Question

Define accounting and describe the different uses of accounting information. What are steps of the accounting process and cycle? What are the various components of an income statement in order to evaluate a firm's "bottom line?"

What do your look for on a company's balance sheet to determine its current financial position? What is ratio analysis? How can it be used to analyze financial statements to evaluate a company's performance?

Answer 1

It can define the accounting  It si the process of recrding the financial transactions and presentation of financial data

The users of accounting information?-

• Management
• Employees
• Owners:

• Accounting cycle - collective process of recording and presenting the accounting transactions

1. Analyzing and recording transactions via journal entries
2. Posting journal entries to ledger accounts
3. Preparing unadjusted trial balance
4. Preparing adjusting entries at the end of the period
5. Preparing adjusted trial balance
6. Preparing financial statements
7. Closing temporary accounts via closing entries

The various components of an income statement in order

Income Statement Format, Components, and Purpose. The Income Statement format is revenues, expenses, and profits (or losses) of an entity over a specified period of time. In other words, it is a description of the entities profitability over a period of time (usually quarterly or annually).

Similarities

The accounting cycle for service companies and merchandising companies includes similar processes. For example, the accounting cycle for both companies follows the same basic structure of recording transactions and reporting financial results. The accountants in both types of companies review the account balances and identify any necessary adjustments. Adjustments refer to transactions that occurred during the month but did not create an entry in the financial records. The adjusting entry records the entry.

Differences

Several differences exist in the accounting cycle between service companies and merchandising companies. These include recognition of revenue and the format of the financial statements. Service companies recognize revenue when the company performs the service for the customer. In most cases, the company bills the customer on a future date to request payment. Merchandising companies generally collect payment from customers when the customer takes the merchandise from the store. The merchandising company recognizes revenue on the date of sale. The income statement formats vary between service companies and merchandising companies. The income statement for the service company subtracts the operating expenses from the revenues to arrive at net income. The merchandising company subtracts the cost of merchandising from the revenue to arrive at gross profit. It then subtracts all other operating expenses to arrive at net income.