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Accounting Standards
Financial statements prepared and presented by a company typically follow an external standard that specifically guides their preparation. These standards vary across the globe and are typically overseen by some combination of the private accounting profession in that specific nation and the various government regulators. Variations across countries may be considerable making cross country evaluation of financial data challenging. Publicly traded companies typically are subject to the most rigorous standards. Small and midsize businesses often follow more simplified standards, plus any specific disclosures required by their specific lenders and shareholders. Some firms operate on the cash method of accounting which can often be simple and straight forward. Larger firms most often operate on an accrual basis
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Depreciation
In accountancy, depreciation refers to two aspects of the same concept:[1]The decrease in value of assets (fair value depreciation) The allocation of the cost of assets to periods in which the assets are used (depreciation with the matching principle) Depreciation
Depreciation
is a method of reallocating the cost of a tangible asset over its useful life span of it being in motion. Businesses depreciate long-term assets for both tax and accounting purpose. The former affects the balance sheet of a business or entity, and the latter affects the net income that they report. Generally the cost is allocated, as depreciation expense, among the periods in which the asset is expected to be used. This expense is recognized by businesses for financial reporting and tax purposes. Methods of computing depreciation, and the periods over which assets are depreciated, may vary between asset types within the same business and may vary for tax purposes
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Governmental Accounting
Various governmental accounting systems are used by various public sector entities. In the United States, for instance, there are two levels of government which follow different accounting standards set forth by independent, private sector boards. At the federal level, the Federal Accounting Standards Advisory Board
Federal Accounting Standards Advisory Board
(FASAB) sets forth the accounting standards to follow. Similarly, there is the Governmental Accounting Standards Board (GASB) for state and local level government.Government Accounting can therefore be referred to as the process of recording and the management of all financial transactions incurred by the government which includes it's income and expenditures.Public vs. Private Accounting[edit] There is an important difference between private sector accounting and governmental accounting. The main reasons for this difference is the environment of the accounting system
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Profit (accounting)
Profit, in accounting, is an income distributed to the owner in a profitable market production process (business). Profit is a measure of profitability which is the owner’s major interest in income formation process of market production. There are several profit measures in common use. Income
Income
formation in market production is always a balance between income generation and income distribution. The income generated is always distributed to the stakeholders of production as economic value within the review period. The profit is the share of income formation the owner is able to keep to himself/herself in the income distribution process. Profit is one of the major sources of economic well-being because it means incomes and opportunities to develop production
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Unit Of Account
A unit of account in economics is a nominal monetary unit of measure or currency used to represent the real value (or cost) of any economic item; i.e. goods, services, assets, liabilities, income, expenses. It is one of three well-known functions of money.[1] It lends meaning to profits, losses, liability, or assets. A unit of account in financial accounting refers to the words that are used to describe the specific assets and liabilities that are reported in financial statements rather than the units used to measure them.[2] Unit of account and unit of measure are sometimes treated as synonyms in financial accounting and economics.[2] Historically, prices were often given in a dominant currency used as a unit of account, but transactions actually settled by using a variety of coins that were available, and often goods, all converted into their value in the unit of account
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Materiality (auditing)
Materiality is a concept or convention within auditing and accounting relating to the importance/significance of an amount, transaction, or discrepancy.[1] The objective of an audit of financial statements is to enable the auditor to express an opinion whether the financial statements are prepared, in all material respects, in conformity with an identified financial reporting framework such as Generally Accepted Accounting
Accounting
Principles (GAAP). As a simple example, an expenditure of ten cents on paper is generally immaterial, and, if it were forgotten or recorded incorrectly, then no practical difference would result, even for a very small business. However, a transaction of many millions of dollars is almost always material, and if it were forgotten or recorded incorrectly, then financial managers, investors, and others would make incorrect decisions as a result of this error
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Going Concern
A going concern is a business that functions without the threat of liquidation for the foreseeable future, usually regarded as at least within 12 months. It implies for the business the basic declaration of intention to keep running its activities at least for the next year, which is a basic assumption to prepare financial statements considering the conceptual framework of the IFRS
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Economic Entity
In accounting, an economic entity is one of the assumptions made in generally accepted accounting principles. Basically, any organization or unit in society can be an economic entity. Examples of economic entities are hospitals, companies, municipalities, and federal agencies. The " Economic entity assumption" states that the activities of the entity are to be kept separate from the activities of its owner and all other economic entities.[1] See also[edit]Piercing the corporate veilReferences[edit]^ Jerry J. Weygandt (2005). Hospitality Financial Accounting. John Wiley & Sons. pp. 41–. ISBN 978-0-471-27055-3. This economics-related article is a stub
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Accrual
Accrual (accumulation) of something is, in finance, the adding together of interest or different investments over a period of time. It holds specific meanings in accounting, where it can refer to accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These types of accounts include, among others, accounts payable, accounts receivable, goodwill, deferred tax liability and future interest expense.[1]Contents1 Accruals in accounting1.1 Accrued revenue 1.2 Accrued expense2 Accruals in payroll2.1 Length of service 2.2 Trial period 2.3 Rollover/carry over3 Other uses 4 See also 5 References 6 External linksAccruals in accounting[edit] For example, a company delivers a product to a customer who will pay for it 30 days later in the next fiscal year, which starts a week after the delivery
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Social Accounting
Social accounting
Social accounting
(also known as social accounting and auditing, social accountability, social and environmental accounting, corporate social reporting, corporate social responsibility reporting, non-financial reporting or accounting) is the process of communicating the social and environmental effects of organizations' economic actions to particular interest groups within society and to society at large.[1] Social accounting
Social accounting
is commonly used in the context of business, or corporate social responsibility (CSR), although any organisation, including NGOs, charities, and government agencies may engage in social accounting. Social Accounting can also be used in conjunction with community-based monitoring (CBM). Social accounting
Social accounting
emphasises the notion of corporate accountability. D
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Annual Report
An annual report is a comprehensive report on a company's activities throughout the preceding year. Annual reports are intended to give shareholders and other interested people information about the company's activities and financial performance. They may be considered as grey literature. Most jurisdictions require companies to prepare and disclose annual reports, and many require the annual report to be filed at the company's registry
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Bookkeeping
Bookkeeping
Bookkeeping
is the recording of financial transactions, and is part of the process of accounting in business.[1] Transactions include purchases, sales, receipts, and payments by an individual person or an organization/corporation. There are several standard methods of bookkeeping, such as the single-entry bookkeeping system and the double-entry bookkeeping system, but, while they may be thought of as "real" bookkeeping, any process that involves the recording of financial transactions is a bookkeeping process. Bookkeeping
Bookkeeping
is usually performed by a bookkeeper. A bookkeeper (or book-keeper) is a person who records the day-to-day financial transactions of a business. They are usually responsible for writing the daybooks, which contain records of purchases, sales, receipts, and payments
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Amortization
Amortization (or amortisation; see spelling differences) is paying off an amount owed over time by making planned, incremental payments of principal and interest. To amortize a loan means "to kill it off".[1] In accounting, amortization refers to charging or writing off an intangible asset's cost as an operational expense over its estimated useful life to reduce a company's taxable income.[2][1]Contents1 Etymology 2 Applications of amortization 3 See also 4 References 5 External linksEtymology[edit] The word comes from Middle English amortisen to kill, alienate in mortmain, from Anglo-French amorteser, alteration of amortir, from Vulgar Latin
Vulgar Latin
admortire "to kill", from Latin
Latin
ad- and mort-, "death". Applications of amortization[edit]When used in the context of a home purchase, amortization is the process by which loan principal decreases over the life of a loan, typically an amortizing loan
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Auditing
An audit is a systematic and independent examination of books, accounts, statutory records, documents and vouchers of an organization to ascertain how far the financial statements as well as non-financial disclosures present a true and fair view of the concern. It also attempts to ensure that the books of accounts are properly maintained by the concern as required by law. Auditing has become such a ubiquitous phenomenon in the corporate and the public sector that academics started identifying an " Audit
Audit
Society".[1] The auditor perceives and recognises the propositions before them for examination, obtains evidence, evaluates the same and formulates an opinion on the basis of his judgement which is communicated through their audit report.[2] Any subject matter may be audited
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Statement Of Changes In Equity
A Statement of changes in equity and similarly the statement of changes in owner's equity for a sole trader, statement of changes in partners' equity for a partnership, statement of changes in Shareholders' equity for a Company
Company
or statement of changes in Taxpayers' equity[1] for Government financial statements is one of the four basic financial statements. The statement explains the changes in a company's Share Capital, accumulated reserves and retained earnings over the reporting period. It breaks down changes in the owners' interest in the organization, and in the application of retained profit or surplus from one accounting period to the next. Line items typically include profits or losses from operations, dividends paid, issue or redemption of shares, revaluation reserve and any other items charged or credited to accumulated other comprehensive income
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International Standards On Auditing
International Standards on Auditing
Auditing
(ISA) are professional standards for the performance of financial audit of financial information. These standards are issued by International Federation of Accountants
International Federation of Accountants
(IFAC) through the International Auditing
Auditing
and Assurance Standards Board (IAASB)
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