The accounting equation and it's componants - Essay Example

Introduction Hello ladies and gentlemen. It is evident that every day we are directly involved in accounting transactions either directly or indirectly. We usually pay for our fares, refill our vehicle fuel tanks, and purchase books. In all these activities accounting is very necessary to ensure that the services are efficiently offered to all the customers keeping track of all transactions. I am going to give an in-depth analysis of accounting. Primary objectives of accounting In a business setup, recording and summarizing financial transaction after ensuring their validity is usually conducted in determining the overall progress of the of the business setup.

This job referred to as accounting is mainly conducted by a pool of qualified person referred to as accountants. The main objectives of accounting are: To keep systematic records- The financial information is very useful in making crucial decision on a company. Thus, it is necessary to keep proper records as human memory cannot be entrusted to remember the specific details of the transactions carried out (Norton & Porter, 2010). To protect business properties- accounting is useful in safeguarding the business property by providing crucial business information to the specified persons such as managers or proprietor.

Ascertain operational profit or loss- Through accounting, the net profit or loss gained by the business during a specified period is identified. This is possible by having a record of all the revenues and expenditure. The profit and loss account is specifically used to document this with excess of revenue over expenses referred to as profits. Ascertain financial position- the balance sheet is a document, which records what the business owes, and owns. From such information, the financial position of the business is established.

Facilitate rational decision Making- by having done analysis of the business transaction. Accounting is capable of identifying strong points of the business and thus is an essential tool in rational decision-making. Accounting Terminologies There are various terminologies used in accounting process or financial reporting which includes: Event- This refers to an occurrence that has effect on assets, liabilities, or shareholders’ equity. Account- the term refers to systematic arrangement of transactions Permanent account- it is an indefinite account whose balance at the end of an accounting period is used in the next accounting period.

Nominal accounts- this refers to accounts, which are closed at the end of the accounting period. Financial Statements- these are documents, which takes into account all the accounting information of the business during a specified period. In their preparation, international financial reporting standards must be adhered (Clark & Owen, 2001). Accounting and My personal life The skills gained in the accounting field are not only applicable to the business setup but also to personal life. In some instances, I have encountered a conflict between my personal and professional ethics.

In the circumstance, I realized that my personal ethics could affect my professional ethics and thus had to make some adjustments. Though accounting, I have managed to improve my skills in keeping record of the activities I am involved. From the information got, I have been able to evaluate the viability of the activity, which has been essential in my decision-making. In addition, I have been able to manage the various resources I have so that I do not engage myself in activities that are not rewarding.

These merits are not specifically attached to me but also to all persons practicing accounting. After completing your studies, you anticipate to get well rewarding jobs. These jobs will ensure that you will also reap the same merits in same quantity or even more. Role of Technology in small Business accounting It is evident that there are various technological advancements implemented in the field of business. This is not only experienced in large business only but also in small business accounting.

In small business, accounting technology has enabled effective and timely monitoring of the business records. This ensures that the services are offered to the customers in an efficient way, which ensures they are outstanding thus attracting more customers. In addition, with technology, the human errors in the conduction of the business are eliminated. Furthermore, validity of the transaction can be asserted removing loopholes which would lead to financial loss. The monitoring of transaction is not only in the sales but also in the accounts receivable.

Thus, financial loss due to forget and lying are eliminated. This is essential in ensuring that the bills receivable are received timely to avoid loss. In addition, the system ensures that the paper work reduces significantly and thus the worker and workload per worker is reduced. This ensures that compliance with tax reporting is effective (Burgess, 2002). Having given an in-depth analysis of accounting, I would like to thank you for giving me a chance to share my knowledge with you. Thank You.

References Burgess, S. (2002). Managing information technology in small business: challenges and solutions. Hershey Pennsylvania: Idea Group Inc. Clark, E., & Owen J. (2001). Dictionary of international accounting terms. London: Global Professional Publishi. Norton, C. & Porter, G. (2010). Using Financial Accounting Information: The Alternative to Debits and Credits. London: Cengage Learning.