Accounting Terms and Concepts - Essay Example

Accounting terms and concepts The scope of accounting that traces an enterprise’s economic data and facilitates informed decisions by users of the information is important to any form and size of business organization. Its significance increases with size of an organization and this memo explains some accounting terms and concepts that are fundamental to your business that is expanding. Owner’s equity can be determined from the accounting equation that relates an entity’s assets to its liabilities and the equity.

The original equation provides that the value of an enterprise’s assets is equivalent to the sum of the value of its liabilities and owner’s economic stake. Owner’s equity can therefore be determined by subtracting the value of all liabilities from assets’ value as shown in the following equation (Warren, Reeve and Duchac, 2011a).Owner’s equity= Assets – LiabilitiesCommunication of economic information to relevant stakeholders is one of the roles of accounting systems that ensure accurate data on an institution’s financial activities.

Accounting systems also establishes frameworks for developing and managing organizational culture and interpersonal relations among an organization’s stakeholders. The systems achieve these through outlining values and standards for practice (Macintosh and Quattrone, 2010). Development of complex Information Technology systems has improved accounting work through computerized accounting and analytics for financial analysis. The technology has simplified the accounting process and improved accuracy through its electronic applications.

Advanced Information Technology has also improved time efficiencies and ensures updated information for managerial functions (Warren, Reeve and Duchac, 2011b). Integrating accounting systems with systems of other departments in an enterprise is necessary because of its associated advantages to both accounting personnel and other users of financial information from other departments such as line managers and top managements. The involved data interoperability avails information to all internal stakeholders and therefore eliminates complete reliance on financial accountants for information, a factor that facilitates timely decisions in other departments.

Integrating accounting systems also relieves accountants of the communication role and promotes their efficiency in consultancy services to other users of financial information. Further, integrated systems facilitate faster transfer of financial updates to all departments for informed decisions and actions (Maher, Stickney and Weil, 2011). ReferencesMacintosh, N. and Quattrone, P. (2010). Management accounting and control systems: An organizational and sociological approach (2nd Ed.). West Sussex, UK: John Wiley & Sons.Maher, M., Stickney, C.

and Weil, R. (2011). Managerial accounting: Introduction to concepts, methods and users (11th Ed.). Mason, OH: Cengage Learning.Warren, C., Reeve J. and Duchac, J. (2011a). Accounting (24th Ed.). Mason, OH: Cengage Learning.Warren, C., Reeve, J. and Duchac, J. (2011b). Financial accounting (12th Ed.). Mason, OH: Cengage Learning.