Accounting Priniciples and Financial Statement Analysis Essay examples

1769 Words 8 Pages
Financial Statements:

Foundational Accounting Principles and Terminology

Shane R. Wagner

TUI University

Module 1 Case Study

29 August 2010

Abstract This paper will discuss the common fundamental accounting principles and analyze the financial statements of three major businesses. A basic understanding of the General Accepted Accounting Principles and the standards established within these practices, allow for investors to obtain an accurate snapshot of the financial health of a business. The different methods of documenting both current and future transactions, can have an impact on the information portrayed by the financial statements of an organization. In addition, the basic format of the financial statements
…show more content…
These rules establish the standard for the creation and upkeep of financial records is to ensure US businesses (or those foreign business that have interests in the US) present a comparable financial health of an organization in addition to ensuring compliance with the Securities and Exchange Commission (SEC). The SEC delegates authority to the Financial Accounting Standards Board (FASB) for establishment and maintenance of the GAAP (Bradford, 2007). The GAAP revolve around four main principles; consistency, relevance, reliability, and comparability. These principles establish the foundation of any US company’s financial statements, allowing flexibility for customization while remaining in compliance with the SEC rules and regulations (Bradford, 2007).
Double Entry Accounting Double-entry accounting is a checks and balance system utilized by business’ to ensure the balance and GAAP compliance of financial records (Toolkit Media Group, 2010). The checks and balance condition is accomplished through the use of a two entry method; credits and debits. This methodology is comparable Newton’s Law of motion; for every action, there is an equal and opposite reaction. The same principle applies to double-entry accounting; for every addition of monies to an account, an equal subtraction of monies

Related Documents