Accounting can be illustrated by the systematic and comprehensive recording of financial transactions involving a business. In other words, it also refers to the process of summarizing, analyzing and reporting the commercial transactions. If you are asked to write an assignment on the subject of accounting, you need to have an understanding of the fundamentals of finance. If you have missed class lectures or having problems in understanding the theories of accounting, you should immediately take accounting assignment help from our experts.
Accounting Basics: The branches of accounting
The divisions of accounting are closely interrelated with each other. In this article, you will gain knowledge about the basics of accounting in precise manner. But if you want to expand your knowledge by getting detailed understanding of the accounting principles, you need to contact our accounting subject experts. Our skilled experts will assist you to solve your problems by providing accounting assignment help.
1. Financial Accounting
It is the practice of reporting a company’s financial position and the results of operations of exte
al parties through financial statements. With the help of standardized guidelines, the transactions are recorded, summarized and presented in the form of financial statements or financial reports. The statements are prepared on routine intervals. These statements are considered as exte
al information because they are given to people outside the company. Financial statements include:
- The balance sheet (the statement of financial position)
- Income statement (the profit and the loss statement) and
- Declarations of cash flows
These are for exte
al users like investors, lenders, suppliers, tax authorities and other stakeholders.
Financial accounting follows common rules known as Accounting Standards and as Generally Accepted Accounting Principles (GAAP). In the U.S. the Financial Accounting Standard Board (FASB) is the institution that framed the accounting standards and principles. To master financial accounting, years of study and practical experience are required.
2. Management Accounting
It is the process of managing reports and accounts that provide accurate and timely financial and statistical information. The information is used by managers in order to make day-to-day and short-term decisions. The process involves,
- Planning: Deciding what products to make and where and when to make them.
- Performance Evaluation: Keeping track of individual products and product lines.
- Operational Control: Knowing the status of the factory floor and the stages of the competition.
Unlike financial accounting that produces annual financial reports for exte
al stakeholders, management accounting discusses about the inte
al users like department managers and chief executive personnel. These reports typically demonstrate:
- The amount of available cash
- Sales revenue generated
- Amount of order in hand
- Statements of accounts payable and receivable
- Outstanding debts
- Raw material
The reports are used for,
- Designing and evaluating the business process
- Budgeting and forecasting
- Implementing and monitoring inte
al controls, etc.
The primary objective of management accounting is to allocate the cost. This is why management accounting was previously known as cost accounting.
It is the process of examining and verifying the company’s accounts and the firm’s system of inte
al control. Auditors are extensively trained to identify the needed areas that require improvement or demonstrate potential danger and incidents of unethical conduct in their field of expertise.
Importance of auditing: Auditing is dedicated to identifying and addressing the potential weakness of the company. The weakness can outweigh temporary loss of productivity. With the help of audits, human resource policies, operational procedures and quality or safety policies and accounting audits are reviewed.
There can two types of auditors in auditing:
al auditors inspect the accounts of an entity and render an opinion independently on whether its statements justify the financial position of the company and the results of the operations.
al auditors focus on the user of financial statements outside the organization. The prior responsibility of the inte
al auditors is to manage the team.
4. Tax Accounting
It is referred as the accounting method that discusses taxes rather than the appearance of public financial statements. It is an area of accounting that controls the preparation of tax retu
s on both the state level and federal level for individual companies.
- Tax Accountant: Tax accountants are certified public accountants who have chosen the field of tax accounting as their sub-specialty. Tax accountants must understand the regulations contained in the Inte
al Revenue Code (the rules and regulations that companies and individual must follow while preparing the tax retu
s). Tax accountants must have a clear idea about the changes in IRS (Inte
al Revenue Service) regulations, which usually occur on a yearly basis. The responsibility of tax accountants is to minimize the tax payments.
- The difference between financial accounting and tax accounting: Compared to financial accounting, tax accounting is based on laws enacted through a highly political legislative process. Tax accounting maintains Generally Accepted Accounting Principles (GAAP), but in few ways it differs from accounting standard accounting regulations. For example, let’s say a company prepares its financial statements implementing the first-in-first-out (FIFO) methods to record the inventories for commercial purposes. They can produce tax reports by using the last-in-first-out (LIFO) approach too. This can help them reduce the current year’s taxes payable.
5. Fund Accounting
It is a system mostly used by non-profit entities including gove
ments and not-for-profit corporations. For these and other similar entities, it is vitally important to keep records of how their money is spent, rather than how it is ea
ed. Fund accounting is a standard practice to distinguish between general funds and special purpose funds. The general funds are used for day-to-day operations (such as paying employees or buying supplies) whereas special funds are dedicated to operating specific activities (such as building a new wing of the hospital).
Role of the fund accountant:
Fund accountants are primarily responsible for all aspects of day-to-day accounting for a group of assigned funds including,
- Calculating/reporting the daily NAV (Net Asset Value) per unit
- Compiling standard weekly and /or monthly financial statements
- Income and expenses accruals
Fund accountant is not typically appointed by firms that just sell funds as their role.
6. Forensic Accounting
It is depicted as an accounting analysis that is suitable to the court which will form the basis for discussion, debate and ultimately dispute resolution. It is used in legal matters, including litigation support, investigation and dispute resolution. Different kinds of forensic accounting enlargements are: bankruptcy, falsification and manipulations of accounts or inventories, matrimonial divorce and so forth.
What forensic accountants do?
The prior responsibility of the forensic accountant is to look beyond the numbers and deal with the business reality of the situation. What forensic accountants do is combine their accounting knowledge with investigation skills in various litigation support and investigative accounting settings. Forensic accountants are employed by public accounting firms, forensic accounting divisions, by consulting firms specializing in risk consulting and forensic accounting services.
Accounting and Bookkeeping: Differences
Accounting is a complete subject and bookkeeping is an essential part of accounting. Bookkeeping is the process of recording of all the economic activity of the organization like sales made, bills paid, capital received etc. In medium and big organizations, these transactions are recorded electronically. But earlier these were manually done in actual books. This is why it called bookkeeping.
The accountants design the accounting system that bookkeepers utilize in their work. They establish the inte
al controls to protect resources and apply the principles of standard setting organization to the accounting records and prepare the financial statements.
What is double-entry bookkeeping?
It can be defined as the economic events of the business. Those events are recorded as transaction and applied to accounts. For example, the cash account tracks the amount of cash on hand; the sales account records sales made. Generally the large companies have thousand of accounts charts, whereas the small companies also have hundreds of them.
Now-a-days, the records of the transaction have typically become the part of the accounting software. In each transaction, there should be the date, the amount and a description.
How to keep good accounting records?
As we mentioned earlier, the jou
als should consist of the date, the amount and a description. Go through the following samples and answer the questions:
Let’s say you have taken decisions to buy lamp over a telephonic conversation on April 5, but the paperwork was not done until April 19. The lamp was delivered on April 25, not on the delivery date April 9. But, now you are having second thoughts about the lamp. So you have decided to retu
the item on the 30th. So on which date the transactions took place: 15th, 19th, 23rd or 30th?
The purchasing cost of the item is $250, and you get a 10% discount on the total amount if you pay within 30 days. Even though you agreed to $250 payment, you can probably reduce another $50 if you threaten to retu
it. On the other hand, being in the stationary business, you know one of your customers has been looking for this antique for a long time, so you can easily charge $300 for one. So what should be a record on the transaction day: $250 or $225 or $200 or $300?
You have bought the item for your office fu
iture account. However, you buy and sell antiques frequently to your customers, so you are always to ready to sell the lamp if you get a good offer. So instead of an office fu
iture account used for fixed assets, should the lamp be recorded in the purchase account you use for inventory? If you are in a big company, there might be dozens of office fu
iture sub-accounts to choose from.
It is important to answer the basics questions of accounting like when did the economic event take place? What is the value of the transaction? Which account is affected by the transaction? But you can see things are very complicated to answer. There are no excuses for out-and-out misinterpretation of company results or sloppy auditing. So if you require expert help, our accounting experts can give you best possible accounting assignment help.
The concept of debit and credits
In accounting discipline, debit means one thing that should be mentioned on left-hand side. On the contrary, credit means one thing that should be mentioned on the right-hand side. When you receive cash, you are supposed to increase the cash account by debiting it. When you make payments, you decrease the cash account by crediting it.
The process involved in accounting
With time, accounting systems have evolved from traditional to mode
accounting cycle. Here we are going to describe the steps of accounting cycle. If you need further help, you can opt for accounting assignment help any time.
- Step 1: Identify the transaction from source document like purchase orders, loan agreements, invoices, etc.
- Step 2: Record the transaction as a jou
- Step 3: Post the entry in the individual accounts in ledgers. Traditionally, Ts represent the accounts with debits on the left and credits on the right.
- Step 4: After reporting, prepare preliminary trial balance of all the accounts by netting all the debits and credits in each account to calculate their balances. Make a total of the left and right side balances and make sure the two columns should be equal.
- Step 5: Adjust the entries that are not generated through particular source of documents. For example, depreciation expenses are recorded for items like equipment to account for the use of the asset and the loss of its value over time.
- Step 6: Prepare an adjusted trial balance of the accounts. The left-hand side (debits) and right-hand side (credits) must be equal in terms of the value.
- Step 7: Calculate the total of the sum of the various accounts and present them in financial statements. The statement is created for both inte
al and exte
- Step 8: Wind up the books of the current month by recording the necessary reversing entries to start fresh in a new period.
Now, you have an overall idea about what accounting is, what the fundamentals of accounting are and how accounting process works. This above information can definitely help you to write an assignment on accounting subject. But writing assignment demands more in-depth knowledge that you can acquire from our experts. Our professionals are capable of providing you best possible accounting assignment help.
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