http://www.aredconsult.com/accounting-resource articles and information about accounting en-us http://www.aredconsult.com/accounting-resource/index.htm articles and information about accounting http://www.aredconsult.com/accounting-resource/about-gaap.htm While many businesses assume that accountants are bound by generally accepted accounting practices and that these are inviolate, nothing could be further from the truth. Everything is subject to interpretation, and GAAP is no different http://www.aredconsult.com/accounting-resource/accounting-principles.htm If everyone involved in the process of accounting followed their own system, or no system at all, there's be no way to truly tell whether a company was profitable or not. Most companies follow what are called generally accepted accounting principles, or GAAP, and there are huge tomes in libraries and bookstores devoted to just this one topic http://www.aredconsult.com/accounting-resource/assets-and-liabilities.htm Making a profit in a business is derived from several different areas. It can get a little complicated because just as in our personal lives, business is run on credit as well. Many businesses sell their products to their customers on credit http://www.aredconsult.com/accounting-resource/balance-sheet.htm A balance sheet is a quick picture of the financial condition of a business at a specific period in time. The activities of a business fall into two separate groups that are reported by an accountant. They are profit-making activities, which includes sales and expenses. This can also be referred to as operating activities http://www.aredconsult.com/accounting-resource/basic-accounting-principles.htm Accounting has been defined as, by Professor of Accounting at the University of Michigan William A Paton as having one basic function: facilitating the administration of economic activity http://www.aredconsult.com/accounting-resource/bookkeeping.htm So what goes on the accounting and bookkeeping departments? What do these people do on a daily basis? Well, one thing they do that's terribly important to everyone working there is Payroll. All the salaries and taxes earned and paid by every employee every pay period have to be recorded www.aredconsult.com/accounting-resource/bookkeeping-basics.htm Most people probably think of bookkeeping and accounting as the same thing, but bookkeeping is really one function of accounting, while accounting encompasses many functions involved in managing the financial affairs of a business. Accountants prepare reports based, in part, on the work of bookkeepers http://www.aredconsult.com/accounting-resource/budgeting.htm Ugh, budgeting is one of those topics we'd rather avoid, but in business, it's an absolute necessity. To prepare a reasoned and thoughtful budget, an accountant must start with a broad-based critical analysis of the most recent actual performance and position of the business by the managers who are responsible for the results http://www.aredconsult.com/accounting-resource/building-cash-reserves Building a financial cushion for your business is never easy. Experts say that businesses should have anywhere from six to nine months worth of income safely stored away in the bank. If you're a business grossing $250,000 per month, the mere thought of saving over $1.5 million dollars in a savings account will either have you collapsing from fits of laughter or from the paralyzing panic that has just set in http://www.aredconsult.com/accounting-resource/careers.htm here are many different careers in the field of accounting ranging from entry-level bookkeeping to the Chief Financial Officer of a company. To achieve positions with more responsibility and higher salaries, it's necessary to have a degree in accounting as well as achieve various professional designations http://www.aredconsult.com/accounting-resource/depreciation.htm Depreciation is a term we hear about frequently, but don't really understand. It's an essential component of accounting however. Depreciation is an expense that's recorded at the same time and in the same period as other accounts http://www.aredconsult.com/accounting-resource/depreciation-reporting.htm In an accountant's reporting systems, depreciation of a business's fixed assets such as its buildings, equipment, computers, etc. is not recorded as a cash outlay. When an accountant measures profit on the accrual basis of accounting, he or she counts depreciation as an expense http://www.aredconsult.com/accounting-resource/disclosure.htm Financial statements are the backbone of a complete financial report. In fact, a financial report is not complete if the three primary financial statements are not included. but a financial report is much more than just those statements. A financial report requires disclosures http://www.aredconsult.com/accounting-resource/gains-and-losses.htm It would probably be ideal if business and life were as simple as producing goods, selling them and recording the profits. But there are often circumstances that disrupt the cycle, and it's part of the accountants job to report these as well. Changes in the business climate, or cost of goods or any number of things can lead to exceptional or extraordinary gains and losses in a business http://www.aredconsult.com/accounting-resource/how-is-accounting-used-in-business.htm It might seem obvious, but in managing a business, it's important to understand how the business makes a profit. A company needs a good business model and a good profit model. A business sells products or services and earns a certain amount of margin on each unit sold. The number of units sold is the sales volume during the reporting period http://www.aredconsult.com/accounting-resource/how-to-analyze-a-financial-statement.htm It's obvious financial statement have a lot of numbers in them and at first glance it can seem unwieldy to read and understand. One way to interpret a financial report is to compute ratios, which means, divide a particular number in the financial report by another http://www.aredconsult.com/accounting-resource/inventory-and-expenses.htm Inventory is usually the largest current asset of a business that sells products. If the inventory account is greater at the end of the period than at the start of the reporting period, the amount the business actually paid in cash for that inventory is more than what the business recorded as its cost of good sold expense http://www.aredconsult.com/accounting-resource/investing-and-financing.htm Another portion of the statement of cash flows reports the investment that the company took during the reporting year. New investments are signs of growing or upgrading the production and distribution facilities and capacity of the business http://www.aredconsult.com/accounting-resource/making-a-profit.htm Accountants are responsible for preparing three primary types of financial statements for a business. The income statement reports the profit-making activities of the business and the bottom-line profit or loss for a specified period http://www.aredconsult.com/accounting-resource/managing-the-bottom-line.htm If you don't keep track of how much money you're making, you have no idea whether your business is successful or not. You can't tell how well your marketing is working. And I don't just mean you should know the amount of your total sales or gross revenue. You need to know what your net profit is. If you don't, there's no way you can know how to increase it http://www.aredconsult.com/accounting-resource/measuring-costs.htm Measuring profits or net income is the most important thing accountants do. The second most important task is measuring costs. Costs are extremely important to running a business and managing them effectively can make a substantial difference in a company's bottom line http://www.aredconsult.com/accounting-resource/parts-of-an-income-statement1.htm The first and most important part of an income statement is the line reporting sales revenue. Businesses need to be consistent from year to year regarding when they record sales. For some business, the timing of recording sales revenue is a major problem, especially when the final acceptance by the customer depends on performance tests or other conditions that have to be satisfied http://www.aredconsult.com/accounting-resource/parts-of-an-income-statement2.htm Of course profit and cost of goods sold expense are the two most critical components of an income statement, or at least they're what people will look at first. But an income statement is truly the sum of its parts, and they all need to be considered carefully, consistently and accurately http://www.aredconsult.com/accounting-resource/parts-of-income-statement3.htm While some lines of an income statement depend on estimates or forecasts, the interest expense line is a basic equation. When accounting for income tax expense, however, a business can use different accounting methods for some of its expenses than it uses for calculating its taxable income http://www.aredconsult.com/accounting-resource/personal-accounting.htm If you have a checking account, of course you balance it periodically to account for any differences between what's in your statement and what you wrote down for checks and deposits. Many people do it once a month when their statement is mailed to them, but with the advent of online banking, you can do it daily if you're the sort whose banking tends to get away from them http://www.aredconsult.com/accounting-resource/profit-and-loss.htm It might seem like a no-brainer to define just exactly what profit and loss are. But of course these have definitions like everything else. Profit can be called different things, for a start. It's sometimes called net income or net earnings. Businesses that sell products and services generate profit from the sales of those products or services and from controlling the attendant costs of running the business http://www.aredconsult.com/accounting-resource/quasar-software.htm Accounting has become more and more complex as have the businesses that use accounting functions. Fortunately, there are several excellent software packages that can help you manage this important function. Quasar is one such package http://www.aredconsult.com/accounting-resource/revenue-and-receivables.htm In most businesses, what drives the balance sheet are sales and expenses. In other words, they cause the assets and liabilities in a business. One of the more complicated accounting items are the accounts receivable http://www.aredconsult.com/accounting-resource/types-of-costs.htm Direct costs are those costs that cann be directly attributed to a product or product line, or to one source of sales revenue, or one business unit or operation of the business. An example of a direct cost would be the cost of tires on a new automobile http://www.aredconsult.com/accounting-resource/what-are-auditors.htm Accountants and auditors help to ensure that the Nation's firms are run efficiently, its public records kept accurately, and its taxes paid properly and on time. They perform these vital functions by offering an increasingly wide array of business and accounting services, including public, management, and government accounting, as well as internal auditing, to their clients http://www.aredconsult.com/accounting-resource/what-are-independent-auditors.htm Indpendent CPA auditors are like referees in the financial reporting arena. The CPA comes in, does an audit of the business's accounting system and methods and gives a report that is attached to the company's financial statements http://www.aredconsult.com/accounting-resource/what-are-other-ratios.htm The dividend yield ratio tells investors how much cash income they're receiving on their stock investment in a business. This is calculated by dividing the annual cash dividend per share by the current market price of the stock http://www.aredconsult.com/accounting-resource/what-difference-private-vs-public-reporting.htm A public corporation is a business whose securities are traded on the public stock exchanges, such as the New York Stock Exchange and Nasdaq. A private company is held solely by its owners and is not traded publicly http://www.aredconsult.com/accounting-resource/what-does-an-audit-do.htm If a business breaks the rules of accounting and ethics, it can be liable for legal sanctions against it. It can deliberately deceive its investors and lenders with false or misleading numbers in its financial report. That's where audits come in http://www.aredconsult.com/accounting-resource/what-does-an-audit-report-contain.htm Most audit reports on financial statements give the business a clean bill of health, or a clean opinion. At the other end of the spectrum, the auditor may state that the financial statements are misleading and should not be relied upon. This negative audit report is called an adverse opinion. That's the big stick that auditors carry http://www.aredconsult.com/accounting-resource/what-happened-at-enron.htm Everyone knows at least a little about the Enron story and the devastation it created in the lives of is employees. It's a story that belongs in any discussion of ethical accounting processes and what happens when accounting standards and ethics are discarded for personal greed http://www.aredconsult.com/accounting-resource/what-happened-in-corporate-accounting-scandals.htm When a corporation deliberately conceals or skews information to appear healthy and successful to its shareholders, it has committed corporate or shareholder fraud. Corporate fraud may involve a few individuals or many, depending on the extent to which employees are informed of their company's financial practices http://www.aredconsult.com/accounting-resource/what-is-accounting-anyway.htm Anyone who's worked in an office at some point or another has had to go to accounting. They're the people who pay and send out the bills that keep the business running. They do a lot more than that, though. Sometimes referred to as "bean counters" they also keep their eye on profits, costs and losses http://www.aredconsult.com/accounting-resource/what-is-accounting-fraud.htm Accounting fraud is a deliberate and improper manipulation of the recording of sales revenue and/or expenses in order to make a company's profit performance appear better than it actually is http://www.aredconsult.com/accounting-resource/what-is-acid-test-ratio-and-roa-ratio.htm Investors calculate the acid test ratio, also known as the quick ratio or the pounce ratio. This ratio excludes inventory and prepaid expenses, which the current ratio includes, and it limits assets to cash and items that the business can quickly convert to cash http://www.aredconsult.com/accounting-resource/what-is-a-corporation.htm Most businesses start out as a small company, owned by one person or by a partnership. The most common type of business when there are multiple owners is a corporation. The law sees a corporation as real, live person. Like an adult, a corporation is treated as a distinct and independent individual who has rights and responsibilities http://www.aredconsult.com/accounting-resource/what-is-a-sole-proprietorship.htm A sole proprietorship is the business or an individual who has decided not to carry his business as a separate legal entity, such as a corporation, partnership or limited liability company. This kind of business is not a separate entity. Any time a person regularly provides services for a fee, sells things at a flea market or engage in any business activity whose primary purpose is to make a profit, that person is a sole proprietor http://www.aredconsult.com/accounting-resource/what-is-earnings-per-share.htm Publicly owned companies must report earnings per share (EPS) below the net income line in their income statements. This is mandated by generally accepted accounting practices (GAAP). The EPS gives investors a means of determining the amount the business earned on its stock share investments http://www.aredconsult.com/accounting-resource/what-is-financial-window-dressing.htm Financial managers can do certain things to increase or decrease net income that's recorded in the year. This is called profit smoothing, income smoothing or just plain old window dressing. This isn't the same as fraud, or cooking the books http://www.aredconsult.com/accounting-resource/what-is-forensic-accounting.htm Forensic accounting is the practice of utilizing accounting, auditing, and investigative skills to assist in legal matters. It encompasses 2 main areas - litigation support, investigation, and dispute resolution. Litigation support represents the factual presentation of economic issues related to existing or pending litigation http://www.aredconsult.com/accounting-resource/what-is-price-earnings-ratio.htm The price/earning (P/E) ratio is another measurement that's of particular interest to investors in public businesses. The P/E ratio gives you an idea of how much you're paying in the current price for stock shares for each dollar of earning. Earnings prop up the market value of stock shares, not the book value of the stock shares that's reported in the balance sheet http://www.aredconsult.com/accounting-resource/what-is-the-fasb.htm The FASB is one organization that provides standardized guidelines for financial reporting. The mission of the Financial Accounting Standards Board (FASB) is to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors and users of financial information http://www.aredconsult.com/accounting-resource/what-is-the-sarbanes-oxley-act.htm The Sarbanes-Oxley Act of 2002 is a United States federal law passed in response to the recent major corporate and accounting scandals including those at Enron, Tyco International, and WorldCom (now MCI).These scandals resulted in a decline of public trust in accounting and reporting practices http://www.aredconsult.com/accounting-resource/what-partnerships-and-limited-liability.htm Some business owners choose to create partnerships or limited liability companies instead of a corporation. A partnership can also be called a firm, and refers to an association of a group of individuals working together in a business or professional practice http://www.aredconsult.com/accounting-resource/who-uses-forensic-accountants.htm Forensic accounting financial investigative specialists work with financial information for the purpose of conveying complicated issues in a manner that others can easily understand