Financial Accounting Vs Managerial Accounting - Difference between financial and Managerial Accounting

Financial accounting reports are prepared for the use of external parties such as shareholders and creditors, whereas managerial accounting reports are prepared for managers inside the organization.

This contrast in basic orientation results in a number of major differences between financial and managerial accounting, even though both financial and managerial accounting often rely on the same underlying financial data. In addition to the to the differences in who the reports are prepared for, financial and managerial accounting also differ in their emphasis between the past and the future, in the type of data provided to users, and in several other ways. These differences are discussed in the following paragraphs.
Emphasis on the Future:

Since planning is such an important part of the manager's job, managerial accounting has a strong future orientation. In contrast, financial accounting primarily provides summaries of past financial transactions. These summaries may be useful in planning, but only to a point. The future is not simply a reflection of what has happened in the past. Changes are constantly taking place in economic conditions, and so on. All of these changes demand that the manager's planning be based in large part on estimates of what will happen rather than on summaries of what has already happened.
Relevance of Data:

Financial accounting data are expected to be objective and verifiable. However, for internal use the manager wants information that is relevant even if it is not completely objective or verifiable. By relevant, we mean appropriate for the problem at hand. For example, it is difficult to verify estimated sales volumes for a proposed new store at good Vibrations, Inc., but this is exactly the type of information that is most useful to managers in their decision making. The managerial accounting information system should be flexible enough to provide whatever data are relevant for a particular decision.
Less Emphasis on Precision:

Timeliness is often more important than precision to managers. If a decision must be made, a manager would rather have a good estimate now than wait a week for a more precise answer. A decision involving tens of millions of dollars does not have to be based on estimates that are precise down to the penny, or even to the dollar. In fact, one authoritative source recommends that, "as a general rule, no one needs more than three significant digits., this means, for example, that if a company's sales are in the hundreds of millions of dollars, than nothing on an income statement needs to be more accurate than the nearest million dollars. Estimates that accurate to the nearest million dollars may be precise enough to make a good decision. Since precision is costly in terms of both time and resources, managerial accounting places less emphasis on precision than does financial accounting. In addition, managerial accounting places considerable weight on non monitory data, for example, information about customer satisfaction is tremendous importance even though it would be difficult to express such data in monitory form.
Segments of an Organization:

Financial accounting is primarily concerned with reporting for the company as a whole. By contrast, managerial accounting forces much more on the parts, or segments, of a company. These segments may be product lines, sales territories divisions, departments, or any other categorizations of the company's activities that management finds useful. Financial accounting does require breakdowns of revenues and cost by major segments in external reports, but this is secondary emphasis. In managerial accounting segment reporting is the primary emphasis.
Generally Accepted Accounting Principles (GAAP):

Financial accounting statements prepared for external users must be prepared in accordance with generally accepted accounting principles (GAAP). External users must have some assurance that the reports have been prepared in accordance with some common set of ground rules. These common ground rules enhance comparability and help reduce fraud and misrepresentations, but they do not necessarily lead to the type of reports that would be most useful in internal decision making. For example, GAAP requires that land be stated at its historical cost on financial reports. However if, management is considering moving a store to a new location and then selling the land the store currently sits on, management would like to know the current market value of the land, a vital piece of information that is ignored under generally accepted accounting principles (GAAP).
Managerial AccountingNot Mandatory:

Financial accounting is mandatory; that is, it must be done. Various out side parties such as Securities and exchange commission (SEC) and the tax authorities require periodic financial statements. Managerial accounting, on the other hand, is not mandatory. A company is completely free to do as much or as little as it wishes . No regularity bodies or other outside agencies specify what is to be done, for that matter, weather anything is to be done at all. Since managerial accounting is completely optional, the important question is always, "Is the information useful?" rather than, "Is the information required?"

Online Accounting Courses

Online Courses in Accounting and Finance

Online courses, training, and diploma programs in accounting, and finance. Topics include: financial accounting, financial statements, financial planning, estate planning, tax preparation, QuickBooks, and more.
Online Accounting Courses

Accountants are responsible for the financial accounting and auditing activities of a business, such as overseeing the books, payroll, tax compliance, and the like. If you're great with numbers and a disciplined self-starter, then this lucrative career path is right for you.
What You'll Learn in Online Accounting Courses
You'll study all aspects of accounting in online accounting courses, including auditing, cost accounting, and individual and corporate taxation. You'll also hone your ability to work with accounting information systems. Accounting is a four-year degree or more if you choose the CPA path. However, accelerated and flexible study programs are available online. Also, short term, one or two-year online accounting courses prepare you for a para-professional accounting position, assisting in auditing and tax preparation.
Bright Prospects for Your Accounting Career
The combination of new federal accounting and auditing laws with increased degree requirements that effectively add an additional year to the CPA have created a dearth of accountants. As a result, accountants were the most in-demand of all college grads in 2005. Beginning accountants with Bachelor's Degrees in Accounting received starting salaries averaging $44,564, according to the National Association of Colleges and Employers. Experienced corporate auditors are pulling down from $70-$85,000 on average. Regardless of your position, expect to work overtime during tax season if you choose accounting as your career.

Why Study Accounting

For those who don't know, Accounting is the language of business and is needed now more than ever before. It is the backbone of all businesses and therefore is a very broad subject. Today, there are more CEOs with degrees in accounting than any other area of study. College students that are unsure which area of business they would like to study should seriously consider accounting. Career opportunities associated with a degree in accounting are practically endless due to how broad the subject is. Job opportunities include public accounting, government, private industry and forensic accounting. There are also opportunities in tax preparation, cost management and even jobs with the FBI. Accounting opportunities are not limited to the ones named above.

Another reason college students should consider studying accounting is the condition of the economy. Due to the recession that our economy is going through, many industries are cutting down on jobs. One area of business that is still thriving is accounting. Various businesses are realizing how important it is to cut down on costs to make their business more profitable during this time of economic crisis. They also realize how important it is to have strict set of internal controls to make their business more efficient. The only way to ensure that both of these can happen is through stringent accounting. After reading this it should be no surprise that accounting jobs may be on the rise.

According to the American Institute of Certified Public Accountants, 91% of accounting firms expect hiring to increase or at least remain the same. This is great news for college graduates who are seeking a career in accounting. So many college students have been worried that they may not have a job when they graduate due to today's economic crisis. With a steady rise in unemployment it is comforting to see that there is still a high demand for accountants.

Job opportunities are not the only reason that college students should consider accounting. The job can be very rewarding as well. The average salary for accountants as of March 9, 2009 is $51,000. This salary can change based on company, location and industry.

Internal controls are important for a business to control internal theft. Without a good set of internal controls it would be too easy for employees to steal cash or even merchandise. An important aspect of internal controls that is important is separation of duties. This means that no one person performs all the jobs of a company. This ensures that one person checks someone else's work making it difficult to fabricate accounting data to steal money from the company. Accounting provides a basis for these controls and checks to see if they are being enforced.

With accounting frauds becoming more and more of a problem there is more of a demand for people with accounting knowledge in the FBI. They need people who are able to decipher financial statements and pick out bad accounting form in order to uncover sophisticated accounting frauds. Accountants are also needed during trial to provide lawyers and prosecutors with testimonial evidence. It can be a very exciting and rewarding area of accounting. Many accountants feel rewarded by uncovering and prosecuting those who try to profit from manipulating financial data. With more and more accounting frauds being committed each year, there is more of a need for strict audits by accounting firms. This means more business for accounting firms and ultimately more jobs for accountants.

If you are a college student searching for a major it would seem wise to pursue a degree in accounting. The opportunities that this degree can provide for you may be endless. You may find yourself working for a large accounting firm or even owning your own private, small scale CPA Firm. You may also become a CEO or a CFO of just about any company being that accounting is the backbone of business. It is safe to say you can't go wrong with a degree in accounting.



Read more: http://www.articlesbase.com/careers-articles/why-study-accounting-809688.html#ixzz0p8FcOeaY
Under Creative Commons License: Attribution

Why Study Accounting and Finance?

Why Study Accounting and Finance?

Accountants record, classify, summarise, interpret and communicate the financial information about a business. However they do more than just prepare financial reports on the activities of an organisation. Experienced accountants work strategically with the executive and management teams by providing expert financial advice on the impacts of management decisions, compliance and governance and the deployment of systems, resources and processes throughout the company. At Macquarie, students learn to apply accounting skills to a range of different managerial, business and problem-solving situations.

According to the Australian Government Australian Careers website, average weekly earnings for accountants are 20% higher than the all occupations average wage* and job prospects are very good. Property and business services industry, finance and insurance companies, and Government Departments were the biggest employers.

Depending on the program selected, accounting also provides training for a wide range of vocations including:

* Auditing
* Merchant banking
* Government accounting
* Public practice
* Investment management
* Service industries
* Manufacturing
* Stockbroking
* Management consulting
* Taxation

Finance concerns the commercial activity of providing funds and capital. It studies the ways in which individuals, businesses and organizations raise, allocate and use monetary resources over time, and addresses the problems of risk and liquidity inherent in the projects. It is concerned with decision making within financial and capital markets and the financial instruments that are traded in those markets and looks at how these interactions facilitate the flow of funds and the control of risk. Finance deals with financing and investment decisions and considers the the development of risk-hedging strategies so as to minimise the damaging effects of adverse movements in share prices, interest rates, exchange rates, and other uncertainties.

According to the Australian Government Australian Careers website, average weekly earnings for financial managers are 39% higher than the all occupations average wage* and job prospects are very good. Property and business services industry, finance and insurance companies, and Government Departments were the biggest employers.

Depending on the program selected, Finance provides training for a wide range of vocations including:

* financial managers
* bank and insurance managers
* multinational funds managers
* investment analysts
* financial researchers in stockbroking firms, banks and government departments
* corporate financial managers or treasurers
* security and derivatives traders
* portfolio managers for trust funds, superannuation funds and insurance companies
* investment analysts in stock exchange markets
* management consultants
* corporate advisors in merchant banks, public accounting firms, and management consulting firms.

*These figures cannot be used in determining a particular wage rate or as an indication of what a person will earn in that job

International Accounting Standard

IAS 1
Presentation of Financial Statements
Issued in September 1997:
Replaced IAS1 (January 1975), IAS 5 (October 1976), IAS 13 (November 1979)
Revised in September 2007

Complete set of financial statements

(1) statement of financial position
--> at the end of period

(2) statement of comprehensive income
--> for the period

(3) statement of changes in equity
--> for the period

(4) statement of cash flows
--> for the period

(5) statement of financial position
--> at the beginning of
--> earliest comparative period

(6) notes, a summary of significant accounting policies

Accrual basis of accounting
--> is used in preparing financial statements

--> except for the statement of cash flows

Comparative information
--> (in respect of the previous period)

--> is required for all amounts
--> reported in the current period's
--> financial statements

Consistency of presentation and classification
--> (from one period to the next)
--> is required

Statement of comprehensive income
--> can be presented in (1) or (2)

(1) in a single statement of comprehensive income
(2) in two statements:
(2a) separate income statement
--> for profit or loss
(2b) separate statement of comprehensive income
--> for other comprehensive income

Accountancy courses qualifications

So, what is a rewarding career? A career with a high salary? A career which has a respected position in society? A career with mobility and excellent prospects?

The accounting profession offers all of these opportunities, as well as a challenging and varied work environment. Accountancy is essentially the effective management and administration of the financial affairs, and accountants are a vital part of any organisation's operations.

As a qualified accountant, you have the opportunity to pursue a variety of finance careers in any of the world's financial centres and in any business sector. Accountants are employed in the public or private sector, industry or commerce, and across the whole spectrum of financial work; from audit and public practice; to management or financial accounting; in taxation related work: or in management consultancy and financial services. Accountants are often perceived as boring 'number crunchers', but the variety of career opportunities open to the qualified accountant highlights this as a misconception.

With accountancy you have the luxury of career mobility; the freedom to choose your own career path and the opportunity to gain the knowledge and skills required to rise to the top in your chosen field. To benefit from career mobility you must acquire the skills that employers want. Employers want quality personnel, professional, flexible and adaptable employers. How do you acquire these skills?

To become qualified accountant in the UK and in other countries around the world the generally accepted route is to join a professional accountancy body and to pass the professional examinations. In addition to this, bodies also require their graduates to satisfy stipulated work experience to gain full membership and qualification.

Taking the UK as an example, the accountancy profession is unregulated except for certain areas, which are regulated by law. These three areas are; investment advice, insolvency work and company audit work. Individuals wishing to practise as an auditor in the UK are required by law to hold an audit qualification from a Recognised Qualifying Body (RQB) there are five RQB's: Association of International Accountants, Institute of Chartered Accountants in England and Wales; Institute of Chartered Accountants of Scotland, Institute of Chartered Accountant in Ireland; Association of Chartered Certified Accountants.

The majority of students pursuing a career in accountancy opt to study a degree prior to their professional examinations.

Most professional bodies operate a policy of exemptions designed to reduce repetition for students who have already attained a qualification of an acceptable standard. For students holding degrees, this means that they are often rewarded exemptions from the whole or part of the first level of a professional qualification, effectively reducing the time scale for qualification.

Accounting Methods

Another decision faced by a new business is what accounting/bookkeeping method is going to be used to track revenues and expenses. An accounting method is just a set of rules used to determine when and how income and expenses are reported.

If inventories are a major part of a business, the decision is made for the business owner by the Internal Revenue Service (IRS). Some business will be required to use the accrual method of accounting while others may be granted an exception and allowed to use the cash basis along with some special rules.

You're more than likely to encounter both the term method and basis used when this topic is discussed. In some cases you'll see the term cash method used and other cases see the term cash basis used. Likewise you'll see the term accrual method used and the term accrual basis used. They both refer to the same concept and are used interchangeably.

* Cash Method
The cash method or basis of accounting recognizes revenues (earnings) in the period the cash is received and expenses in the period when the cash payments are made. Actually, two types of cash methods (basis) of accounting exist:

o strict cash method (basis)
o modified cash method (basis)

A strict cash method follows the cash flow exactly. A modified cash method includes some elements from the accrual method of accounting and provides special methods for handling items such as inventory and cost of goods sold, payroll tax expenses and liabilities, and recording and depreciating property and equipment.

Many small businesses, whether they know it or not, are actually using a modified cash method.

By concentrating on recording revenues and expenses, the purpose of the cash or modified cash method of accounting is on determining the net income or loss for a period based on the cash received and the cash spent.

Information, such as the amounts billed to customers for products and/or services and not paid, and the amounts billed by suppliers for their products and/or services and not paid is not normally recorded and maintained in the "books" using the cash method.

Many small businesses start out using the cash basis rather than the accrual basis of accounting.

Use of the cash basis generally is not considered to be in conformity with generally accepted accounting principles (GAAP). Is this necessarily bad ? No, if no need is foreseen for what are called audited financial statements there's no need for concern. In most cases, audited statements are only required for the "big boys" (companies whose ownership interests are publicly traded). The "little guys" like the ma and pa shops don't need to worry. Still, when possible, a business should strongly consider using the accrual method of accounting.

* Accrual Method
The accrual method or basis of accounting records income in the period earned and records expenses and capital expenditures such as buildings, land, equipment, and vehicles in the period incurred.

The purpose of the accrual method of accounting is to properly match income and expenses in the correct period.

In order to accomplish this, the accrual method of accounting records revenue as earned when the product and/or service is shipped or rendered and invoiced (billed) to customers. Likewise, expenses and capital expenditures are recorded as incurred when the product and or service is shipped or rendered and invoiced (billed) by the supplier.

Information, such as the amounts billed to customers for products and/or services and not paid, and the amounts billed by suppliers for their products and/or services and not paid is recorded and maintained in the "books" using the accrual method. This is the accounting method that is required to be used in order to conform to generally accepted accounting principles (GAAP) in preparing financial statements for external users.

Difference Between The Two Methods
The difference between the two methods used for recording revenues and expenses results from when the business transaction is recorded in the "books" (timing). A business using the accrual method will record revenues and expenses in their "books" before a business using the cash method. In other words, unlike the cash method, they don't wait until they get paid by the customer or wait until they pay a supplier to record the transaction.

Comment: I've heard that "forewarned is fore armed" so here goes. Cash Flow and Profits are two different "animals". Due to the timing difference as to when revenue and expenses are recorded and when the cash resulting from the revenue and expenses is actually received or paid out , a business using the accrual method of accounting and reporting a "hefty" profit does not necessarily mean that they have the cash to pay their bills.

Even though the accrual method provides a better measure of profit and loss, many small businesses still use the cash basis of accounting. I think with the advent of easier to use computer accounting and bookkeeping software, we'll see more businesses adopting the accrual basis of accounting.

Relationship Between the Type of Bookkeeping System Used and the Accounting Method Used
What if any is the relationship between the type of bookkeeping system used and the method of accounting ?

The Single Entry bookkeeping system is used along with the Cash Method of accounting.
Debits and Credits are not used to record financial events.

The Double Entry bookkeeping system can be used with both the Cash and Accrual methods of accounting.
Debits and Credits are used to record financial events.

So You Know
You can use a different accounting method, the cash method or the accrual method, for each business that you set up.

Also, you can keep two sets of books, one on the cash basis and the other on the accrual basis, for the same business. You do; however, have to select one of the methods for tax purposes and continue to use it in the future. This is perfectly legal. It's when you keep two sets of books to hide your true earnings when the trouble begins.

Accounting and Bookkeeping Software
Let's muddy the water about the single and double entry accounting method at least as to how it relates to using bookkeeping and accounting software.

Single or Double Entry ?
Accounting and bookkeeping software programs actually allow the user to make a single (one) entry and the software handles creating the debit and credit entries "behind the scenes". The double-entry system is still there, but it's hidden from the user. The one exception is the general journal where the user does enter debits and credits.

Let's look at a sample transaction of invoicing (billing) a customer to illustrate what I'm talking about.. An invoice to a customer is created and printed and the resulting transaction is automatically recorded in the "books" as an increase to the amounts owed by customers and an increase to revenues (sales) using debits and credits.

Wow, since it's automatic, does that mean we don't need to learn about debits and credits later ? Only in your dreams. Although an airplane can be flown on auto-pilot, would you want to be on that plane without a trained pilot ? The same applies to using accounting and bookkeeping software. You need a properly trained bookkeeper or accountant that is also familiar with the software product in order to properly use the software. That ole saying "GIGO" (Garbage In - Garbage Out) definitely applies here.

Let's also muddy the water regarding the cash method and accrual method of accounting.
Some accounting software allows you to convert data back and forth between a cash basis and accrual basis of accounting. As I stated earlier, you do have to select one of the methods for tax purposes and continue to use it in the future.

WHAT IS ACCOUNTING?

Quite simply, accounting is a language: a language that provides information about the financial position of an organization. When you study accounting you are essentially learning this specialized language. By learning this language you can communicate and understand the financial operations of any and all types of organizations.



This is because the information required by most organizations is very similar and can be broken down into three main categories:

ACCOUNTING INTRODUCTION



Operating Information

This is the information that is needed on a day-to-day basis in order for the organization to conduct its business. Employees need to get paid, sales need to be tracked, the amounts owed to other organizations or individuals need to be tracked, the amount of money the organization has needs to be monitored, the amounts that customers owe the organization need to be checked, any inventory needs to be accounted for: the list goes on and on. Operating information is what constitutes the greatest amount of accounting information and it provides the basis for the other two types of accounting information.



Financial Accounting Information

This is the information that is used by managers, shareholders, banks, creditors, the government, the public, etc… to make decisions involving the organization and its operations. Shareholders want information about what their investment is worth and whether they should buy or sell shares, bankers and other creditors want to know whether the organization has an ability to pay back money lent, managers want to know how the company is doing compared to other companies. This type of information would be very difficult to extract if every company used a different system for recording their financial position. Financial accounting information is subject to a set of ground rules that dictate how the information is reported and this ensures uniformity.



Managerial Accounting Information

In order for the managers of a company to make the best decisions for a company they need to have specific information prepared. They use this information for three main management functions: planning, implementation and control. Financial information is used to set budgets, analyze different options on a cost basis, modify plans as the need arises, and control and monitor the work that is being done.



As you can see, accounting is a multifaceted system involving different people with different needs and after analyzing the various uses and applications of accounting information the American Accounting Association has come up with this definition: “the process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by users of the information.”



In order to facilitate the informed use of this financial information, accounting has come to be based on specified rules or conventions called “principles.” These principles provide general laws or rules that are used to guide accounting activity and are called Generally Accepted Accounting Principles, or GAAP for short. These principles are established by the Financial Accounting Standards Board (FASB) which is a nongovernmental agency funded by the accounting profession and contributions from business organizations. While there is no legal obligation for companies to adhere to GAAP, there are strong practical reasons to do so. From auditing to reporting earning to the US Securities Exchange Commission to applying for a loan, there are very compelling reasons for organizations to conform to the generally accepted standard.



What Is The End Result Of All This Accounting Information? We’ve talked about the reason for maintaining accounting information and the end result of all of this recording is the preparation of financial statements. These statements let people see, at a glance, the financial position of an organization. These statements provide summaries of the operating information and are used extensively by people within and external to the company. The statements fall into one of two categories:

*

Status/Stock – these statements show the financial status of an organization at one specified instant in time. Stock reports = a snapshot.
*

Flow Report – these statements show the flow of financial information over a period of time. Flow reports = motion picture

GAAP requires the preparation of three different statements:



Balance Sheet

A Balance Sheet is a status report that shows information about the organization’s resources at one given time. Examples of information found on a balance sheet are how much cash is in the bank, what is owed to creditors, and the value of the company’s assets.



Income Statement

An Income Statement (also called a Statement of Earnings, Statement of Operations, or a Profit and Loss Statement) is a report that shows the flow of revenues (amounts earned from business activity) and expenses (amounts paid in the course of operations) over a given period of time, typically a month, quarter, or year.



Statement of Cash Flow

As the name suggests, this is also a flow statement that details the movement of cash through the organization over a specified period.



The whole purpose of accounting is to provide information that is useful and relevant for interested parities when making decisions regarding the company and its operations. In order to do that effectively, a specific language and subsequent rules have been developed for users of the information. By learning accounting you learn these rules and can then communicate financial information with others in a comprehensible and comparable manner.

How to Study Accounting

Ken Harper, Instructor

Sharon Miller, Assistant



1. Cumulative Study -- Accounting is certainly not a mystery, and is easy to learn. The major secret to learning accounting is remembering that it is a cumulative study subject based on the first five chapters. Each learning objective builds on the previously learned concepts and procedures. The accounting course is organized so that you learn the most fundamental concepts and procedures first, then you will be required to build on these concepts and procedures. To learn accounting, you must master the first five chapters. These fiver chapters are the basis for the next sixteen chapters. When students run into difficulty, it is generally because they have either forgotten the earlier material or have not learned it well enough to move forward.
2. Maintain a good attendance record -- You need to hear from me what topics are important, why they are important, and how to use them. Copying notes from other classmates may not always show you the what, why and how.
3. Participate actively in class -- Arrive at your classroom a few minutes early. Choose a seat where you can hear and be heard. Don't be afraid to ask or respond to questions. Try to overcome your shyness. Commit yourself to ask or answer questions in class. Remember someone else in the class is probably wondering about the same thing.
4. Do not use memorization as a substitute for understanding -- You need to understand both the reasons and the mechanic of accounting. Memorizing information will hurt you later on in the course.
5. Take notes -- A recent study indicated that you will remember 10% to 15% of what was said in class. However, if you write it down, your retention rate increases to 85%. Note taking is essential to learning accounting. You must learn to take notes efficiently, accurately, and quickly so you will not jeopardize your ability to listen effectively.
6. Make friends by studying in a group -- Exchange telephone numbers with at least two classmates. Make arrangements to study with these friends on a regular basis. Working in groups has benefits. These benefits include increasing your knowledge of accounting and improving your critical thinking and communication skills. If you are able to explain and demonstrate (verbalize) the learning objective to other group members, then you really understand the concepts. Don't be afraid to change study groups if you are unhappy with your original group. Finally, don't allow you study group turn into a gossip group, stick to your accounting.
7. Be prepared -- Before going to class review the textbook, study guide, homework assignment, and class notes. Make a list of questions you have to ask me. Writing out your questions makes it easier for you to ask me in class.
8. Keep up with the work -- Waiting until the last minute does not give you the opportunity to completely understand the learning objectives. If you have completed your homework and are able to verbalize the learning objectives to other members in your study group, then you will do well on the test. If however, you are trying to complete the reading and homework assignments the night before the examination, you will be unprepared. There is a saying, "He who does the homework ahead of time gets the A or B. He who doesn't do the homework ahead of time gets the C or D."
9. Tape record the class lectures -- This procedure has two benefits. First, you will not be overly concerned about taking notes. Secondly, recording gives you another opportunity to hear the lesson. It especially lets you review words that you are not familiar.
10. Find out what resources are available to you -- Resources available to you are:
1. Study guide
2. Tutorial - Sharon Miller
3. Your fellow classmates
4. Your instructor:
5. F41
6. Phone 408.864.8589
7. Electronic Mail School harperken@fhda.edu
8. Electronic Mail Home: drkenharper@yahoo.com

How to Study Accounting

How to Study Accounting
Studying is defined as applying oneself to learning. The purpose of studying accounting is to obtain the textbook and technical knowledge of accounting plus the experience necessary to succeed in the accounting profession.

Research has shown that the greater your involvement in studying, the more you retain. Retention means how long you are able to remember the concepts and practices. The four groups of study activities are shown from the lowest percentage of retention (about 10%) to the highest level of retention (about 98%):

* Hearing
* Seeing
* Saying
* Doing

Let's also look at why you are studying manual accounting when you hear so much about the use of the computer to complete accounting tasks in business. It is true that computers have become an integral part of accounting. However, you must first know the basics of accounting, the language of the profession, and the flow of the accounting cycle before you can effectively enlist the aid of a computer. A computer is only a tool to perform routine accounting tasks and print the results more quickly and attractively.

Now, let's begin our journey learning manual accounting. To do so, we shall work our way through the hierarchy of retention.

Hearing alone will only take you to the lowest level of retention. This means that if the only activity you enlist in your learning process is listening, you will retain very little. However, this does not mean that listening is not important as a learning tool. There are several things you can do in the area of listening.

* Attend class equipped with paper and pencil to take notes. Use a tape recorder if this fits your needs and the instructor agrees. Also, take your textbook to class to refer to as the presentation progresses.

* Be prepared to listen to questions asked and answers given, as well as classroom discussion.

The second level of retention adds seeing to hearing to increase the amount you remember. Two re- sources are critical to this level: your instructor and your textbook.

* First, observe your instructor carefully. Take note when he or she makes references to textbook examples, shows illustrations on handouts, distributes material on transparencies or overhead projections, or shows examples drawn in chalkboard presentations.

* Second, know your textbook and what it contains, how it is structured, and where you can find various tools.

So far, we have looked at only half of the retention hierarchy. Hearing allows you to retain the least. Hearing and seeing together increase your chances for retention. However, if you add saying or verbal participation at the third level, you will significantly increase what you remember. There are several ways in which you can strengthen your learning by hearing the sound of your own voice speaking about the subject.

* Ask questions. Sometimes you may feel confused and feel unable to formulate a question. Don't let that stop you. Try to avoid the sweeping negative statement, "I just don't get this." Narrow your question to the place your understanding went off the track.

* Volunteer answers. Be an active and enthusiastic learner!

* Participate in classroom discussions. You may be surprised how your own life experiences have prepared you for this course in accounting. You have owned things, owed money, bought items, sold things, incurred expenses, and earned an income. You may have filled out a W-4 form when you went to work for an employer, and received a W-2 form from the employer at the end of a calendar year. You may have had a checking account. Each of the activities mentioned are ones that you will experience in accounting. Your experience is valuable-share it in class. Use your personal experiences to visualize accounting tasks. See how each task fits into the accounting cycle. The discussion questions at the end of each chapter provide material to spark conversations and support discussions.

* Study with a Partner or group. It will serve not only as a way to get acquainted, but it will also provide you with support. The give and take of studying as a team will help both of you learn. You both win because your voice is a powerful tool for teaching others as well as strengthening your own learning.

* Finally, outside of class, talk to yourself. Yes, talk to yourself! For example, study glossary terms aloud, reread your notes aloud, talk your way through an accounting transaction. Let your brain hear you. You will decrease your journalizing and posting errors considerably with this technique. Don't be bashful. It will be much easier for you to speak up in class as the terminology becomes more familiar.

Let's add the last retention builder to the hierarchy--doing. So far, we have investigated

* hearing only
* hearing plus seeing
* hearing plus seeing plus saying

and now,
* hearing plus seeing plus saying plus doing.

You may have heard it said that accounting is best learned through the end of a pencil. In other words, you can read and listen all you wish, but until you actually do it, it does not become yours. An analogy might be one of studying to become a surgeon or an auto mechanic by only reading and hearing about your profession-until you try it, you do not have a working knowledge of the subject. Therefore, let me suggest that you thoughtfully and conscientiously complete all assignments your instructor makes whether they are questions, exercises, or problems.

Accounting is like a pyramid. What you learn in each new chapter builds on knowledge from previous chapters. If the base of the pyramid is not firmly in place, your accounting skills will be weak.

To summarize, in looking at "How to Study Accounting," you have seen that you need to put into force all levels of action to give yourself the highest level of retention-hearing plus seeing plus saying plus doing. You have also seen how important it is that you know your textbook-how it is structured and where to find the things you need.

Intro to Accounting

Intro to Accounting - Simple - a complete online accounting course for beginners with sample problems and their solutions, covering what accounting is and its role, accrual accounting, costs vs. expenses, credit purchases, debit and credit, deferrals, depreciation methods, double-entry accounting system, financial statements preparation, general journal records, historical cost of assets, intangible assets and amortization, inventory cost flows methods (FIFO, LIFO, etc.), perpetual and periodic inventory methods, product vs. selling and administrative costs, revenue and expenses, service vs. merchandising companies, single- and multistep income statements, tangible vs. intangible assets, the elements of financial reporting and more