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Organizations that provide accounting governance basically refers to the bodies formed for the purpose of guiding the accounting professions. By guiding we mean the rules and regulations that are set for the purpose of directing accountants and bookkeepers on how to go about computing, recording and implementing accounts information.
These rule and regulations are set aside to monitor the activities that involve accounting profession were later made a requirement for each and every organization that practiced this profession. The requirement came out of the fact that more and more companies were not consistent in the application of accounting techniques thereby producing reports that were not faithfully represented and were biased.
Generally Accepted Accounting Standards refer to accounting principles, standards and procedures that organizations use to produce their respective financial statements. In the United States, GAAPs are a compilation of rules and procedures used in the preparation, presentation and reporting of financial statements of an extensive range of firms which include: both public and private firms, non-profit organizations and government establishments (Melville, 1999).
FASB and SEC are the two legal bodies that have been given the mandate to frequently amend the rules and regulations that form part of GAAPs. These amendments are made frequently depending with the need of the moment and the entire profession is required to comply with the amendments made. The ease of communication is made possible through the annual journals that are published after each and every successful amendment so as to keep accountants at ease with the changing accounting environment.
FASB is the short form of Financial Accounting Standard Board; this board is composed of seven independent members who are obviously accounting professionals. This board was formed for the purpose of establishing and communicating principles and procedures of financial accounting information as well providing a report of the same. The mandate of FASB is to govern the preparation of business financial reports which are then handed to SEC for approval and publishing (Collins& Keith, 2010).
All in all, the main task of FASB is to make moves that would aid in improving the business accounting practices and procedures by assisting in formulation of rules and regulations whose objective is not only in identifying accounting reports but also determining challenges in a timely manner thereby developing a standardized mode of producing accounting data to the financial industry allover.
SEC is the short form for Securities and Exchange Commission. This board has been mandated with the authority to create awareness to both existing and potential investors, maintaining a fair and arranged financial market that would make possible the formation of capital to entities which in turn would be used to supplement economic growth of the country. The need to come up with a board that controls and oversees the securities in the financial was for the mere reason of protecting the investor from the unstable security markets. Unlike money saved in banks, purchased stocks and bonds lose value from time to time and this incident lead to the formation of this body. The law that oversees the security market in the United States requires that all forms of investors whether large or small be exposed to certain kinds of information about security investments. This institution achieves this level of fairness by putting a decree that requires all public companies to disclose their respective financial information to the investors so that they could be in a better position to decide whether to buy, sell or hold onto their securities.
With the prevailing economic recession, I believe that these two organizations have thrived in protecting the different users of the accounting information a great deal. The rules and regulations set aside by these two institutions have helped in curbing great levels of corruption and greed upon public companies. For instance, in some time back, the public companies were suspected of conducting illegal business activities that involved sharing of internal company intelligence with a group of individuals who were there to accumulate large sums of money from the unsuspecting public(Melville, 1999).
The introduction of GAAPs was a major success in the sense that both public and private companies were obligated to disclose a fair representation of financial information that was to be used by potential investors in making decisions on whether to invest or not. Without these regulatory boards it basically means that these investors would be exposed to a high level of exploitation.
The basic concepts of Financial Accounting information are four in number, that is, accounting entity: this assumes that a business is a separate entity from its owners, going concern entity: this concern holds that a business is expected to be in full operation throughout the time, monetary unit principle: this concern assumes that the business entity would consistently use the same currency in recording revenue and expenses. And the last concept is the time period principle which assumes that the economic undertakings of an entity could be partitioned into artificial time frames (Collins& Keith, 2010).
The source of accounting data include: associations, organizations and companies financial reports (both public and private companies), cover books, directories that report on financial accounting, job reviews and newsletters from entities.
Accounting information is used by potential investors to make decisions that involve rational investment ideas. Well represented accounting information would attract more investors than a report which is considered biased. Creditors of an entity are the next group of users of the information. This creditors use the information to gauge the creditworthy of an entity. A company whose report is fairly represented gains a substantial amount of creditors who will be willing to work with the firm out of trust. Managers of the firm also use the accounting information in making decisions concerning the firm. The report provided would be mainly used for the purpose of differentiating projects that need immediate funding and those that could wait.
Another user of the accounting information is the government. The government would use this information for the purpose of making decision involving taxations. Entities have the moral responsibility of disclosing their fincial statements to the public. The public have the right to know the major shareholders of the entity for the purpose of transparency (Collins& Keith, 2010).
The major users of accounting information are shareholders. These classes of users are the main source of funding of entities and they would therefore require companies to report the information in a very transparent way so that they could make decisions to either commence being shareholders or quit altogether. Financial accounting is the main material used in deciding the amount of profits to be set aside as dividends.
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