Assignment in Financial Accounting

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Joey Chan (BA IBA)

252RFRFNO03

Assignment in Financial Accounting

Companies operate to achieve varies goals. They may be interested in providing a healthy work environment for their employees, in reaching a high level of control, or making contributions to civic and social organization and activities. However, to meet these goals, a company must first achieve its two primary objectives: earning a satisfactory profit and remaining solvent. If a company failed to meet either of these objectives, it will not be able to achieve its various goals and will not be able to survive in the long run. In order to show others how well one company has performed, financial statement is necessary, it is because “ Financial statements are accounting reported used to summarize and communicate financial information about a company. A company’s integrated accounting system produces three major financial statements: the income statement, the balance sheet, and the cash flow statement. Each of these statements summarizes specific information that has been identified, measured, recorded, and retained during the accounting process.”

Basically, The financial statements and what they report are as follows. The income statement (sometimes referred to as the “ P&L” or profit and loss statement) reports revenue and expense events that occurred during the reporting period.  A revenue minus expenses equals net income (also referred to as profit or earnings).  The balance sheet reports the business’s assets, its liabilities, and the owners’ equity in the business as of the last day of the reporting period.  The statement of cash flows reports cash inflows and cash outflows from financing events, investing events, and operations during the reporting period.

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The financial statements reflect the effects of economic events on the business entity.  Financing may be obtained from owners, lenders, or both. When owners provide financing, assets and owners’ equity on the balance sheet increase. When money is borrowed from lenders, assets and liabilities on the balance sheet increase.  Neither of these financing events is reported on the income statement. When a business invests in assets like inventory or equipment, payment is made at time of purchase or the purchase is on credit, with payment due some time later.  If assets are bought for cash, the balance sheet will report ...

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