MIE201BusinessProcesses-49

Deviations between the two serve as a " trip wire ' or feedback loop " to launch more detailed financial analyses in an effort to pinpoint trouble spots & opportunities annual report- summary of a firm's financial info , products , & growth plans for owners & potential investors . Financial statements meeting these conditions are audited . Primary external users of audited info are gov . agencies , stock holders , & potential investors , lenders , suppliers , & employers . Financial statements evaluate the return on stockholders' investments & the overall quality of the firmis myit team . The Accounting Process The Accounting Equation assets - a firm's economic resources , or items of value that it owns , ( cash , inventory , land , equipment, buildings , & other tangible or intangible things ) liabilities - debts that a firm owes to others ( bank loans , supplier credit , & other debts ) owners' equity - equal assets minus liability & reflects historical values . accounting equation - Assets = liabilities + owners'equity double - entry bookkeeping - a system of recording & classifying business transactions that maintains the balance of the accounting equation . accounting cycle - four - step procedure of an accounting system examining source documents , recording trans actions in an accounting journal , posting recorded transactions , & preparing financial statements . 1. Examine Source Documents: checks, credit card receipts, sales slips, & other related evidence concerning specific transactions. 2. Record Transactions: journal - a time- ordered list of account transactions 3. Post Transactions: ledger- a book or computer file with separate sections for each account. Transfer info from journal to ledger. The process is known as posting . At the end of the accounting period ( yearly , or monthly & quarterly), prepare a trial balance - a summary of the balances of all accounts in the general ledger . If , upon totaling , the trial balance doesn't balance ( the accounting equation is not in balance ) they look for mistakes ( an error in one or more of the ledger entries ) & correct them . 4. Prepare Financial Statements. In public corporations & other orgs, a CPA must attest, or certify that the org. followed generally accepted accounting principles in preparing the financial statements . When these statements are completed , the orgs books are " closed " & the cycle begins for next period .