what it says; the statement records cash receipts coming in, and payments sent out.

Although all four financial statements are viable for an organization, I feel that the Statement of Cash Flows is the most important; I feel this because all organizations need to record their cash flows no matter if they are going out or coming in. I own a small business and find all four statements very important, I use the information from the balance sheets to help me set new budgets for the following year, and the Statement of cash flows to help me determine where the majority of expenses (costs) and revenues come from.

What do you think of when you hear the word debit? What do you think of when you hear the word credit? Why does your bank statement show a credit for an increase in your cash balance? Is an increase to your bank statement a debit or a credit? What method would you use to summarize transactions and transfer to the ledger?

The word debit to mean would mean an immediate transaction, or change in financial status, up or down. The word credit to me means an immediate documentation of the transaction; however a future pending closure date of documented transaction. I think of this in my own personal life through this definition more in terms of my own personal debit and credit card transactions. Of course to me, debit transactions tend to be more financially secure as this comes from available funds, while credit transactions can tend to be higher risk as there may exist the potential to spend above ones available funds. The text defines this disposition as liabilities.
Our text discusses the double-entry system, which outlines the need for accounts to balance between debits & credits. Though when these things conflict Weygandt (2008) states, “The normal balance of an account is on the side where an increase in the account is recorded. Thus, asset accounts normally show debit balances, and liability accounts normally show credit balances. The Cash account, for example, will have a credit balance when a company has overdrawn its bank balance.” (Weygandt 2008, p.50). Although this may be the case for an increase to a cash account, however according to our text in most cases a debit would typically signify an increase to your bank statement.
According to Weygandt (2008) the proper method for summarizing transactions & transferring the ledger would be posting, as he states, “Transferring journal entries to the ledger accounts is called posting. This phase of the recording process accumulates the effects of journalized transactions into the individual accounts.” (Waygandt 2008, p.59).

Reference:

Weygandt, J. J. (2008). Financial accounting (6th ed.). Hoboken, NJ: John Wiley & Sons.

Who are the different users of accounting information? What are the differences between managerial and financial accounting? What is the role of the CPA and how does it differ from other accountants? What is the value of the accounting function in your organization, both internally and externally?

There are two classifications for users of accounting information; internal users and external users. According to Weygandt (2008), “Internal users of accounting information are those individuals inside a company who plan, organize, and run the business. These include marketing managers, production supervisors, finance directors, and company officers.” He then states, “External users are individuals and organizations outside a company who want financial information about the company. There are several types of external users. The two most common types of external users are investors and creditors.” (Weygandt 2008, p.5). Managerial accounting provides internal reports to help users make decisions about their companies. Financial accounting provides economic & financial information for investors, creditors and other external users.
A certified public accountant (CPA), “examines company financial statements and provides an opinion as to how accurately the financial statements present the company’s results and financial position. Analysts, investors, and creditors rely heavily on these “audit opinions,” which CPAs have the exclusive authority to issue.” also, “Many CPAs are entrepreneurs. They form small- or medium-sized practices that frequently specialize in tax or consulting services.” (Weygandt 2008, p.29).  

Reference:
Weygandt, J. J. (2008). Financial accounting (6th ed.). Hoboken, NJ: John Wiley & Sons.