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Accounting, also known as accountancy, is the process of recording and processing information about economic entities, such as businesses and corporations. [1] [2] Accounting measures the results of an organization's economic activities and conveys this information to a variety of stakeholders, including investors, creditors, management, and regulators. [3]
The philosophy of accounting is the conceptual framework for the professional preparation and auditing of financial statements and accounts.The issues which arise include the difficulty of establishing a true and fair value of an enterprise and its assets; the moral basis of disclosure and discretion; the standards and laws required to satisfy the political needs of investors, employees and ...
The purpose of the MD&A is to provide a narrative explanation, through the eyes of management, of how an entity has performed in the past, its financial condition, and its future prospects. In so doing, the MD&A attempt to provide investors with complete, fair, and balanced information to help them decide whether to invest or continue to invest ...
The accounting equation is a statement of equality between the debits and the credits. The rules of debit and credit depend on the nature of an account. For the purpose of the accounting equation approach, all the accounts are classified into the following five types: assets, capital, liabilities, revenues/incomes, or expenses/losses.
Financial accounting serves the following purposes: producing general purpose financial statements; producing information used by the management of a business entity for decision making, planning and performance evaluation; producing financial statements for meeting regulatory requirements.
The objective of an audit of financial statements is to enable the auditor to express an opinion on whether the financial statements are prepared, in all material respects, in conformity with an identified financial reporting framework, such as the Generally Accepted Accounting Principles (GAAP) which is the accounting standard adopted by the U ...
Given the above, one view of the progression of the accounting and finance career path is that financial accounting is a stepping stone to management accounting. [16] Consistent with the notion of value creation, management accountants help drive the success of the business while strict financial accounting is more of a compliance and ...
Accountants may argue that financial accounting principles represent true values and are more than sufficient for management accounting purposes. Maximizing financial statement results is a primary objective; however, focusing only on accounting numbers or common financial ratios can lead to bad behavior versus focusing on operations and ...