Running head: DISCUSSION OF ACCOUNTING
Discussion of Accounting Terms and Reports
Brian K. Brecht
TUI University
ACC501
Module 1
Introduction, Review of Accounting Process and Financial Statements
Dr. Jesse Arman
Introduction, Review of Accounting Process and Financial Statements
Accounting processes have many terms associated with them and a solid understanding of these terms will allow one to better assess the various financial statements for a company. In the following discussion of a few of these terms one will be able to more easily decipher the financial reports that will also be addressed. By having the ability to do so, one should be able to make more sound decisions in assessing a company’s financial position.
The first topic of discussion will be concerning the Generally Accepted Accounting Principles, commonly referred to as GAAP. These principles are the rules of engagement, so to speak, for accounting in the United States and are developed by a consensus of experts and members of the Financial Accounting Standards Board (accounting, 2008). They basically lay out accepted practices on how companies within the same industry report their finances. Without these principles, companies producing similar products could construe their financial reports in order to make themselves look better than the competition.
Another term associated with accounting is historical cost. By definition, “historical cost of an asset is the sum of all of the expenditures the company made to acquire it” (accounting, 2008). Simply put, this means that a company must take into accou ...