The simplest interpretation is that the value of a company is represented by the difference between what things of value it possesses (the equity) and what it owes (is liable for).
Equities include cash, money owed to the company (accounts receivable), value of inventory, and value of its equipment, buildings, and land; liabilities include money owed (accounts payable), mortgages, and any other claim or encumbrance on the company’s revenue or property. Another way of understanding this equation is that a company owes all of its assets either to creditors or owners. 2) The tools used by accountants are the general journal, the general ledger, and financial statements. The general journal is the chronological record of all the company’s transactions. (3) It is based upon the double entry system, another basic principle of accounting. (2) The double entry system recognizes that every transaction affects two accounts- for example, if a payment is received by the company, it is added to the cash account but it is subtracted from the accounts receivable account.
The Term Paper on Risk Management Within General Motors Company
... and Chrysler instead of cash for half that the auto companies owed the VEBA (Voluntary Employee Beneficiary Association) trusts, and the ... top of the automotive industry. Risk Management within the General Motors Company General Motors has been in business since 1908 and currently ... several poor business decisions that did not take into account any future risks or market changes. A new management ...
If a product is sold, there is a debit from inventory and a corresponding credit to cash (or accounts receivable).
The double entry system has two fundamental working principles: 1) each transaction shows in each of two accounts, and 2) each account has (at least) two columns, allowing for both debit from and credit to that account. (4) Each entry in the general journal is then recorded in the appropriate accounts in the general ledger. This allows the activity and balance for any given account to be viewed. 5) This transfer of information from general journal to general ledger is readily done automatically by computer software. (5) The information from the general ledger is then used for the preparation of financial statements. There are four financial statements required by Generally Accepted Accounting Principles, or GAAP, which are widely accepted accounting standards. (2)
It is a profession, which means that accountants make decisions based on the best interest of their clients, irrespective of their personal best interest. Ethics in accounting are very important, and big decisions involving large amounts of money are made on the basis of financial statements prepared by the accountant. Technological advances have made much of the mundane work of general ledger entries and preparation of financial statements easier. Software is available to assist in accounting at levels ranging from individuals to large corporations. 7) Rather than replacing the accountant, these technologies allow the accountant to focus on interpretation of the information generated to assist individuals, business owners, and corporate stockholders in making the best decisions possible. (7) Thus we see that accountants have a very important role in our society. The profession requires not only intellectual skills, but also honesty and high moral character since so many people depend on the accountant’s work in making decisions that may affect their lives and financial well-being very deeply.
