Accounting Essay Example | Topics and Well Written Essays - 500 words - 24

Accounting - Essay Example e interested parties conceptualize as well as enabling them have a better understanding of the financial soundness of the firm (Donald, 2007).  For a new business, as well as an existing one, in order to  continue  will its operations, meeting customers  need  and its objectives of wealth maximization, there is a need to  source  funds (Steven, 2009).  The two  broad  sources of funds are  debt  and equity which may vary depending on a number of factors, though not limited to the nature of the firm, its operations and its  market  repute. The combination of these two sources of funds refers to the  firm’s capital structure. In order to achieve the stated objective of the firms four employees as stated in the question, employees numbers  are assigned  i.e., employee no. 1, 2, 3, and 4. The most appropriate rate of  payment  is monthly for easy accounting.  To achieve this, firm has to  generate  some accounts in its charts of  accou nt  including payroll, salaries and  wage  payable  accounts.  These accounts are debit (Dr) and credit (Cr) as argued by (Donald, 2007). For effective operation of the business, tangible assets like plant and  machinery, computer, motor vehicles equipment, furniture and fittings among others. According to FASB guideline, all these assets are subject to depreciation  due  to wear and tear as they continue  being used. Therefore, accounts like depreciation expense, accumulated depreciation as well as  individual  assets  account  should be prepared and be included in the  firm’s charts of accounts. An example of journal entries based on charts of accounts  is shown  bellow. Some of the internal controls which are aimed at reducing the firms overall risk are, compliance with laws and regulation, reliability of financial reporting and effectiveness as well as efficient operation of the