Introduction

One of the expectations I have heading into this class is to understand the basics and

fundamentals of financial accounting, especially knowing that financial accounting and its

processes are broad. Also, in consideration of the fact that the business environment fluctuates

and changes, I have the expectation and inquisition in desiring to understand how the financial

environment affects the financial accounting, reporting and its processes in our society.

What is Accounting?

Accounting can be described as the process of recording, classifying and summarizing financial

transactions. It lays out an accurate understanding of the financial health of an organization and

its performance, which can also constitute as a catalyst for resource management and strategic

increase in the organization. Accounting can also be described as a powerful machine in which

you input raw data (figures) and receive an output of processed information (financial

statements). The essence of this point is to provide one with a concept of what’s working and

what’s not working to enable one fix it (John Iwuozor & Kelly Main, 2023).

Who are the users of accounting information?

An accounting information is referred to as the basis for which all important decisions are taken

regarding the business operations by the organization. The users of the accounting information

include: Owners, Managers, Creditors, Government Agencies and Investors. The information

derived by virtue of the accounting of a business becomes severe for providing the market with

sufficient information to make an informed decision (Geoffrey, n.d.).

Why is accounting important to our society?

financial standpoint and strength, which makes accounting an extremely significant phrase in our

contemporary society. It is recognized to be the profession suitable for both males and females

who have their career ambition set on top-ranking positions in sectors such as; industry,

management, government, and general business. Accounting is a fundamental necessity of every

entrepreneur, right from the controller of a gasoline station to the administration of the United

States of America, it’s importance to our society cannot be overemphasized and none of the

business concern can function without it, as accounting is engraved in every aspect of a business

concern (Essay Examples, 2019).

What is the accounting cycle?

The accounting cycle is best described as a multistep method used by businesses in creating an

error-free record of their fiscal status, which is as summarized on their balance sheet. In the

course of the cycle’s many phases, organizations will record their financial operations in a

journal, transfer the information derived into a general ledger, evaluate the entries and ensuring

that the books are well-balanced and error-free before generating financial statements and

closing the books for the period (Rebecca Bichachi, 2022).

The six steps of the accounting cycle are; (1) Analyzing which seeks to identify and analyze all

transactions made during the accounting period and how it affects an organization’s financials.

For example, a company’s (Dexter Art) sale of an antique painting in the store for $250, marks

the beginning of an accounting cycle which will be of a beneficial effect to the company’s cash

flow. (2) Recording entails the act of recording the details of all financial transactions, arranged

in order of occurrence as journal entries, either documented in a register book or in a financial

management system, using the double-entry bookkeeping. For example, Dexter Art generates an
invoice for a $250 transaction in its accounting system and the transaction is recorded as an entry

being an increase in the cash received as credit, while there will be a debit if money is expended.

(3) Classifying is the method of sorting and grouping items alike together by creating a chart of

accounts. For example, office supplies expenses is treated as a different account type, while

identified multiple office supplies expenses such as paper clips, staplers and binder clips can be

posted to this account.

The next step is Summarizing. (4) Summarizing is the act of aggregating similar events into one

summary to determine the results. For example, the Finance Controller of Dexter Art can request

for the Manager to provide a listing of all the office supplies expenses recorded up to that period.

(5) Reporting is the step that discloses the results and assembles financial statements which

conveys the results to its intended users. For example, at the end of the accounting year, the

Financial Controller can prepare the draft Financial Statement (Balance Sheet and Income

Statement) to the Independent Auditors for their review. (6) Interpreting is the step that reviews

the total results and analyzing it in comparison to the previous year results and the primary

budget. For example, the Owners of Dexter Art can mandate the Finance Controller to determine

the organization’s debt-to-equity ratio to guide its future decision making.

Conclusion:

Prior to the commencement of this class, I have not explored this aspect of accounting that deals

with the intricacies of how the business environment can either positively or negatively impact

financial accounting and its effect on our society. This class will equip me as a professional and

advance my growth with the essential knowledge about the business environment, the accounting

process and how business ethics plays a crucial role in accounting, as well as the high standards

an accounting professional is required to uphold in the contemporary business environment.

John Iwuozor & Kelly Main, (2023, January 20). What Is Accounting? The Basics Of

Accounting. Retrieved from

https://www.forbes.com/advisor/business/what-is- accounting/

Geoffrey VanderPal. (n.d). BUS5003 Business Environment. Nexford University.

https://nexford.instructure.com/courses/3610/pages/module-1-purpose-of-

accounting?module_item_id=133212

Essay Examples. (2019). The Importance Of Accounting In Our Modern Society.

Retrieved from https://benjaminbarber.org/the-importance-of-accounting-in-our-

modern-society/

Rebecca Bichachi, (2022, October 28). What Is the Accounting Cycle? Steps and Definition.

Retrieved from

https://www.netsuite.com/portal/resource/articles/accounting/accounting-

cycle.shtml