Contemporary Issues in Accounting

Accounting is a field that is often misunderstood. The Accounting for the Modern World staff has been helping students in accounting classes understand the concepts of financial statements and how to use them. Here, we will go over some of the more contemporary issues in accounting, such as social media marketing, fraud prevention management, and supply chain risk analysis. Get help in completing contemporary issues in accounting homework/assignments.

Contemporary Issues in Accounting
Contemporary Issues in Accounting

 

What is accounting, and why is it important?

Accounting is a field that focuses on the recording, categorization, and summarizing of financial data. Whether it is to direct current operations or make decisions in investment strategies, accounting plays an integral role in business. This branch of business analysis can be traced back to ancient times, but today’s accounting practices are vastly different from what they used to be with technological advances.

The importance of understanding accounting comes into play as soon as a person goes to college and needs to take courses in this subject area. However, even if someone has no plans for entering a career field directly related to accounting, there is still a need for knowledge about this topic.

For example, when considering personal investments, one should know how the current fiscal year is being handled. Therefore, if someone wants to make an intelligent decision about saving up money for the future, one needs to know how much revenue was generated by the previous fiscal year. This information can also help with budgeting and estimating how much money should be set aside to cover expenditures associated with that same period.

The two central governing bodies in accounting are The Financial Accounting Standards Board (FASB) and The International Accounting Standards Board (IASB). These organizations assist in providing standards that companies must follow when reporting financial data. Many businesses utilize independent auditors so these parties can ensure that all company operations are being carried out correctly and according to regulations.

The history of accounting

When thinking about the history of accounting, it is essential to remember that this field has been around longer than written accounts have. The creation of a double-entry bookkeeping system is credited with significantly altering how various transactions were recorded. Thus, even though we cannot document precisely when these developments took place, they are still considered noteworthy achievements in the world of accounting.

The Italian mathematician, Luca Pacioli, is one of the first scholars to recognize and promote the importance of accounting within society fully. He also contributed heavily to the development and implementation of double-entry bookkeeping, therefore placing him at the forefront in helping create a culture surrounding all aspects related to economic management.

In modern times, today’s policies regarding accounting are based on the standards established by the Financial Accounting Standards Board (FASB) and The International Accounting Standards Board (IASB), which were formed in 1973. Although accounting was first practiced centuries before, this is when both organizations came together to create a unified code that all companies must abide by.

Accounting ethics 

When studying accounting, it is essential to consider that this field has both legal and moral responsibilities. It is also necessary to recognize that financial records can impact not only external audiences but also internal ones by influencing employee performance and motivating them to work harder. Therefore, accountants are supposed to be held to a higher level of accountability than other business professionals, which means they must maintain high levels of ethical conduct at all times.

Examples of unethical behavior include making false statements, failing to disclose relevant information, allowing conflicts of interest between personal interests and their employer, or even engaging in an unlawful activity such as tax evasion.

With the aid of technology, there are many new ways for individuals who specialize in this field to detect either unethical behavior or fraudulent activity. Software applications have been created that allow for easy cross-referencing between different accounts, making it easier than ever for accountants and auditors to review various financial reports and compare them against a predetermined set of criteria. Changes made to these records are then analyzed using algorithms that can determine if any discrepancies occur, suggesting some suspicious activity; therefore, completing an audit process more efficiently than traditional manual methods.

How to make sense of financial statements 

When reading a financial statement, it is essential to remember that this document consists of many different parts. There are four main sections: the income statement, cash flow statement, balance sheet, and the statement of retained earnings. When reviewing these documents, you should expect to see condensed annual reports and quarterly ones, but they all follow the same order when listed in order of importance.

These documents can be presented either verbally or graphically, depending on the type of report being distributed.  Within each section, there are specific amounts that will be displayed, such as revenue and expenses. For example, when reviewing the income statement, these figures will most likely be negative or positive numbers. These terms are essential to understand to comprehend how and where money is being earned or spent. They also allow for a better overview of whether an organization is succeeding financially or not; thus, allowing managers and investors to make more informed decisions regarding future business operations.

To understand the data displayed within any financial report, it may be helpful to visualize them on a two-dimensional chart such as above. The x-axis (horizontal) represents time, whereas the y-axis (vertical) represents different amounts, making it easier to take quick mental notes about changes occurring over time concerning projected values.

The following chart provides a short description of each section that should be listed within an annual report. Remember that these are not the only pieces of information contained in one; however, they are considered the most critical and pertinent details. As mentioned before, when reading any financial statement, it is essential to keep in mind that all reports must adhere to an accepted set of standards that were created by both the FASB & IASC.

Current issues in accounting, including the tax code and fraud prevention 

The significant component of an audit is analyzing internal practices and the risks they face in business transactions. Another essential part of this examination process involves looking at how healthy companies comply with current and proposed regulations created by various governing bodies, such as The Federal Reserve System.

One issue that has recently come to light on Capitol Hill is the concern over a tax code overhaul. A key goal for government officials who are currently “writing” the new law is simplifying it; while reducing compliance costs and making it less complicated to understand for individuals who do not specialize in accounting or finance.

Bringing balance back to our federal budget will be one of the biggest challenges facing our nation’s leaders in the future. Everyone seems to have a different idea of how this can be achieved, including altering the tax code. A key component in reducing our debt and balancing our budget is to find additional sources of income while at the same time cutting costs.

The Federal Reserve System has created two proposals aimed at accomplishing these goals by implementing new regulations that would apply mainly to banks, credit unions, and other institutions that accept deposits from individual investors who are both businesses or individuals.

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Contemporary Issues in Accounting
Contemporary Issues in Accounting