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Reflection Paper Accounting Essay

Accounting to me is challenge as a whole; it is a good subject to learn because accounting knowledge is always in demand. So far, I am on a good path learning the basics of accounting. I’ve learned how accounting affects business and how it allows organizations to identify cash inflows and outflows. This accounting course provided me a great opportunity to understand the various important aspects of accounting that I believe will be helpful in my future practical life. I need to begin my own particular business in future for that it’s important to have great knowledge of Financial and Managerial Accounting. This course has helped me to comprehend numerous essential ideas of accounting. This knowledge is going to help me to comprehend and investigate financial statements and will empower me to take great business choices in view of accounting data. The following is the rundown of what I have realized and can detract from this course.

Chapter 01

After reading the first chapter, I learned that who are the stakeholders or users of the accounting information. I get found out about different organizations like AICPA, FASB and so on impacting the foundation of generally accepted accounting principles (GAAP) for businesses or governmental organizations. I comprehend the significance of morals and accounting gauges like IFRS. While learning different sort of business I become more acquainted with vital idea of accounting i.e. the business entity idea. Most critical thing I adapted in this chapter is accounting ideas and principles. I get to Introduced to assets, liabilities, stock holders equity and imperative financial statements.

Chapter 02

Chapter 02 gave insights about strides in recording posting the effects of the business transactions. They are different assets and liabilities records utilized for recoding the exchange as a part of journal, t-records and ledger. Here I learned different strides of accounting cycle beginning from breaking down the transactions by looking at source documents. I found out about get ready trial balance from ledger and amending trial balance errors. Double-entry procedure is utilized which oblige that every exchange be recorded by an entry that has equivalent debits and credits. Resource records will regularly have charge balances and obligation records will typically have credit balances. I comprehend that records are of two sorts genuine (Balance Sheet accounts) & ostensible (income statement accounts).

Chapter 03

After completing the Chapter 03, I am able to understand the adjusting processes of the financial statements for given period in light of trial balance or ledger entries. Here I adapted imperative idea of accrual basis of accounting. In accrual basis of accounting revenues are perceived when they are earned and expenses are perceived when they are really caused to deliver income. Where as in cash basis of revenues and expenses are perceived when cash is gotten and paid separately. Records are balanced so that income statement reports fitting income or cost and to make the balance sheet report the best possible resource or risk. Matching rule obliges that matching of expenses and revenues to introduce a precise photo of the profitability of a business. Adjusting entries are of two sorts deferred and gathered things. In the wake of passing adjusting entries balanced trial balance is readied.

Chapter 4

Chapter 04 explained about use of work sheet facilitate the completion of the accounting cycle. The work sheet is a columnar sheet of paper or a computer spreadsheet on which accountants summarize information needed to make the adjusting and closing entries and to prepare the financial statements. Important Steps in competing accounting cycles are preparing adjusted trial balance after posting adjustment entries, Extend adjusted balances of from the Adjusted Trial Balance columns to the Income statement, Statement of retained earnings and Balance sheet. Here I learn important ratios i.e. current ratio and debt ratio. Current ratio specifies company’s ability to pay its short-term obligations.

Chapter 05

In chapter 05, I learned different imperative parts of merchandise transactions and there recording. I found out about contra accounts Sales Returns and Allowances account, Sales Discounts account, purchase returns and Allowances account and Purchase Discounts account. Two sorts of inventory processed took after i.e. perpetual inventory system and periodic inventory technique both having their own particular benefits and negative marks and ought to be utilized according to the need of specific business. Presently computerization as encouraged numerous firms to utilize perpetual inventory method for instance it has get to be economical for some retail locations to utilize perpetual inventory methodology notwithstanding for products of low unit value, for example, goods.

Chapter 06

Chapter 06 discusses the diverse methods of inventory accounting i.e. FIFO method, LIFO method and Average cost method. All have diverse merits and negative marks under distinctive situations. For e.g. the merits of FIFO methods are-(1) Easy application, (2) the expected flow of costs relates with the ordinary physical flow of goods and (3) the balance sheet sum for inventory is liable to surmise the current market and so on. Burdens of FIFO can be – amid continually rising prices FIFO can offer ascent to paper profits. Amid times of rising prices, FIFO makes higher net income since the costs charged to cost of goods sold are lower. However LIFO expect that the costs of the latest purchases are the first costs charged to cost of goods sold. Net income is generally lower under LIFO since the costs charged to cost of goods sold are higher because of inflation.

Chapter 07

Chapter 07 underlines the significance of having effective internal controls in every business. Inability to implement adequate internal controls can bring about frauds or robberies. Organizations ensure their benefits by different internal control procedures like – segregating employee duties, assigning specific duties to each employee, rotating employee job assignments, and using mechanical devices etc. Five components of internal control are Control environment, Risk assessment, Control activities, Information and communication and Monitoring. Sarbanes-Oxley Act was passed.

The Act was passed as one aftereffect of the huge misfortunes to the employees and investors from accounting fraud circumstances including organizations, for example, Enron and WorldCom. I figure out how to build up internal control through control of cash receipts and cash distributions, fitting utilization of the bank checking account, readiness of the bank reconciliation, and protection of petty cash funds.

Conclusion

Accounting is an important factor in any business; large or small. If you don’t know your numbers, you don’t know the financial health of your business. In later chapters I found out about different sort fixed assets like Property, Plant & equipment and depreciation methods like Straight-line method, units-of-production method and double-Accelerated declining-balance (DDB) method and so forth. Depreciation is the measure of plant resource cost distributed to every accounting period profiting from the plant resource’s utilization. Depreciation is a procedure of portion, not valuation. Land is considered to have an unlimited life and is in this way not depreciable. On the other hand, land improvements brief landscaping, parking lots and so on are connections to the land they have limited lives and thusly are depreciable.

For Natural resources rather than depreciation we utilize consumption. Consumption is the fatigue that outcomes from the physical evacuation of a piece of a natural asset. While for intangible assets Amortization is utilized. Amortization is the systematic write-off of the cost of an intangible resource for cost. Goodwill is an intangible value connected to a business, confirm by the capacity to gain preferable return on investment over that earned by competitors in the same industry. I struggle with the accrual accounting only because I have never used this method on either a personal or business related level. In fact, this accounting course made me capable of establishing my own business.


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