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Introduction to Financial Accounting and GAAP

Accounting, a.k.a. “The Language of Business”, is a large and diverse topic. Subtopics include financial accounting, cost accounting, management accounting, internal auditing external auditing, international accounting, governmental and not-for-profit accounting and taxes. The subtopic that comprises the largest portion of an accountants academic program of study is financial accounting.

The purpose of financial accounting is basically to provide useful information to users who will use that information to make a decision, most commonly either an investment or a credit decision. To be useful information needs to be relevant and reliable. The most common means of conveying information to users is through the preparation of financial statements: 1. the income statement, 2. the balance sheet, 3. the statement of cash flows, and 4. the statement of shareholders’ equity.

The income statement presents the profitability of company over a period of time. The balance sheet presents the assets, liabilities, and owners’ equity at the end of the period of time used for the income statement. The statement of cash flows classifies all cash inflows and outflows during the time period into one of three categories: operating, investing, and financing. The statement of shareholders’ equity shows how the shareholders’ equity changed over the period.

Generally accepted accounting principles (GAAP) are a set of standards, methods, procedures, and guidelines companies follow in measuring and reporting financial information in the financial statements. GAAP comes from written sources as well as practices that have been used for a ling time that have become generally accepted. Although the Securities and Exchange Commission (SEC) has the legal authority to set accounting standards for companies, it has always delegated the majority of this responsibility to the accounting profession itself. The current accounting professional body that sets standards is known as the Financial Accounting Standards Board (FASB). The FASB issues standards called Statements of Financial Accounting Standards (SFAS). They can be found on the FASB web-site, http://www.fasb.org. As of May 2007 the FASB has issued 159 such statements.

All publicly traded companies listing their stocks on U.S. stock exchanges must have their financial statement audited by an external CPA firm that expresses an opinion as to whether the financial statements have been prepared in conformity with GAAP. The idea is to lend credibility to the financial statements by providing a third-party’s verification that the statements are presented fairly in conformity with high quality standards, GAAP!

Recent accounting scandals (WorldCom, Enron, etc), however, have given the accounting profession somewhat of a black eye and have rekindled the debate over whether principles-based, or more recently termed, objectives-oriented, standards should be set forth as opposed to rules-based accounting standards. A principles-based approach to standard setting stresses professional judgment, as opposed to following a specific list of rules.

Personal Finance Site and the Financial Help You Need

A personal finance site conveys the information about the various options available for public to invest in long and short term investment. It secures their money and provides them a definite income for life, when they have taken retirement from their work. It is recommended for anyone who is planning his pension, to invest in annuities, fixed deposits and life insurance, by which you are assured of considerable income for life.

A personal finance site is of great importance to all those who have been on the verge of retirement, or even for those who have just started their career. Better investment options are required by everyone who wants to make it big in the forthcoming years of his career. Adults eager to seek retirement want to know options to invest in from where they could get permanent monthly income after the retirement in the form of interests on investments.

A Personal finance site can help you take control of your financial transaction. And they do it for free. You need not worry about paying them huge parts of the benefits you own. You need not buy the original software for that, you can just use these sites to do the rest of the work for you.

You can get an in succession total of your net worth by submitting your personal financial information on such sites. These are owed by big commerce houses and avail the best of technology to secure the information. Thus you need not worry about the safety of your information and virus threat to your system as well. These sites analyze every penny you spent through credit or debit cards, but you are required to submit the true information about how you spent the cash during the previous accountable period.

A personal financial site, tells you how you handle through your financial life, and the list of the best investment options suiting your case. Such a personal finance site could be categorized on the basis of services provided by them. Like money management sites, investment seeking sites, personal financial life analyzing sites and many more.

The best money management sites to cater all your money management needs are:

• Mint
• Money Strands
• Wesabe
• Thrive
• Buxfer

A personal finance site of this sort conveys useful information to the users to direct their present and ongoing investments to assure safer future. The above said sites are claimed to be the best in the industry as they take only a few minutes for initial processing of the financial report of the user and then provide conclusion about their financial life and risks. Such sites perform automatic categorization of the incomes earned by the user during the specific tenure. But mint money management site has not been performing up to the standards at times. As it takes more than an hour to complete the initial process and the categorization of income done on this site is also incorrect at times. In such cases users are required to keep a check on what sort of analysis the site has done, and only after that they should consider the conclusions provided by the site.