Overview of Accounting Essay

The audiences of fiscal dictations and managerial authorships include the shareholders, employees, prospective employees, customers, suppliers, the government, the transport exchanges, investors, lenders and the public at large. What is important is that each audience has a different perspective in reading the pecuniary statements and managerial broods. For example, a lender would like to know the leverage of the gild, if it has the capacity to service debt and if the loans to the company would be well secured.There are several purposes served in preparing financial statements and managerial reports. The financial statements are designed to show its audience, the companies finances, that is how the company got its finances, what it was employ for and where is it being currently used (Luecke, R. 2002). For this purpose there are four-spot main financial statements that is the income statement, the hard currency feast statement, the equilibrise shred and the statement of sh areholders equity.In general an income statement has the purpose of showing how much gross a company earned in a period of time, the sleep sheet shows the companys assets, liabilities and shareholders equity, the cash flow statement shows the inflow and outflow of cash and the purpose of the statement of shareholders equity is to show changes in the ownership of companys shareholders over a period of time. The personality of the income statement is in the form of a report that shows the costs and expenses that the occupancyes incurs in order to earn its revenue.It flip overs the net earnings of the company. The nature of balance is such that it provides point wise information to the highest degree the assets, liabilities and shareholders equity. The nature of a tradees balance sheet is such that it is set up like the basic accounting system equation. Usu completelyy on the left get through side the companies list the assets and on the right hand side they list their liabil ities with the shareholders interest at the bottom. This system of rules differs from unsophisticated to country. For instance, in some countries the assets are listed on the right hand side.However, the basic nature of the balance sheet remains the same. The nature of the cash flow statement is such that it can inform its audience if the business generated cash or not. The cash flow statement is a report that shows cash changes over time instead of exact currency amounts at a point in time. It simply uses and rearranges information from the balance sheet and income statement of the business. The most important report that is issued by the management of a company is the annual report (Stittle, J. 2003).The nature of this report is such that it has circumstantial financial and business information required by law of the country in which the company is registered, modern annual reports have impressive pictures and stories that eulogize the companys surgical procedure in the past year. The information contained in this report can help the audience make sure and honorable decisions. In the USA the SEC requires that the audited annual report be displace to every shareholder at the end of the year. In this the management comments well-nigh the future. Form 10-K required to be filled in the USA ha more detailed financial information.The companys financial performance is described in a section of the quarterly or annual report that is called Managements Discussion and Analysis of Financial train and Results of Operation, In this section of the Annual Report the management describes its own instinct of the financial condition of the company. The management in this section of the annual or quarterly report describes what it understands of the current financial condition of the business. It to a fault gives its believe of the relevant trends and challenges that the business faces.This allows the audience to see the financial condition of the business from the p erspective of management and allows the audience to make informed and ethical decisions. In other words it provides the audiences the background that is required to study and understand the financial statements. Financial accounting information can be used in making informed and ethical business decisions. How? The income statement shows the earning per share, a enumeration that tells you how much you as a shareholder would receive if the company distri howevered all its earnings.This allows you to make an invest/ non invest decision. Giving more information about the financial health of the company is the cash flow statement. It divides cash flow into flows from operating activities, investing activities and financing activities. This informs not only the investors but also the management, employees, suppliers and customers about the source of cash for the company and allows them to make better decisions. The footnotes of the reports give important information that helps make effi cient and ethical decisions.The footnotes refer to stock options, pension plans, income taxes and important accounting policies and practices. For example, a company may be showing an inflated profit figure because its accounting practices have changed but reading the footnotes helps the audiences make better decisions and ethical decisions with regards to the company. To make ethical and informed decisions it is important to read between the lines of these reports. How is this accomplished? By doing ratio compendiumCommonly the ratios that are examined are debt-to-equity ratio, inventory turnover ratio, operating beach ratio, P/E ratio and working capital. Consider this, well in the first place the Enron scam exploded several investors were able to smell by examining the ratios that something was misemploy with the company. They decided to sell off their stocks and avoided losses. To sum, the intention of the financial statements and management report is to inform the different stakeholders of a business. If these statements are carefully analyzed and mute they help these stakeholders make an informed and ethical decisions.