Financial Statements - Purpose of Accounting

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Financial statements

Financial Statements - Purpose of Accounting
ACC 280
May 17, 2011
Carol Harker

Financial Statements - Purpose of Accounting
Every business has a need to generate profit and remain in the black. In today’s business world, it is important to have the means to track and monitor the gain or increase of income and profits within the organization. According to Weygandt, “Accounting can be defined as activity that is used to identify, record, and communicate the economic events of a business.” (Weygandt. 2008.) Included in the report we will discuss the purpose of accounting and identify the four basic types of financial statements that are used. Finally we will discuss how the core financial statements of accounting are connected to each other and their uses for all stakeholders in a company.
The purpose of accounting is to keep track of economic events for a business. “Accountants are primarily employed to track the flow of money through an organization” (QuickMBA, 2010). Good accounting practices make it easy to keep track of finances for any type of business. “Keeping an accurate balance sheet is a fundamental part of running even the most basic of an organization” (QuickMBA, 2010). Activities such as sales, purchases, and any interest earned from investments are classified as economic and posted to a specified account record. Accountants have a code of ethics that they must adhere to ensure integrity in the reporting process. The use of an accounting system for a business will reduce risk of non-compliance with Federal laws and help limit the amount of errors in a business decision. Precise accounting serves the interests of the business over the long-term. Inaccurate accounting can destroy a business by destroying the investors trust in the company. An erroneous balance sheet can be a significant issue that will affect the business’s…...

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