ASSESSMENT 1

Claudio, Althea F.

1. Why do you think accounting is important in everyday life?

In businesses, they hire accountants to do the accounting for them. On the other hand, for
us ordinary people, we have to do the accounting ourselves. There could be a lot and a variety of
reasons as to why accounting is important for us humans: budgeting, tracking, savings and
investment, and stability. First, it helps budget our finance. This helps us plan on how much from
our money we would allocate for a certain buy or spending. Few of the benefits of this is avoiding
impulsive buying and overspending. Secondly, it helps track our finance. Through accounting, we
would know where our money went and if we were able to keep a certain amount for our savings
and such. With this, we would be informed if there should be some changes on our budgeting like
cutting back or increasing the amount allocated for a need or want. If we successfully carry out the
budgeting and tracking, from there, we would have the money we could and have saved up to keep
and if possible, to invest. No amount is invalid because if we put it together, small amount could
become a greater and so if we wise enough, we should invest it on a business, stocks, and/or a field
that would help us increase our finance. Lastly, in general, accounting supports financial stability
for stable life. In modern living, money is everything, it plays a significant role in our lives as
without it, we wouldn’t have a comfortable and decent lifestyle or worse, we wouldn’t survive.

2. Discuss the different financial statements?

Accounting generates an output through financial statements. During the discussion, there
were four kinds of financial statements mainly; Income Statement, Statement of Changes in
Equity, Balance Sheet (Statement of Financial Position), Statement of Cash Flows. In Income
Statements, you would see the summary of the revenues and expenses of a company for a specific
period of time. As for the Statement of Changes in Equity, it shows the summary of changes in
capital including investments, profit or loss, and equity during a specific period of time. Third, the
Balance Sheet or Statement of Financial Position, this provides the list of all the assets, liabilities
and equity of the company as at a certain date. Lastly, Statement of Cash Flows which exposes the
amount of cash received and laid out during a period.

3. Illustrate the flow of money in business.

The movement of money into and out of a firm are referred to as cash flow, which are generally
classified as cash flows from operations, investment, and financing. Wherein, cash flow is vital to
the survival and stability of the business including the personal finance of the owner.
The chart below illustrates the flow of money in business:

Photo (CASH FLOW ILLUSTRATION) created by Althea F. Claudio.