Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Running head: Overview of Accounting
Overview of Accounting
Kristie Richards
MBA 503
University of Phoenix
September 10, 2007
Overview of Accounting
In the following informational presentation I will be explaining the differences of financial
reports. I will also explain how ethical business decision making is used in financial
reporting.
Financial Statements
Accountants, shareholders, stock brokers, financial managers, and CEO, to name a few use
several financial statements to relate to how well a company is doing financially. I will
share with you the most used reports and explain the purpose for each report and how it
can relate to your position in the company. First is the income statement. The income
statement is a major device for measuring the profitability of a company over a period. The
income statement covers a defined period of time, whether it is one month, three months or
a year. It is easy to read the profit or loss after the expense items are deducted. In order for
managers to view gross profit you will have sales minus goods sold. With knowing gross
profit you can determine the profit from operations by subtracting selling and
administrative expense and depreciation from gross profit to obtain operating profit.
Operating profit can measure how efficient management is generating revenue and
controlling expenses. Second is the balance sheet. The balance sheet indicates what the
company owns and how assets are financed in the form of liabilities or ownership interest.
The balance sheet is a snapshot at that point in time of the company. It does not represent
the transaction for a specific month but it shows all of the transactions that have affected
the company since the beginning. Using the balance sheet with the income statement
financial managers can answer how much revenue the company made or lost and how
much the company is worth. Third is the statement of cash flow. The purpose of this report
is to emphasize the nature of the cash flow to the operations of the company. According to
accountants, cash flow represents cash or cash equivalent items that can be converted into
cash within 90 days. For example, money market funds oradditional investments.
To summarize the above the financial manager must be familiar with the accounting
reports to administer the finances of the company. The income statement provides a
measure of the company profitability over a specific period of time. The balance sheet is a
snapshot of the financial position of the company at a point in time with the stockholders
