Running Head: ACCOUNTING

Running Head: ACCOUNTING
Accounting
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ACCOUNTING 2
 Explain the impact of accounting transactions in financial statements.
To achieve the aim of providing correct reports and documentation, every accounting
transaction is essential. The statements must be precise in order, each and every transaction
must be reported correctly. The statements must be precise and accurate and every
transaction must be reported correctly. Transactions entail purchases, borrowing, transfers
and any other transaction that includes the trade of goods, services, and money. Concisely
prepared financial statements enable a business to analyze its overall business performance
and evaluate the information to make financial decisions more effective. Information in the
field of financial statements is that investors use it to make decisions on whether they want to
move forward with further investment or to scale back their current investment. Financial
statements frequently show various times or periods and transactions, especially large ones,
which are recorded at the wrong time that give a false representation of the actual figures for
a specified period (Trabulsi, 2018).
 Describe the elements and purpose of each financial statement.
Financial statements has ten components, Assets, liabilities, equity, comprehensive income,
revenues, expenses, gains, losses, investments by owners, and distributions to owners are the
basic elements that comprise a financial statement (Robinson, 2020). Assets are listed on the
balance sheet of a company and are acquired or generated to increase the value of a company
or support the operations of that company. Liabilities are an essential part of a business as
they are used to fund projects and compensate for major expansions. Equity is crucial as it
reflects the value of the securities or a business interest in an investor. Comprehensive
income is intended to provide users with information on the financial results of a company
ACCOUNTING 3
over the financial period. The total of revenue is significant as a company needs to bring in
money to make a profit. An accounting expense is the money a company spends or costs
incurred in its efforts to generate revenue. Gains are important as they show any appreciation
ship of the market prices of assets in the business. For financial accounting, a loss is a
reduction in net income which is beyond the normal business activities. Investment by
owners is the sum of capital or other assets that the owner contributes to the company either
to establish it or to keep it going. Distribution to owners is the compensation of retained
profits resulting to a simple assessment of the company's equity and assets.
 Discuss the components and use of financial analysis.
There are five major key elements of financial analysis. They include:
Revenue – this is the major source of income in a business. If a client makes up a large
amount of the revenue in a company, the business could suffer if they discontinue their
purchases.
Profits – Profits are important in maintaining long term life in a business. Producing
consistent profits in the business lowers the risk of insolvency or termination in the long run.
Operation efficiency – it is the measure of how the company is using its resources. It is
measured using accounts receivables and inventory turnover ratios. Poor operational
efficiency leads to lower profits hence slow growth of the business.
Capital efficiency and solvency – this is to the interest of investors as well as creditors. The
ROE as well as Debt-to-Equity ratios measure the leverage which is a pre-determinant of
solvency.
ACCOUNTING 4
Liquidity – using the current ratio, investors as well as other users are able to determine the
liquidity position of the firm.

ACCOUNTING 5
References.
Robinson, T. R. (2020). International financial statement analysis. John Wiley & Sons.
Trabulsi, R. U. (2018). The Impact of Accounting Information Systems on Organizational
Performance: The Context of Saudiâ€™ s SMEs. International Review of Management
and Marketing, 8(2), 69-73.

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Running Head: ACCOUNTING

 Explain the impact of accounting transactions in financial statements.

transaction must be reported correctly. Transactions entail purchases, borrowing, transfers

a specified period (Trabulsi, 2018).

 Describe the elements and purpose of each financial statement.

reflects the value of the securities or a business interest in an investor. Comprehensive

to establish it or to keep it going. Distribution to owners is the compensation of retained

profits resulting to a simple assessment of the company's equity and assets.

 Discuss the components and use of financial analysis.

efficiency leads to lower profits hence slow growth of the business.

ROE as well as Debt-to-Equity ratios measure the leverage which is a pre-determinant of

liquidity position of the firm.

Trabulsi, R. U. (2018). The Impact of Accounting Information Systems on Organizational

Performance: The Context of Saudiâ€™ s SMEs. International Review of Management

and Marketing, 8(2), 69-73.

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