Accounting Course Assignment ACCT205 Essay Example | Topics and Well Written Essays - 1250 words

Accounting Course Assignment ACCT205 - Essay ExampleUsers of financial information can look at a equilibrate sheet at the end of each accounting period and know if the business has more or less value if the debts are higher(prenominal) or lower, and if the working capital is higher or lower. This can be easy if the balance sheet is properly prepared. By analyzing the balance sheet, users such as investors, creditors, taxation departments and shareholders can assess the ability of the organization to meet short-term obligations and solvency, as well as the ability of the organization to pay all present-day(prenominal) and long-term debts as they fall due.L. Jensen, (1997) indicates that the balance sheet also shows the relative proportions of debt and equity financing, the composition of assets and liabilities, and the amount of earnings that the company has had to retain as retain earnings. This information will be used by external parties such as investors, the government, credit ors, debtors and others to help assess the companys financial status in a specific financial year, which is required by both lending institutions and investors before they will allot any money toward business whether for lending or for investing.A corporation is a business entity that is wholly owned by itsshareholders.It often raisesequity capitalby selling shares of stock to investors. Equity is the chief(prenominal) source of funds of a corporation. Equity capital is an ownership interest in the corporation and each share of stock represents a fractional interest in the issuing firm. Shareholders in a corporation make vital decisions such as electing directors, investment decisions and other major decisions. The management acts as stewards of the shareholders funds. It is of grandeur to note that equity capital is not a liability to be repaid at a future date but is usually added to the liabilities in the balance sheet.Business accounting guides.com