RRJ#3

Reference:

Day, J. (2010, August 2). “Accounting Principles & Standards: Avoid Them at Your Peril”. Returned to Evan Carmichael Aug 2, 2010, from http://www.evancarmichael.com/Accounting/3600/ACCOUNTING-PRINCIPLES--STANDARDS--AVOID-THEM-AT-YOUR-PERIL.html

Summary:

In the article “Accounting Principles & Standards: Avoid Them at Your Peril” John Day explained the difference between accounting principles and accounting standards. Accounting principles are the basic suppositions, laws of operation, and imperative characteristics. These principles make the financial statements helpful to a person who makes decisions. First, the basic supposition is that users need correct information such as full disclosure principle, cost principle, and monetary unit assumption. Second, users need to know laws of operation such as matching principle and revenue recognition principle. Third, they also need imperative characteristics like relevancy principle and comparability principle. However, accounting standards are methods to solve accounting problems. These standards aren’t stable like accounting principles. For example, methods of depreciation and stock are updated every year.

Reaction:

I agree with the author as he showed the difference between accounting principles and accounting standards. Also, I think he is creative, because he can explain his points with clear examples. However, my major is accounting, so I disagree with the author when he said methods of depreciation and stock are kinds of standards, for I think these are kinds of principles. The methods of depreciation and stock follow consistency principle. In sum, this article is useful, for it gave me new terms in my majors such as principles, inventory, and depreciation.

Reference:
Patel, A. (2010, Jun 28). “Financial Reporting: Now it is easy to create your own financial report”. From http://www.evancarmichael.com/Accounting/4969/Financial-Reporting-Now-it-is-Easy-to-create-your-own-Financial-Report.html

Summary:
In the article “Financial Reporting: Now it is Easy to create your own Financial Report” Akash Patel explained why the financial reporting helps you to control your budget. There are five steps to make a good financial reporting for expenses and income every month. First, you need to use a software program to register any financial procedure. Second, you should divide financial data to different groups. Third, you record the financial data in financial reporting. In this step, you exclude tax from your income. Fourth, you record your income after tax. Fifth, you should sum up your expenses, then they are deducted from your income.

Reaction:
I agree with the author as he showed the relationship between the good financial reporting and saving the budget. Also, I think he is creative, because he can explain the steps of preparing financial reporting with clear examples. However, I disagree with him when he said the annual payment divides into twelve equal parts, for I think some months benefit from the annual payment more than other months. In addition, I think his conclusion isn’t obvious because he didn’t give an example for the unusual information.

The Main Two Sides of The Accounting

Reference:
Label, W. (2010, Jul. 11). “Exploring the Ins and Outs of Double Entry Accounting”. Evan Carmichael, from: http://www.evancarmichael.com/Accounting/5234/Exploring-the-Ins-and-Outs-of-Double-Entry-Accounting.html

Summary:
In this article, Label explained the double entry system though steps of the accounting cycle. According to Label, the double entry system has two equal sides, debit in the left side and credit in the right side. However, this cycle includes five steps in an accounting period. First, an accountant writes a financial transaction in a general journal. In this step, the accountant distributes this transaction on accounts by using the double entry system. In the Second step, the accountant sends the financial information from the general journal to the general ledgers. There is a specific general ledger for each account. Third, the accountant creates a trial balance that includes a debit and a credit side to receive the balances of accounts. In this step, the total of the debit and the credit side must be equal. In the Fourth step, the accountant does the adjusting entries. The accountant uses the double entry system to edit the balances of some accounts such as a prepaid building rent and office supplies. Fifth, the accountant figures out the net income by using the double entry system on revenues and expense accounts. In this step, he or she closes these accounts close in the owner's equity account.

Reaction:
I agree with the author as he showed the relationship between the double entry system and the steps of the accounting cycle. Also, I think he is creative, because he can explain his points with clear examples. However, I disagree with the author when he said the basic accounting equation is assets = liabilities + owner's equity, for I think that the basic accounting equation is assets + revenues = liabilities + owner's equity + expenses.