Write a paper that discusses the principles of financial accounting. No references or specific style is required.
This paper must include the following concepts: transactions, recording, financial statements, account analysis, accounting equation, journalizing transactions, debits and credits, journalizing with pre and post- trial balance, adjusting entries, accounting cycle, journal AJE's, closing JE's, working with the worksheet-balance sheet, merchant operations, purchases, sales, inventory, COG's available, FIFO, LIFO, average cost, CGAS, gross profit inc. stmt., internal control, cash, identify internal control principles, bank recon., note interest, JE's for bad debts, allowances, JE's for receivable transactions, plant assets, transaction analysis, depreciation computing, receivables, current liabilities, payroll accounting, JE's for disposals, and JE/AJE for liabilities, and balance sheet.
** Complete solution in the attached WORD document **
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Accounting transactions are the events that require the data to be documented. In financial accounting, we document these transactions and this information through a recording system called double-entry accounting. In double-entry accounting, every transaction has both a credit and a debit, which is what causes the transaction to balance. For example, if my company paid rent in the amount of $500, the double-entry accounting transaction would be recorded as follows:
Rent expense $500
We have debited the left side and credited the right side. This has caused our entry to balance. Our accounting transaction then flows onto the proper financial statement. In this case, we would see the effect of our transaction on the income statement through the rent expense account, and the balance sheet from the decrease in cash needed to pay the rent expense. This is the manner in which we record transactions. Double-entry accounting for the recording of transactions is the currently acceptable method under Generally Accepted Accounting Principles (GAAP). We debit the left side, which increases the balance of the account, and we credit the right side, which decreases the balance of the account.
The financial statements are composed of four main statements, which include the balance sheet, income statement, cash flows statement, and retained earnings (shareholders' equity) statement. The income statement lists revenue, cost of goods sold, gross profit, expenses, and net income. It shows us the total amount of income and expenses for the period, and we are then able to determine if the company showed a profit or loss. The balance sheet includes our assets and liabilities, which include both current and long-term assets and liabilities. Basic and more complex financial ratios can be calculated based on the balance sheet, which indicates the company's level of solvency for the period.
The statement of cash flows shows users the inflows and outflows of cash for the period in three separate categories, which include operating activities, investing activities, and financing activities. This statement can be prepared using either the direct or indirect method. This statement shows users where the company's money came in from, and where it then went out to in the given accounting period. The statement of shareholders' equity (retained earnings statement) shows users the current amount in retained earnings and includes dividend payouts in the specified period.
The accounting equation is as follows = total assets equals liabilities plus shareholder's equity. The accounting equation is what "makes" the balance sheet balance. This all goes back to our double-entry accounting system. Because of the double-entry accounting system where debits always, always equal credits, the balance sheet balances. If accounting transactions were recorded in a way that was not double-entry, our debits and credits would not equal and it would deviate from the basic accounting equation.
We perform an account analysis on all accounts at random or specified periods throughout the year. Account analysis involves analyzing the given ...
Response includes an attached Word document.