Overview of Accounting

Overview of Accounting

Running head: OVERVIEW OF ACCOUNTING

Overview of Accounting

Brenda Anderson-Comier

University of Phoenix

Introduction to Finance and Accounting

MBA/503

Jacob Matthews

Jan 8, 2007

Overview of Accounting

Brenda Comier, President of Comier & Comier, LLP, have been contracted to give an informational presentation to a group of small business owners (SBO) with no accounting or financial knowledge. The workshop is designed to help the small business owner understand and fulfill their accounting and finance responsibilities. This presentation will also give them an understanding that accounting involves the accumulation of historical information. Finance, on the other hand, involves analyzing the historical information and using it to plan and make future decisions. During the presentation, Brenda will identify the audiences, purposes, and natures of financial statements and managerial reports. Brenda will also explain the use of financial accounting information in making informed and ethical business decisions.

Financial Statements and Managerial Reports

Financial Statements are summaries of monetary data about an enterprise. Brenda identified the audience of financial statements and managerial reports to be:

• prospective investors

• shareholders

• Banks

• government regulators

• management,

• labor

The purpose of financial statements:

• To inform the audience of how the company performed.

• To show how much assets, liabilities, and equity it currently has.

The nature of financial statements is the numerical compilation of categorical objective aspects of the organization.

Managerial reports are different from the financial statements. Managerial reports:

• Objective analysis of finite categorical information used to evaluate adopted positions and to adjust those positions to better meet goals.

• The primary use

o Invalidate or validate assumptions

o Reduce financial risk.

• Management Reports can consist of:

o Comparative Balance Sheet

o Cash Flows,

o Statement of Changes in Financial Position, and

o Statement of Working Capital

Brenda explained to the SBO’s that a financial manager must understand the basic concepts of accounting in order to use the tools the accountants provide.