The paper "Types of Accounting Information & How They Are Recorded" is a perfect example of a finance and accounting coursework. Business organisations use distinctive accounting systems in order to record accounting information in the best manner possible. Even though there are a number of an underlying financial record like invoices and journals; the fundamental accounting record is fairly defined by the different types of financial statements that help to evaluate and summarise the financial status of a given entity. Subsequently, the need for accounting rules and regulations has grown over the years with simple and complex modifications being affected in order to summarise these financial record types in ways that users of accounting information can easily understand (Labardin & Nikitin, 2009).
Thus, the focus of this paper is to examine the importance of adhering to rules whenever conducting preparing financial information especially end-year financial statements. Types of Accounting Information & How They Are Recorded It is important to note that each type of accounting information is recorded in a unique manner but are always related in one way or another. An income statement is a distinctive form of accounting information that helps to ascertain, list and record all incomes and expenses transactions that have occurred within a given operational year.
It is specifically utilised measure the profitability levels of an entity and it is recorded in a daily, monthly, quarterly as well as annual basis from such other accounts as sales and purchases ledgers (Danos, Holt & Imhoff. Jr, 1989). These records enable the owner of a business to understand whether or not the operations are resulting in high incurrence of expenses or even the generation of additional income. A balance sheet is a form of accounting information platform that records both assets and liabilities of an entity within a specified period of time.
The preparation of this form of accounting information takes from such accounts as the accounts receivables and payables for that matter (Danos, Holt & Imhoff. Jr, 1989). It is mainly used for the purpose of assessing the potential financial health of an entity within a given period. The statement of cash flows is yet another important form of accounting information that is recorded and presented using such accounts as cash books.
It showcases the in and outflows of cash resource (Danos, Holt & Imhoff. Jr, 1989). It helps to establish whether an entity has sufficient cash resource to meet its underlying expenses and obligations. Uses Accounting Information The uses of accounting information can be distinctively grouped into two aspects; uses of accounting information within an entity and its uses outside the entity as well. The uses of accounting information within the entity by such stakeholders as the owners, employees and also the Board of Directors is meant to evaluate the organisation’ s immediate stability as well as profitability aspects so that they can make a basis for future effective decisions (Constantin, 2012).
In fact, the owners and Board of Directors are specifically interested with an entity’ s accounting information for purpose of ascertaining their immediate capacities to generate revenues and thus profits while employee personnel are interested in finding out, of course from this financial information, whether or not the entity is fairly positioned to avail remuneration packages, other benefits as well as possible career opportunities (Constantin, 2012).
Constantin, DF. 2012. The users of accounting information and their needs. Accessed from http://fse.tibiscus.ro/anale/lucrari2013/lucrari_vol_xix_2013_032.pdf
Costa, JA. 2012. Accounting: An information system for organisations. Accessed from http://www.upf.edu/usquid-facecon/_pdf/ebook_accounting.pdf
Danos, P, Holt, DL & Imhoff. Jr, EA. 1989. “The use of accounting information in bank lending decisions, Accounting Organisations & Society, 14 (3).pp. 235-246
Labardin, P, & Nikitin, M 2009. “Accounting and the Words to Tell It: An Historical Perspective.” Accounting, Business & Financial History 19 (2): pp.149–166
Oler, D K., Oler, MJ & Skousen.CJ 2010. “Characterizing Accounting Research.” Accounting Horizons 24 (4): pp.635–67