Managerial Decision And Financial Account -Myassignmenthelp.Com

Question: Discuss About The Managerial Decision And Financial Accounting? Answer: Introduction Trial Balance refers to bookkeeping or accounting report that includes the balances of each ledger account of the companies. There are two columns in a trial balance; one of debit balances and another is credit balances. Under the manual system of accounting, accountants prepare the trial balance so that they can discover any kind of errors while posting the entries (Weygandt, Kimmel and Kieso 2015). Thus, it can be seen that that trial balance plays an integral part in the accounting of the companies. In the recent era, the introduction of various bookkeeping and accounting software has almost eliminated the possibility of errors in positing the transactions. Still the auditors and accountants consider trial balance of great importance in case they want to check the account balances of general ledger before the necessary adjustments (Needles, Powers and Crosson 2013). It needs to be mentioned that certain specific reasons lead to the preparation of trial balances for the companies. These reasons are discussed below: There are numerous instances where the accountants to the transportations mistakes at the time of doing the double entries. However, with the help of trial balance, these errors can be identified. In this process, it is required to divide the difference between the debit side and credit side of trial balance by 9 and it will find the error of transportation. Calculation errors can be seen while posting the journal entries and ledger accounts and trial balance helps the accountants to find these kinds of errors. These errors may take place due to the poor calculation power of the accountants (Edmonds et al., 2013). Trial balance plays an integral part in the detection of duplication errors in the financial statements of the companies. There are many instances where the accountants write an ledger balance two times and due to this, the trial balance will not match. For this reason, it is required for the preparation of trial balance for the companies. With the help of trial balance, the accounts become able to identify the omission errors in the posting of ledger balances. In the presence of this error, the trial balance of the companies will not match (Horngren et al., 2012). Thus, from the above discussion, it can be seen that the trial balance helps the accountants in finding different types of errors in the financial statements. For all these reason, it is required for the companies to prepare trial balances. Adjustment Journal Entries are considered as an important part of the accounting process of the companies. The adjustments journal entries help in the conversion of the accounting records of the companies to the accrual basis of accounting. For this reason, the accountants do the accounting journal entries before the issue of the financial statements (Needles, Powers and Crosson 2013). It needs to be mentioned that certain reasons lead to the reordering of adjustment journal entries. As pre the accrual accounting concept, the recognition of revenue is done in the period in which it is earned; and the recognition of the expenses is done at the time of their incurrence. Some business transactions have major effects on the revenue and expenses of the companies more than one accounting period. For example, a company may receive fees for their services for more than one accounting period or may pay their expense for more than one accenting year. In this process, the accountants cannot record advance revenue receive or advance payment of expenses in the financial statements of the current accounting period as it is required to assign them in the correct accounting years and in the correct financial statements (Year 2017). In these situations the adjustment journal entries play an integral part. The main purpose of the adjustment journal entries is the correct assignment of the income and expenses in the correct financial years and in the correct financial statements. With the assistance of adjustment journal entries, the accountants assign a portion of the revenue to the particular accounting period in which it is earned. By following the same process, the accountants assign a portion of the expenses in the accounting period in which it is incurred (Stice and Stice 2013). Thus, it can be seen that the presence of necessary adjustments journal entries ensure that the relevant revenues and expenses are reported in the correct income statements of the correct accounting period. This total adjustment helps in bringing correctness and transparency in the financial statements of the companies and it also makes sure that all the financial statements are developed based on correct accrual basis concept (Brown 2014). In this context, it needs to be mentioned that the adjustment journal entries are done at the end of the accounting period. In the process of accounting for the business organizations, adjusted trial balance is an important concept. An adjusted trial balance refers to the listing of all account names and their balances in the trial balances after the completion of necessary adjustments for the current accounting periods. In this context, it needs to be mentioned that adjusted trial balance is not a financial statements as it is considered as an internal document. The main aim of the development of adjusted trial balance is to make it sure that the debit balance of the trial balance is matched with the credit balance of the trial balance (Chambers 2014). It needs to be mentioned that there are certain purposes that lead to the development of adjusted trial balance. As per the earlier discussion, it can be seen that adjusted trial balance lists the ending balances of the accounts after all necessary adjustments (Chatfield and Vangermeersch 2014). Thus, one of the major purpose of the development of adjusted trial balance is to correct the errors in the journal entries so that they can be recorded in the financial statements of the companies as per the required accounting standards. After that, another major purpose of the development of the adjusted trial balance is to get the summary of the balances of all the accounts so that they can be helpful in the development of financial statements. For this particular reason, all the adjusted entries are recorded in a separate column (Salim and Ferran 2014). Hence, from the above discussion, it can be seen that there are two major purposes for the development of adjusted trial balance in the companies. First, the adjusted trial balance is required for the verification of the debit balances with the credit balances of the trial balance. Second, the presence of adjusted trial balance ensures the effective construction of various financial statements of the companies like balance sheet, statement of cash flows and others. However, in the recent years, disuse can be seen in case of adjusted trial balance due to the inception of different accounting software. The application of different accounting software has minimized the possibility of errors in the journal entries. Thus, from the above discussion, it can be observed that adjusted trial balance has much importance in the accounting of the business organizations (Kuter and Gurskaya 2014). In this context, it needs to be mentioned that the adjustment journal entries are different from the closing journal entries on some major way and the accountants of the companies are required to take into consideration all these aspects. Thus, there should not be any mistake in the recording of these entries (Scott 2015). They are discussed below: The adjustments entries are done at the end of the accounting period so that the financial statements of the companies remain updated as per the accrual basis of accounting. In this aspect, electricity expense of the companies can be used as example. Companies use to use electricity for each day basis, but they get the bill for monthly basis. Thus, it is required for the companies to make the adjustments of the electivity expenses for the last 10 to 15 days in the financial statements so that they can be properly recorded. Thus, it can be seen that it is the responsibility of the business organizations to make the necessary adjustments related to the adjusted journal entries at the end of the financial years (Weil, Schipper and Francis 2013). In case of closing journal entries, it can be seen that they are dated as the last date of the accounting period, but their entries into the accounts are done after the preparation of the financial statements (Gassen 2014). In most of the cases, the income statement accounts are seen in the closing entries. In the presence of the closing journal entries, the balances of the revenue and expenses accounts become zero. It implies that there will be a new start of the revenue and expenses account with nothing as balance in the accounts. It helps the business organizations in the easy reporting of the new year revenue and expenses. Moreover, the net amount of the revenue and expense balances will end in the retained earnings or the owners equity (Socea 2012). References Brown, R. ed., 2014.A history of accounting and accountants. Routledge. Chambers, R.L. ed., 2014.An accounting thesaurus: 500 years of accounting. Elsevier. Chatfield, M. and Vangermeersch, R. eds., 2014.The history of accounting (RLE accounting): an international encylopedia. Routledge. Edmonds, T.P., McNair, F.M., Olds, P.R. and Milam, E.E., 2013.Fundamental financial accounting concepts. New York, NY: McGraw-Hill Irwin. Gassen, J., 2014. Causal inference in empirical archival financial accounting research.Accounting, Organizations and Society,39(7), pp.535-544. Horngren, C., Harrison, W., Oliver, S., Best, P., Fraser, D. and Tan, R., 2012.Financial accounting. Pearson Higher Education AU. Kuter, M.I. and Gurskaya, M.M., 2014. 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