Instructions
Explain how routine financial transactions shape an organization’s basic financial statements. Ensure to include an explanation of key words in your response: assets, liability, revenue, expenses, cash accounting, and fund accounting.
Be sure to use the file I am attaching containing Chapter 6 from the textbook, you must use this as your source and other sources you think is best, BUT please but SURE to use chapter 6 of this book.
ANSWER:
Business activities in an organization determine the elements in its financial statements. The accounting cycle amounts to the process of generating financial documents. The accounting cycle begins with the financial managers and accountants in the organization analyzing business activities. They then record the transactions in journals to offer a trail of transactions in an organization. Financial managers will then post the journal entries into ledgers before summarizing them in a trial balance. Eventually, accountants will prepare financial statements indicating the transactions undertaken by an organization over an accounting period. In that regard, the various business transactions that are performed daily in an organization and later recorded in journals end up shaping the organization’s overall financial statements.
Business transactions are incremental over time. According to Kioko & Marlowe (2017), the budgeting process in bureaucratic organizations takes a progressive approach. In that case, every year’s budget is an increment from the base budget. In the same light, business transactions in an organization are incremental considering the assets, whose value remain constant, but continue reading…