Accounting Basic for Managers
Accounting for Managers is a sufficient financial knowledge accounting tool, for better management accounting or financial accounting information in their organizations. Accounting For Managers Objectives is to introduce, the students with the fundamentals principles main focus of managerial accounting, better management financial accounting and cost management. financial accounting is that the space of accounting associated with the outline, analysis and news of monetary transactions in an exceedingly business. In financial accounting financial statements of any business or organization is available for public use. the financial accounting statements information is important for shareholders, suppliers, banks, employees, government agencies, business owners and other stakeholder decision-making objectives. Financial accounts are governed by both local and international accounting standards. Generally Accepted Accounting Principle (GAAP) is the standard framework for guidelines for financial accounting used in any jurisdiction. It includes standards, conferences and rules that the accountants follow in recording and briefing and preparation of financial statements. The second one is International Financial Reporting Standards (IFRS), report a specific type of transaction and events in financial statements. This is a set of accounting standards. IFRS is international business accounting organization globally, issued by the International Accounting Standards Board (IASB). IFRS standards are used in the international business accounting, among the global organizations. It is not used in accounting information for people outside the organization or in day to day activities of the company.
The Objective of Financial Reporting
The objective of financial reporting in International Financial Reporting Standards, is the availability of useful financial information for existing and potential investors, lenders and other creditors to make decisions about providing resources to the business organization.
According to the European Accounting Federation: Capital management is a competitive objective of financial reporting.
Financial Accounting Qualities
Financial accounting qualities are the preparation of financial statements. that can be used by the public and related stakeholders using historical cost accounting (HCA) or continuous Purchasing Power Accounting (CPPA). When producing financial statements, they should follow the following information.
Financial accounting should be decision specific. It should have possible accounting information to influence decisions. Until this feature is not present, then there is no relevance of accounting statements.
Data is material if its default or incorrect statement. That can affect the financial decisions of the users taken on the basis of financial statements.
Accounting statements ought to be error free or bias. It should be easily trusted by managers. Often information that is highly relevant is not very reliable, and vice versa.
The accounting report should be expressed as clearly as possible and should be understood by those for whom the information is necessary.
Comparability: Financial reports of different periods should be comparable to each other. in order to take meaningful conclusions about the unit's financial performance and trends of the situation over time. Comparisons can be ensured by implementing the same accounting policies over the time.
Three Components of Financial Statements
These are following three components of financial statements.
Statement of Cash Flows
The statement of cash flows shows only the real cash inputs and outputs flow within a certain period. The general model of a income statement is as
Cash influx - money Outflow + gap Balance = Closing Balance
See example, in the beginning of September, smith has $5 in her bank account. During the same month, smith borrowed $20 from james.
At the top of the month, Ellen bought a tshirt for $7.
Smith's cash flow statement for the month of September will be
Cash inflow: $20
Opening balance: $5
At last Closing balance will be: $20 – $7 + $5 = $18
Let's see second example in the beginning of June. a company that buys and resells furniture, sold 2 tables. They had bought two tables for $25 each, and sold them $50 per table. The first table price was paid in cash however the second table was bought in credit terms. Then that company cash flow statement for the month of June will be. Cash inflow - $50 received in cash for the first table. the second table price is not received in cash (sold in credit terms).
Cash outflow - $50 they bought the 2 tables for $25 each.
Opening balance: $0
Closing balance: $50 – 2*$25 + $0 = $50–50=$0, so the cash flow for the month of June is $0 and not $50.
Cash Flow Statement considers only real cash exchanges, and Does not pay attention to the questionnaire Persons on unpaid or outstanding.
The Statement of Profit and Loss (income statement or statement of operations)
The statement of profit or income statement reports the change in the value of the company's accounts (usually in single financial year) in a set period, and the changes in the same accounts compared to the previous period. All changes are summarized on the "bottom line" as net income, which are often reported as "net loss" when less than zero. The net profit or loss is determined by:
Sales (revenue) - price of products sold - marketing, general, body expenses (SGA) - depreciation/ amortization = earnings before interest and taxes (EBIT) - interest and tax expenses = profit/loss
Statement of Financial Position (Balance Sheet)
The balance sheet is financial statement showing a firm's assets, liabilities and equity (capital) at a given time, usually reported with income details at the end of the financial year. Total assets are always in the sum of the total combined liabilities and equities of the firm. This statement best demonstrates the fundamental accounting equation
Assets = liabilities + equity.