Foundational Accounting Principles and Terminology Essay Example for Free

Foundational Accounting Principles and Terminology EssayWe on the whole know how valuable the report aspect of any condescension/organization is. It is basic wholey the most important way to manage finances. Without proper score for all expenses and finances, a company and/or organization forget definitely have a hard time organism mo terminalaryly stable. In this paper we pull up stakes discuss some foundational accounting principles and terminology that ar basic but quite essential to the accounting practice. Now lets discuss some accounting terms beginning with Generally accredited Accounting Principles.Generally Accepted Accounting Principles (GAAP) is a codification of how CPA firms and corporations prepargon and present their business in pay off and expense, assets and liabilities on their financial statements. GAAP is not a single accounting rule, but rather the nub of many rules on how to account for various transactions. GAAP are more like accounting standard s (Wikipedia, 2009). abutting we have Contra-Asset Accounts, which is defined as an account which offsets another account. A contra-asset account has a credit equilibrium and offsets the debit ratio of the corresponding asset.A contra-liability account has a debit balance and offsets the credit balance of the corresponding liability (InvestorWords, 2009). Let us move on to Historical Cost, which is a measure of prise used in accounting in which the price of an asset on the balance poll is establish on its nominal or original cost when acquired by the company. The historical-cost method is used for assets in the U. S. below mainly accepted accounting principles (Investopedia, 2009). Okay, now there is the Accrual Basis vs. property Bonus Accounting. This is the fight between the two.In Accrual basis accounting, income is reported in the fiscal period it is earned, regardless of when it is received, and expenses are deducted in the fiscal period they are incurred, whether the y are paid or not. Basically, you record both revenues and expenses when they occur. In bills basis accounting, revenues are recorded when cash is actually received and expenses are recorded when they are actually paid (Ward, 2009). Last but not least, there is the Accounting Standards Codification.Accounting Standards Codification (ASC) is a major restructuring of accounting and reporting standards designed to simplify user access to all authoritative U. S. generally accepted accounting principles (GAAP) by providing the authoritative literature in a topically organized structure. ASC disassembled and reassembled thousands of nong overnmental accounting pronouncements (including those of FASB, the Emerging Issues Task Force EITF, and the AICPA) to organize them under approximately 90 topics. The ASC are those that oversee that all accounting and reporting standards are adhered to (Wikipedia, 2009).It is now time to move on to discuss and describe terzetto sets of financial statem ents that are part of financial statements of companies /organizations. The three sets of financial statements we will be describing are The equilibrise Sheet, The Income Statement and The Statement of Cash Flows. The balance sheet also known as the Statement of financial position reveals a companys assets, liabilities and equity (net worth). The balance sheet is divided into two part that must equal each other, or balance each other out. The formula of the balance sheet is Assets= Liabilities + Shareholders Equity.What this formula means is that assets, or the means used to operate the company, are equilibrise by a companys obligations along with equity investment brought into the company and its retained lucre (Investopedia, 2009). Next we have the income statement, which measures a companys financial performance over a detail accounting period. The financial performance is assessed by giving a summary of how the business incurs its revenues and expenses. It also shows the ne t profit or loss incurred over a specific accounting period, which is typically over fiscal quarter or year (Investopedia, 2009). Moving on to the last one, which is the cash attend statement. The cash flow statement allows investors to understand how a companys operations are running, where its money is coming from, and how it is being spent. The cash flow statement is also a mandatory part of a companys financial report, and has been so since 1987 (Investopedia, 2009). Now I will describe which is more useful, Net Income or Cash from Operating Activities? I believe that Cash from Operating Activities is more useful to companies because they can generate cash in several different ways.Three different ways to be exact, they are cash flows from direct activities, from investing activities, and financing activities. Cash from Operating Activities, in my opinion is the most useful because it paints the best generate of how well a companys business operations are producing cash. Afte r looking over the annual financial reports for Samsung, RTL Group and Lockheed Martin, I make the prediction that each company will draw out to improve its net income as well as see a significant spike in their cash flow.As far as relevant information in regards to conglomerates, such as the IDOLS fraction of the Fremantle Media North America, I was not totally sure how to get this information but I lastly continued to read the investor portion on the RTL Group website where I found out more information. each(prenominal) in all, I learned some new definitions when it comes to accounting and decision making. I thought this grant was intense due to a lot of reading and research, but I believe I got by dint of it well. I look forward to learning more about how accounting and decision making come together.Referenceshttp//www.investopedia.com/articles/04/033104.asphttp//www.investopedia.com/articles/04/031004.asphttp//www.investopedia.com/terms/i/incomestatement.asphttp//www.invest orwords.com/5476/contra_account.htmlhttp//en.wikipedia.org/wiki/Generally_Accepted_Accounting_Principles