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Accounting Overview

Accounting:   Overview for Small Business Owners
January 29, 2007

Accounting:   Overview for Small Business Owners
The opportunity to present information to small business owners with no accounting or finance knowledge certainly presents an immediate challenge.   The material included herein will identify the audiences, purposes and natures of financial statements and managerial reports.   In addition to this, the scope of the paper will explain the use of financial accounting information in making informed and ethical business decisions.
Financial Statements
"Accounting is sometimes said to be the language of finance because it provides financial data through income statements, balance sheets, and the statement of cash flows" (Block & Hirt, 2005).   Financial statements are at their most basic level a summary of the monetary position of any organization. The most common financial statements include the income statement, the balance sheet, and the statement of cash flows (formerly referred to as the statement of changes of financial position). These statements are used by management, labor force, investors (present and prospective), creditors and government regulatory agencies. Financial statements can be available for individuals, non-profit organizations, retailers, wholesalers, manufacturers and service industries. The nature of the organization involved dramatically affects the kind of data available in the financial statements. The purpose of the user dramatically affects the data he or she will seek.
To pursue the inner workings of accounting through these financial statements, a basic appreciation for each must be obtained.   The three financial statements described are a required element of the Statement of Financial Accounting Standards (SFAS, No. 95), detailed by the Financial Accounting Standards Board (FASB).   "The mission of the FSAB is to establish and improve standards of financial accounting and reporting for the guidance and education of the...