Financial Information Scoring Guide
5202019 Financial Information Scoring Guide
Prepare a comprehensive financial accounting report and analysis based on the provided data, including the creation of a general journal for a company using appropriate financial data, describing business accounting terminology, internal and external users of accounting data, the role of ethics in accounting, the purpose of accounting conventions, main financial statements, and the role of debit and credit. The report should include detailed explanations supported with examples, demonstrate understanding of ethical issues, and accurately prepare journal entries based on the given transactions using correct data and computations.
Paper For Above instruction
The purpose of this paper is to demonstrate an understanding of fundamental accounting principles and procedures through the preparation and analysis of financial records based on the provided scenario involving Capella Golf Course. This includes creating accurate journal entries, explaining key accounting terminology, identifying the users of financial information, understanding the ethical considerations, and comprehending the main financial statements and concepts such as debits and credits.
Introduction
Accounting serves as the backbone of financial management in any business, providing critical information for decision-makers, investors, and regulators. The process begins with accurate recording of financial transactions through journal entries, which are subsequently summarized in financial statements. This paper reflects on the core elements of accounting, illustrating how these principles are applied in a practical scenario involving a hypothetical golf course business.
Preparation of a General Journal
Based on the detailed transactions provided, we first prepare the general journal entries, applying accurate financial data and computations as follows:
| Date | Accounts | Debit | Credit |
|---|---|---|---|
| May 1 | Cash | $20,000 | |
| Owner's Capital | $20,000 | ||
| May 3 | Land | $12,000 | |
| Buildings/Shed | $2,000 | ||
| Equipment | $1,000 | ||
| Cash | $15,000 | ||
| May 5 | Advertising Expense | $700 | |
| Cash | $700 | ||
| May 6 | Prepaid Insurance | $600 | |
| Cash | $600 | ||
| May 10 | Equipment | $1,050 | |
| Accounts Payable | $1,050 | ||
| May 18 | Cash | $1,100 | |
| Service Revenue | $1,100 | ||
| May 19 | Cash | $1,500 | |
| Unearned Service Revenue | $1,500 | ||
| May 25 | Owner's Drawings | $800 | |
| Cash | $800 | ||
| May 30 | Salaries and Wages Expense | $250 | |
| Cash | $250 | ||
| May 30 | Accounts Payable | $1,050 | |
| Cash | $1,050 | ||
| May 31 | Cash | $2,100 | |
| Service Revenue | $2,100 |
Explanation of Business Accounting Terminology
Understanding the key terminologies is essential in accounting. Accounts such as Cash, Land, Equipment, and Buildings represent asset accounts, indicating resources owned by the business. Accounts payable and unearned revenue reflect liabilities, showing obligations owed by the business. Owner's capital and drawings represent equity, indicating owner investments and withdrawals. Understanding these terms enables accurate recording and analysis of financial data (Kieso, Weygandt, & Warfield, 2019).
Internal and External Users of Accounting Data
Internal users include management and employees who use financial data to make operational and strategic decisions. External users comprise investors, creditors, regulators, and tax authorities who interpret financial statements to evaluate financial health, creditworthiness, and compliance (Wild, Subramanyam, & Halsey, 2020). Recognizing these users' needs influences how financial data is prepared and presented.
Role of Ethics in Accounting
Ethics play a vital role in maintaining trustworthiness and integrity within the accounting profession. Ethical standards prevent fraud, misrepresentation, and manipulation of financial data. Accountants are bound by ethical codes such as integrity, objectivity, and confidentiality, which uphold the credibility of financial information used by various stakeholders (Gaa, 2022).
Purpose of Accounting Conventions
Accounting conventions established by law, regulators, and professional bodies provide standardized guidelines, ensuring consistency, comparability, and transparency across financial reports. Examples include the consistency principle, which mandates that accounting methods are applied uniformly over time, and full disclosure, requiring comprehensive reporting of financial information (Schroeder, Clark, & Cathey, 2019).
Main Financial Statements
The primary financial statements include the Income Statement, Balance Sheet, and Statement of Cash Flows. The Income Statement reports revenues and expenses, revealing net profit or loss. The Balance Sheet presents assets, liabilities, and equity at a specific point in time. The Statement of Cash Flows details cash inflows and outflows, illustrating liquidity and cash management (Weygandt, Kimmel, & Kieso, 2018).
Role of Debit and Credit
In double-entry accounting, debits and credits are fundamental. Debits increase assets and expense accounts, while credits increase liabilities, equity, and revenue accounts. Proper application of debits and credits ensures the accounting equation (Assets = Liabilities + Equity) remains balanced. For example, recording a sale for cash increases both cash (debit) and revenue (credit) (Harrison, Horngren, & Thorne, 2018).
Conclusion
This paper provided an integrated overview of essential accounting principles by preparing journal entries based on real transactions, explaining key terminology, and analyzing the functions of various financial statements. Understanding these fundamental concepts equips students and practitioners to accurately record, analyze, and interpret financial data, fostering transparency and trust in financial reporting. Proper ethical conduct, adherence to conventions, and knowledge of user needs are pivotal in maintaining the integrity and usefulness of accounting information.
References
- Gaa, J. C. (2022). Ethical considerations in accounting. Journal of Business Ethics, 175(2), 285-300.
- Harrison, W. T., Horngren, C. T., & Thorne, D. (2018). Financial & managerial accounting (6th ed.). Pearson.
- Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate accounting (16th ed.). Wiley.
- Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2019). Financial accounting theory and analysis: Text and cases (13th ed.). Wiley.
- Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2018). Financial accounting (10th ed.). Wiley.
- Wild, J. J., Subramanyam, K. R., & Halsey, R. F. (2020). Financial statement analysis (12th ed.). McGraw-Hill Education.