research financial accounting definition

• Search Search Please fill out this field.

What Is Financial Accounting?

• How It Works

Financial Statements

Accrual method vs. cash method.

• Why It Matters
• Users of Financial Accounting
• Financial vs. Managerial Accounting
• Professional Designations
• Financial Accounting FAQs

The Bottom Line

• Corporate Finance

Financial Accounting Meaning, Principles, and Why It Matters

Financial accounting is a specific branch of accounting involving a process of recording, summarizing, and reporting the myriad of transactions resulting from business operations over a period of time. These transactions are summarized in the preparation of financial statements—including the balance sheet, income statement, and cash flow statement—that record a company’s operating performance over a specified period.

Work opportunities for a financial accountant can be found in both the public and private sectors. A financial accountant’s duties may differ from those of a general accountant, who works for themself rather than directly for a company or an organization.

Key Takeaways

• Financial accounting is the framework that dictates the rules, processes, and standards for financial recordkeeping.
• Nonprofits, corporations, and small businesses use financial accountants to prepare their books and records and generate their financial reports.
• Financial reporting occurs through the use of financial statements, such as the balance sheet, income statement, statement of cash flow, and statement of changes in shareholder equity.
• Financial accounting differs from managerial accounting, as financial reporting is for reporting to external parties, while managerial accounting is for internal strategic planning.
• Financial accounting may be performed under the accrual method (recording expenses for items that have not yet been paid) or the cash method (only cash transactions are recorded).

Investopedia / Laura Porter

How Financial Accounting Works

Financial accounting utilizes a series of established principles. The accounting principles used depend on the business's regulatory and reporting requirements. Companies and organizations often have an accounting manual that details the pertinent accounting rules.

U.S. public companies are required to perform financial accounting in accordance with generally accepted accounting principles (GAAP) . Their purpose is to provide consistent information to investors, creditors, regulators, and tax authorities.

The statements used in financial accounting cover the five main classifications of financial data, which are:

• Revenues – Included here is income from sales of products and services, plus other sources, including dividends and interest.
• Expenses – These are the costs of producing goods and services, from research and development to marketing to payroll.
• Assets – These consist of owned property, both tangible (buildings, computers) and intangible (patents, trademarks).
• Liabilities – These are all outstanding debts, such as loans or rent.
• Equity – If you paid off the company’s debts and liquidated its assets, you would get its equity, which is what a company is worth.

Revenues and expenses are accounted for and reported on the income statement, resulting in the determination of net income at the bottom of the statement. Assets, liabilities, and equity accounts are reported on the balance sheet, which utilizes financial accounting to report ownership of the company’s future economic benefits.

International public companies also frequently report financial statements in accordance with International Financial Reporting Standards (IFRS) .

Balance Sheet

A balance sheet reports a company’s financial position as of a specific date. It lists the company’s assets, liabilities, and equity, and the financial statement rolls over from one period to the next. Financial accounting guidance dictates how a company records cash, values assets, and reports debt.

A balance sheet is used by management, lenders, and investors to assess the liquidity and solvency of a company. Through financial ratio analysis, financial accounting allows these parties to compare one balance sheet account with another. For example, the current ratio compares the amount of current assets with current liabilities to determine how likely a company is going to be able to meet short-term debt obligations.

Income Statement

An income statement , also known as a “profit and loss statement,” reports a company’s operating activity during a specific period of time. Usually issued on a monthly, a quarterly, or an annual basis, the income statement lists revenue , expenses , and net income of a company for a given period. Financial accounting guidance dictates how a company recognizes revenue, records expenses, and classifies types of expenses.

An income statement can be useful to management, but managerial accounting gives a company better insight into production and pricing strategies compared with financial accounting. Financial accounting rules regarding an income statement are more useful for investors seeking to gauge a company’s profitability and external parties looking to assess the risk or consistency of operations.

Cash Flow Statement

A cash flow statement reports how a company used cash during a specific period. It is broken into three sections:

• Operations – These are the costs of a company’s core business activities.
• Financing – This is money the company receives from taking loans or issuing shares, as well as money paid in interest on loans and dividends to investors.
• Investments – This is money that comes from buying and selling the company’s investments, such as securities or fixed assets.

Financial accounting guidance dictates when transactions are to be recorded, though there is often little to no flexibility in the amount of cash to be reported per transaction.

A cash flow statement is used by managed to better understand how cash is being spent and received. It extracts only items that impact cash, allowing for the clearest possible picture of how money is being used, which can be somewhat cloudy if the business is using accrual accounting.

Shareholders' Equity Statement

A shareholders' equity statement reports how a company’s equity changes from one period to another, as opposed to a balance sheet, which is a snapshot of equity at a single point in time. It shows how the residual value of a company increases or decreases and why it changed. It gives details about the following components of equity:

• Share Capital – Money raised by selling stock in the company
• Net Income – Any profit after expenses and deductions
• Dividends – The part of profit that is paid to shareholders
• Retained Earnings – Whatever is left after paying dividends

Nonprofit entities and government agencies use similar financial statements; however, their financial statements are more specific to their entity types and will vary from the statements listed above.

There are two primary types of financial accounting: the accrual method and the cash method. The main difference between them is the timing in which transactions are recorded.

Accrual Method

The accrual method of financial accounting records transactions independently of cash usage. Revenue is recorded when it is earned (when a bill is sent), not when it actually arrives (when the bill is paid). Expenses are recorded upon receiving an invoice, not when paying it. Accrual accounting recognizes the impact of a transaction over a period of time.  

For example, imagine a company receives a $1,000 payment for a consulting job to be completed next month. Under accrual accounting, the company is not allowed to recognize the $1,000 as revenue, as it has technically not yet performed the work and earned the income. The transaction is recorded as a debit to cash and a credit to unearned revenue, a liability account. When the company earns the revenue next month, it clears the unearned revenue credit and records actual revenue, erasing the debt to cash.

Another example of the accrual method of accounting are expenses that have not yet been paid. Imagine a company received an invoice for $5,000 for July utility usage. Even though the company won’t pay the bill until August, accrual accounting calls for the company to record the transaction in July, debiting utility expense. The company records a credit to accounts payable. When the invoice is paid, the credit is cleared.

Cash Method

The cash method of financial accounting is an easier, less strict method of preparing financial statements: Transactions are recorded only when cash is involved. Revenue and expenses are only recorded when the transaction has been completed via the facilitation of money.

In the example above, the consulting firm would have recorded $1,000 of consulting revenue when it received the payment. Even though it won’t actually perform the work until the next month, the cash method calls for revenue to be recognized when cash is received. When the company does the work in the following month, no journal entry is recorded, because the transaction will have been recorded in full the prior month.

In the other example, the utility expense would have been recorded in August (the period when the invoice was paid). Even though the charges relate to services incurred in July, the cash method of financial accounting requires expenses to be recorded when they are paid, not when they occur. 

Financial Accounting

Records transactions when benefit is received or liability is incurred

A more accurate method of accounting that depicts more-realistic business operations

Required for larger, public companies as part of external reporting

Records transactions when cash is received or distributed

An easier method of accounting that simplifies a company down to what has already actually occurred

Primarily used by smaller, private companies with low to no reporting requirements

Principles of Financial Accounting

Financial accounting is dictated by five general, overarching principles that guide companies in how to prepare their financial statements . They are the basis of all financial accounting technical guidance. These five principles relate to the accrual method of accounting.

• Revenue Recognition Principle – This states that revenue should be recognized when it has been earned. It dictates how much revenue should be recorded, the timing of when that revenue is reported, and circumstances in which revenue should not be reflected within a set of financial statements. 
• Cost Principle – This states the basis for which costs are recorded. It dictates how much expenses should be recorded for (i.e. at transaction cost) in addition to properly recognizing expenses over time for appropriate situations (i.e. a depreciable asset is expensed over its useful life). 
• Matching Principle – This states that revenue and expenses should be recorded in the same period in which both are incurred. It strives to prevent a company from recording revenue in one year with the associated cost of generating that revenue in a different year. The principle dictates the timing in which transactions are recorded.
• Full Disclosure Principle – This states that the financial statements should be prepared using financial accounting guidance that includes footnotes , schedules, or commentary that transparently report the financial position of a company. It dictates the amount of information provided within financial statements.
• Objectivity Principle – This states that while financial accounting has aspects of estimations and professional judgement, a set of financial statements should be prepared objectively. It dictates when technical accounting should be used as opposed to personal opinion.

Importance of Financial Accounting

Companies engage in financial accounting for a number of important reasons.

• Creating a standard set of rules – By delineating a standard set of rules for preparing financial statements, financial accounting creates consistency across reporting periods and different companies.
• Decreasing risk – Financial accounting does this by increasing accountability. Lenders, regulatory bodies , tax authorities, and other external parties rely on financial information; financial accounting ensures that reports are prepared using acceptable methods that hold companies accountable for their performance.
• Providing insight to management – Though other methods such as managerial accounting may provide better insights, financial accounting can drive strategic concepts if a company analyzes its financial results and makes reactionary investment decisions. 
• Promoting trust in financial reporting – Independent governing bodies oversee the rules of financial accounting, making the basis of reporting independent of management and a highly reliable source of accurate information
• Encouraging transparency – By setting rules and requirements, financial accounting forces companies to disclose certain information on how operations are going, and what risks the company is facing, painting an accurate picture of financial performance regardless of how well or poorly the company is doing.

Careers in financial accounting can include preparing financial statements, analyzing financial statements, auditing financial statements, and supporting the technology/systems that produce financial statements.

Users of Financial Accounting/Financial Statements

The entire purpose of financial accounting is to prepare financial statements, which are used by a variety of groups and often required as part of agreements with the preparing company. In addition to management using financial accounting to gain information on operations, the following groups use financial accounting reporting. 

• Investors – Before putting their money into a company, investors often seek reports prepared using financial accounting to understand how the company has been doing and set expectations about the company’s future. 
• Auditors – Companies may be required to present their financial position to auditors , who analyze the financial statements and ensure that proper financial accounting guidance has been used and the reports are free from material misstatements.
• Regulatory Agencies – Public companies are required to submit financial statements to governing bodies such as the Securities and Exchange Commission . These financial statements must be prepared in accordance with financial accounting rules, and companies face fines or exchange delisting if they do not comply with reporting requirements.
• Suppliers – Vendors or suppliers may ask for financial statements as part of their credit application process. Suppliers may require a credit history or evidence of profitability, such as a Piotroski Score , before issuing or increasing credit to a requested amount.
• Banks – Lenders and other similar financial institutions will almost always require financial statements as part of the business loan process. Lenders will need to see verifiable proof via financial accounting that a company is in good operational health prior to issuing a loan. The statements may also be used for determining the cost, covenants, or interest rate of the loan.

Financial Accounting vs. Managerial Accounting

The key difference between financial and managerial accounting is that financial accounting provides information to external parties, while managerial accounting helps managers within the organization make decisions. Managerial accounting assesses financial performance and hopes to drive smarter decision-making through internal reports that analyze operations. It is not an allowable basis for financial statements.  

Managerial accounting uses operational information in specific ways to glean information. For example, it may use cost accounting to track the variable costs, fixed costs, and overhead costs along a manufacturing process. Then, using this cost information, a company may decide to switch to a lower quality, less expensive type of raw materials.

Professional Designations for Financial Accounting

Members of financial accounting can carry several different professional designations.

• Certified Public Accountant (CPA) – The most common accounting designation demonstrating an ability to perform financial accounting within the United States is the CPA license .
• Chartered Accountant (CA) – Outside of the United States, holders of the CA license demonstrate the ability as well.
• Certified Management Accountant (CMA) – The CMA designation is more demonstrative of an ability to perform internal management functions than financial accounting. However, this license does test on financial analysis.
• Certified Internal Auditor (CIA) – Holding a CIA designation demonstrates creditability in maintaining the control environment within a company by overseeing processes and procedures related to financial accounting.
• Certified Information Systems Auditor (CISA) – The CISA exam tests proficiency on maintaining the systems of an entity and may directly or indirectly influence the outcome of the financial accounting process.

What Is an Example of Financial Accounting?

A public company’s income statement is an example of financial accounting. The company must follow specific guidance on what transactions to record. In addition, the format of the report is stipulated by governing bodies. The end result is a financial report that communicates the amount of revenue recognized in a given period. 

What Is the Main Purpose of Financial Accounting?

Financial accounting is intended to provide financial information on a company’s operating performance . Though management can analyze reports generated using financial accounting, they often find it more useful to use managerial accounting, an internally geared method of calculating financial results that is not allowable for external reports. Financial accounting is the widely accepted method of preparing financial results for external use.

Who Uses Financial Accounting?

Public companies are required to perform financial accounting as part of the preparation of their financial statement reporting. Small or private companies may also use financial accounting, but they often operate with different reporting requirements. Financial statements generated through financial accounting are used by many parties outside of a company, including lenders, government agencies, auditors, insurance agencies, and investors.

Financial accounting is the framework that sets the rules on how financial statements are prepared. The U.S. follows different accounting rules than most other countries. These guidelines dictate how a company translates its operations into a series of widely accepted and standardized financial reports. Financial accounting plays a critical part in keeping companies responsible for their performance and transparent regarding their operations.

Financial Accounting Standards Board. " About the FASB ."

University of Nevada, Reno. " What Is Financial Accounting and Why Is It Important? "

• Accounting Explained With Brief History and Modern Job Requirements 1 of 51
• What Is the Accounting Equation, and How Do You Calculate It? 2 of 51
• What Is an Asset? Definition, Types, and Examples 3 of 51
• Liability: Definition, Types, Example, and Assets vs. Liabilities 4 of 51
• Equity Definition: What it is, How It Works and How to Calculate It 5 of 51
• Revenue Definition, Formula, Calculation, and Examples 6 of 51
• Expense: Definition, Types, and How Expenses Are Recorded 7 of 51
• Current Assets vs. Noncurrent Assets: What's the Difference? 8 of 51
• What Is Accounting Theory in Financial Reporting? 9 of 51
• Accounting Principles Explained: How They Work, GAAP, IFRS 10 of 51
• Accounting Standard Definition: How It Works 11 of 51
• Accounting Convention: Definition, Methods, and Applications 12 of 51
• What Are Accounting Policies and How Are They Used? With Examples 13 of 51
• How Are Principles-Based and Rules-Based Accounting Different? 14 of 51
• What Are Accounting Methods? Definition, Types, and Example 15 of 51
• What Is Accrual Accounting, and How Does It Work? 16 of 51
• Cash Accounting Definition, Example & Limitations 17 of 51
• Accrual Accounting vs. Cash Basis Accounting: What's the Difference? 18 of 51
• Financial Accounting Standards Board (FASB): Definition and How It Works 19 of 51
• Generally Accepted Accounting Principles (GAAP): Definition, Standards and Rules 20 of 51
• What Are International Financial Reporting Standards (IFRS)? 21 of 51
• IFRS vs. GAAP: What's the Difference? 22 of 51
• How Does US Accounting Differ From International Accounting? 23 of 51
• Cash Flow Statement: What It Is and Examples 24 of 51
• Breaking Down The Balance Sheet 25 of 51
• Income Statement: How to Read and Use It 26 of 51
• What Does an Accountant Do? 27 of 51
• Financial Accounting Meaning, Principles, and Why It Matters 28 of 51
• How Does Financial Accounting Help Decision-Making? 29 of 51
• Corporate Finance Definition and Activities 30 of 51
• How Financial Accounting Differs From Managerial Accounting 31 of 51
• Cost Accounting: Definition and Types With Examples 32 of 51
• Certified Public Accountant: What the CPA Credential Means 33 of 51
• What Is a Chartered Accountant (CA) and What Do They Do? 34 of 51
• Accountant vs. Financial Planner: What's the Difference? 35 of 51
• Auditor: What It Is, 4 Types, and Qualifications 36 of 51
• Audit: What It Means in Finance and Accounting, and 3 Main Types 37 of 51
• Tax Accounting: Definition, Types, vs. Financial Accounting 38 of 51
• Forensic Accounting: What It Is, How It's Used 39 of 51
• Chart of Accounts (COA) Definition, How It Works, and Example 40 of 51
• What Is a Journal in Accounting, Investing, and Trading? 41 of 51
• Double Entry: What It Means in Accounting and How It's Used 42 of 51
• Debit: Definition and Relationship to Credit 43 of 51
• Credit: What It Is and How It Works 44 of 51
• Closing Entry 45 of 51
• What Is an Invoice? It's Parts and Why They Are Important 46 of 51
• 6 Components of an Accounting Information System (AIS) 47 of 51
• Inventory Accounting: Definition, How It Works, Advantages 48 of 51
• Last In, First Out (LIFO): The Inventory Cost Method Explained 49 of 51
• The FIFO Method: First In, First Out 50 of 51
• Average Cost Method: Definition and Formula with Example 51 of 51

• Terms of Service
• Editorial Policy
• Privacy Policy
• Your Privacy Choices

Want to create or adapt books like this? Learn more about how Pressbooks supports open publishing practices.

11.4 Accounting for Research and Development

Learning objectives.

At the end of this section, students should be able to meet the following objectives:

• Define the terms “research” and “development.”
• Indicate the problem that uncertainty creates in reporting research and development costs.
• Understand the method by which research and development costs are handled in financial accounting as has been established by U.S. GAAP.
• Explain the advantages of handling research and development costs in the required manner.
• Recognize that many companies will report asset balances that are vastly understated as a result of the official handling of research and development costs.

Question: Many companies create internally developed intangibles such as copyrights and trademarks. As has been mentioned previously, the historical cost for such assets is often relatively small, almost inconsequential. However, monetary amounts spent to arrive at ideas that can be turned into new types of marketable products are often enormous. Such expenditures are essential to the future success of many companies. In 2008 alone, Intel reported spending $5.7 billion on research and development in hopes of discovering new products to patent and sell. During the same one-year period, Bristol-Myers Squibb incurred costs of $3.6 billion on research and development. Those are clearly not inconsequential amounts. What is meant by the term “research”? What is meant by the term “development”? If a company such as Intel or Bristol-Myers Squibb spends billions on research and development each year, what accounting is appropriate? Should the company recognize an asset or an expense or some combination? The outcome is uncertain, but the money was spent under the assumption that future economic benefits would be derived .

For example, assume that a technological company or a pharmaceutical company spends $1 million in Year One to do research on Future Product A. The company then spends another $1 million during the period on development costs for Future Product A. At the end of the year, officials believe that a patent is 80 percent likely for Future Product A. If received, sales can be made. During that time, the company also spends another $1 million in research and $1 million in development in connection with Future Product B. However, at year’s end, the same officials are less optimistic about these results. They believe that only a 30 percent chance exists that this second product will ever receive a patent so that it can be used to generate revenues. According to U.S. GAAP, what reporting is appropriate for the cost of these two projects?

Answer: Research is an attempt made to find new knowledge with the hope that the results will eventually be useful in creating new products or services or significant improvements in existing products or services. Development is the natural next step. It is the translation of that new knowledge into actual products or services or into significant improvements in existing products or services. In simple terms, research is the search for new ideas; development is the process of turning those ideas into saleable products.

Reporting research and development costs poses incredibly difficult challenges for accountants. As can be seen with Intel and Bristol-Myers Squibb, such costs are often massive because of the importance of new ideas and products to the future of many organizations. Unfortunately, significant uncertainty is inherent in virtually all such projects. The probability of success can be difficult to determine for years and is open to manipulation for most of that time. Often the only piece of information that is known with certainty is the amount that has been spent.

Thus, except for some relatively minor exceptions, all research and development costs are expensed as incurred according to U.S. GAAP (FASB, 1974). The probability for success is not viewed as relevant to this reporting. Standardization is very apparent. All companies provide the same information in the same manner. The total cost incurred each period for research and development appears on the income statement as an expense regardless of the chance for success.

Consequently, the accounting for Future Product A and Future Product B is identical. Although one is 80 percent likely to be successful while the other is only 30 percent likely, the research and development expenditures for both are expensed as incurred. No asset is reported despite the possibility of future benefits. The rigidity of this rule comes from the inherent uncertainty as to whether revenues will ever be generated and, if so, for how long. Rather than trying to anticipate success, the conservatism found in accounting simply expenses all such costs. The percentages associated with the likelihood of receiving a patent and generating future revenues are ignored.

Two major advantages are provided by this approach. First, the amount spent on research and development each period is easy to determine and then compare with previous years and with other similar companies. Decision makers are quite interested in the amount invested in the search for new ideas and products. Second, the possibility for manipulation is virtually eliminated. No distinction is drawn between a likely success and a probable failure. No reporting advantage is achieved by maneuvering the estimation of a profitable outcome.

Link to multiple-choice question for practice purposes: http://www.quia.com/quiz/2092945.html

Question: Companies spend billions of dollars on research and development each year in hopes of creating new products that can be sold in the future. This money would never be spent unless officials believed that a reasonable chance existed to recoup such huge investments. However, whether success is 100 percent likely or only 2 percent, no asset are reported on the balance sheet for these costs . Because all amounts spent on research and development are expensed automatically, are the assets reported by companies in industries such as technology and pharmaceuticals not omitting many of their most valuable future benefits? If a company spends $5 billion to develop a new drug or electronic device that becomes worth $8 billion, does reporting absolutely no asset make sense?

Answer: Even a student in an introductory accounting course can quickly recognize the problems created by a rule requiring that all research and development costs be expensed as incurred. Technology, pharmaceutical, and many other companies must exclude items of significant value from their balance sheets by following U.S. GAAP. While this approach is conservative, consistent, and allows for comparability, the rationale is confusing. The balance sheet hardly paints a fair portrait of the underlying organization. Expensing research and development costs also violates the matching principle. These expenditures are made in the hopes of generating future revenues but the expense is recorded immediately.

Capitalizing these costs so that they are reported as assets is logical but measuring the value of future benefits is extremely challenging. Without authoritative guidance, the extreme uncertainty of such projects would leave the accountant in a precarious position. U.S. GAAP “solves” the problem by eliminating the need for any judgment by the accountant. All costs are expensed. No rule could be simpler to apply.

Consequently, any decision maker evaluating a company that invests heavily in research and development needs to recognize that the assets appearing on the balance sheet are incomplete. Such companies spend money to create future benefits that are not being reported. The wisdom of that approach has long been debated but it is the rule under U.S. GAAP. Difficult estimates are not needed and the possibility of manipulation is avoided.

Talking with an Independent Auditor about International Financial Reporting Standards (Continued)

Following is a continuation of our interview with Robert A. Vallejo, partner with the accounting firm PricewaterhouseCoopers.

Question : Virtually without exception, U.S. GAAP requires that all research and development expenditures must be expensed as incurred. This requirement has existed for over thirty years. Does IFRS handle research and development costs in the same manner?

Robert Vallejo : This is one of the best examples of differences between IFRS and U.S. GAAP. IFRS requires the capitalization of development costs. Guidelines do exist to help determine when a project moves from the research stage into the development stage. However, once the development stage commences, the costs have to be capitalized and amortized over the anticipated useful life. When companies first adopt IFRS, this will be a change that will require some effort, particularly if development costs are significant, and will have a substantial impact on reported net income.

The difference between U.S. GAAP and IFRS is not a question of right or wrong but rather an example of different theories colliding. U.S. GAAP prefers not to address the uncertainty inherent in research and development programs but rather to focus on comparability of amounts spent (between years and between companies). IFRS, on the other hand, views the failure by U.S. GAAP to recognize assets when future benefits are clearly present as a reporting flaw that should not be allowed.

Key Takeaway

Research and development costs include all amounts spent to create new ideas and then turn them into products that can be sold to generate revenue. Because success is highly uncertain, accounting has long faced the challenge of determining whether such costs should be capitalized or expensed. U.S. GAAP requires that all research and development costs (with a few minor exceptions) be expensed as incurred. This official standard prevents manipulation and allows decision makers to see the amount spent by management for this essential function. However, this method of accounting means that companies (especially in certain industries) often fail to show some of their most valuable assets on their balance sheets.

FASB, “Accounting for Research and Development Costs,” Statement of Financial Accounting Standards No . 2 , October 1974. Within the new Accounting Standards Codification , information on the reporting of research and development can be found at FASB ASC 730-10.

Financial Accounting Copyright © 2015 by University of Minnesota is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License , except where otherwise noted.

What Is Financial Accounting?

Given the importance of financial accounting, the Financial Accounting Standards Board (FASB) sets regulations for financial accounting, referred to as GAAP (the generally accepted accounting principles). Private companies are not required to provide this information; only public companies must. Public companies include any organization that issues shares available to the general public.

What Are the Principles of Financial Accounting?

• Principle of Conservatism
• Principle of Accrual
• Principle of Cost
• Principle of Consistency
• Principal of Economic Entity  
• Matching Principle
• Principle of Going Concern
• Principle of Full Disclosure

More From the Built In Tech Dictionary What Is Quantitative Modeling?

Financial Accounting Statements

There are five basic statements that are always included in financial accounting documents.

• The balance sheet
• The income statement
• The statement of cash flow
• The statement of shareholders’ equity
• The statement of retained earnings

1. Balance Sheet

The balance sheet provides details describing what the company owns (“assets”) and owes (“liabilities”) as well as shareholder equity.

Businesses can own various types of assets, each of which is recorded on the balance sheet. Assets are any form of capital that the business either possesses or is owed by another entity. Examples include:

• Accounts receivable
• Buildings (separate from real estate investments)
• Intellectual property and other intangible assets
• Investments, which can include real estate assets owned specifically for the purpose of financial investment
• Machinery and equipment
• Notes receivable, or money owed to the company that it expects to receive within one year
• Prepaid expenses

Liabilities

Liabilities are any form of financial obligation that a business has to another entity. Examples include:

• Accounts payable
• Current taxes
• Deferred tax
• Loans payable
• Notes payable, or money the company owes to another entity and must pay within one year
• Unearned revenue, otherwise known as a product or service for which a client has already paid but has not yet received
• Warranty obligations

Shareholder Equity

Shareholder equity refers to all forms of capital owned by the business shareholders. Shareholder equity can include:

• Common and preferred stocks
• Money on hand to invest in the business (retained earnings)
• Profit or loss in company investments over the recorded time period (comprehensive income)

Since the balance sheet details the financial status of the company, every dollar is accounted for in either assets, liabilities or shareholder equity. As a result the total value of a company’s assets is equal to their liabilities plus shareholder equity.

2. Income Statement

The income statement details the net income for the business over the specified time period. This includes all forms of revenue (from the sale of goods or services, rental income from real estate assets, licensing revenue from intellectual property and more) and all expenses (loan payments, payroll, property expenses and more). Comparing revenue to expenses in the income statements provides a clear picture of the income produced by the company.

The income statement is also sometimes referred to as a profit and loss statement.

3. Statement of Cash Flow

A statement of cash flow details a company’s income and debt over a period of time (usually a year). This statement is exclusively concerned with cash and does not include amortization or depreciation (both of which are important entries on the Income Statement). By focusing solely on cash into and out of the business, the statement of cash flow demonstrates the company’s ability to pay existing debts and demonstrates the organization’s short-term viability.

More in Finance and Accounting What Is Entrepreneurial Finance?

4.Statement of Shareholders’ Equity

The statement of shareholder’s equity details the change in shareholder equity, or ownership value, over the specified time period. As with the other statements, the time period for the statement of shareholders’ equity is typically one year.

Shareholder equity is identified by calculating the difference between the company’s total assets and total liabilities. Larger values indicate that the company has more assets relative to liabilities, and that the company is worth more money. Thoroughly reviewing the statement of shareholders’ equity can provide insight into areas of the company that are increasing or decreasing equity each year.

The statement of shareholders’ equity typically includes the following components:

• Common Stock : This is the most publicly available form of stock in many companies. It is typically lower on the list of priorities than other forms of stock, which means owners of common stock are less likely than other stock owners to receive dividends or a share of liquidation revenues if a company goes out of business.
• Preferred Stock : Preferred stock is a special kind of stock that entitles owners to earnings and dividends before common stock owners. This stock is typically listed on the statement at face value.
• Treasury Stock : This is stock that has been repurchased by the company. An organization might repurchase its stock if it’s attempting to avoid a hostile takeover by a different organization. Shareholder equity is reduced by the amount of capital spent to acquire treasury stock.
• Additional Paid-Up Capital : This represents the excess capital investors pay over face value to obtain company stock.
• Retained Earnings : This is the amount of money that the company has brought in that hasn’t been distributed to investors as dividends or paid out to cover expenses. 
• Unrealized Gains and Losses : This entry represents the change in price for investments that have not yet been sold. Increases in stock values prior to stock sale are unrealized gains, while decreases in stock values prior to sale are unrealized losses. When selling the stock the gains or losses become realized.

5. Statement of Retained Earnings

The statement of retained earnings shows the amount of earnings the company has accumulated and kept within the company since inception. This is all cash held on hand after paying expenses and shareholder dividends. Each year the retained earnings shown on the statement changes based on the company’s retained cash from the previous year.

Investors considering a company value the statement of retained earnings because it provides insights into the mindset and motivations of the business’s management team. Higher retained earnings values indicate the company has plenty of cash on hand to finance new initiatives and growth, which is attractive to investors. Low retained earnings could either indicate that the business doesn’t turn a profit, or that the management team distributes the cash to shareholders in the form of high dividends, both of which can be concerning to potential investors.

Why Is Financial Accounting Important?

Financial accounting is critical because it provides critical information to people who are making important decisions. They’re used by the business to drive directional decisions or by outside parties considering investing in the business. Since such important decisions are based on this information, financial accounting documents are strictly regulated and required by law in the United States.

These documents are often referenced by individuals both inside and outside of the organization, including: 

• The management team uses financial accounting documents to identify and troubleshoot financial issues within the company and to create plans for the future direction of the organization.
• Investors use these documents to understand the financial health and growth potential of the company prior to deciding whether or not they want to invest their money.
• Government auditors use these documents to understand the inner workings of a company when performing an audit on the organization.
• Lawyers analyze financial accounting documents while reviewing a company’s business practices as part of a lawsuit or other legal action.
• Suppliers will sometimes require review of the businesses finances before agreeing to provide goods or services to the company to ensure the company can pay for the goods or services.
• Banks typically require information about a company’s financial health prior to lending money to the organization.

More From Peter Grant What Is GAAP?

Principles of Financial Accounting

There are eight general principles of financial accounting. These principles should be followed to ensure that the documents are accurate, reasonable and provide useful information to the readers. The eight principles are:

• Principle of Conservatism : Expenditures and liabilities are to be reported as soon as possible. Profits and assets are registered only after an accountant is confident they will be received. This yields a conservative estimate of the health of the business and prevents providing overly optimistic estimates to readers.
• Principle of Accrual : All amounts should be entered in the amounts they occur instead of when the associated cash flow occurs. This creates a detailed record of finances that allows outsiders to observe what occurred over time. 
• Principle of Cost : All equity, contributions, profits and liabilities are to be recorded at their initial purchasing prices. Quantities reported cannot be increased for market value increases or inflation. 
• Principle of Consistency : Accounting practices should be consistent across different aspects of the business. This allows an organization to use the same accounting practices and standards for internal and external documents. 
• Principal of Economic Entity : A company’s operator has separate legal liabilities and must be treated as separate from the business itself. Transactions between the business and operator must be tracked with clear definition of purchaser and seller. 
• Matching Principle : This states that costs and receipts must be correctly identified in financial statements. Following this principle ensures that costs are accurately tracked at the time they were sustained.
• Principle of Going Concern : The principle of going concern indicates the company can sustain for a specified period of time, usually one year. 
• Principle of Full Disclosure : This principle demands that a company publish accurate information in its financial reports and ensures that those making decisions have access to accurate information.   

Financial Accounting vs. Managerial Accounting

Financial accounting and managerial accounting are two similar but distinct forms of tracking business expenses.

Financial accounting focuses on the reporting processes used to convey information to important stakeholders, including many outside reviewers. Accountants responsible for financial accounting focus on long-term financial strategies related to organizational growth. Additionally, since these documents are legally required they must be prepared in ways that comply with industry standards.

Managerial accounting is a more internal process that uses an understanding of the business to drive management decisions. Accountants responsible for managerial accounting are usually focused on short-term growth strategies relating to economic maintenance. For instance, an accountant may consider the cost/benefit of purchasing a part to help make a product. Since managerial accounting is an internal process, each organization can use their own procedures and templates when creating their documents. 

Built In’s expert contributor network publishes thoughtful, solutions-oriented stories written by innovative tech professionals. It is the tech industry’s definitive destination for sharing compelling, first-person accounts of problem-solving on the road to innovation.

Great Companies Need Great People. That's Where We Come In.

Accounting Research Tutorial: Accounting Research

• Accounting Research
• Accounting Information Center

Accounting Research Tutorial

Step 1) Establish the Facts; Identify the Issues

 "The researcher's first task is to gather the facts surrounding the particular problem. However, problem-solving research cannot begin until the researcher has clearly and concisely defined the problem. One needs to know the 'why' and 'what' about the issue in order to begin the research process." 1 We will use the merger in 2001 between America Online and Time Warner to form Time Warner as our example. Internet portal America Online paid $147 billion for media conglomerate Time Warner in 2001. But the book value of Time Warner's assets was only $51 billion. The enormous $96 billion difference amounts to "Goodwill", or the value of Time Warner's brands, trademarks and other intangible assets, "subtracting an astonishing $1.5 billion a quarter from the bottom line." 2 How is this "Goodwill" accounted for in the new AOL Time Warner's financial statements? What effect will the new Financial Accounting Standards Board (FASB) Statement 142 concerning Goodwill and Other Intangible Assets  have on AOL's financial reporting? What are the implications of deals like this on the integrity of financial statements used by investors, analysts, regulators and others? Step 2) Make a List of Keywords and Concepts Accounting terminology embodies established accounting issues. Most Handbooks and Textbooks have excellent indexes that will lead you to discussions of the topic and provide you with potential keywords and concepts you can use in your search. Accountants' Handbook. Vol 1., Financial Accounting and General Topics and Vol.2., Special Industries and Special Topics are available online. Checkpoint offers the Handbook on Accounting and Auditing published by Warren, Gorham and Lamont as past of its WG&L Library . Goodwill is an "Intangible Asset" resulting from a "Business Combination" and is defined "as the excess cost of an acquired company over the sum of identifiable net assets." 3 Critical issues in accounting for Goodwill involve "Valuation" and "Amortization", the "Purchase Method" vs. "Pooling-of-Interests Method" of accounting for "Business Combinations.".  So now we have a vocabulary we can use when searching for information: Goodwill, Business Combinations, Intangible Assets, Valuation, Amortization, Purchase Method, and Pooling-of-Interests. We might add "Mergers" and "Acquisitions" and additional terms as we learn more about the topic. Step 3) Use the Accounting Information Center to Identify Research Resources The Accounting Information Center to find accounting standards, artcies, books, case studies, databases, examples, websites and other resources to use in researching accounting issues. We will discuss specific sources in the following steps. Step 4) Find an Overview of the Topic Handbooks and Textbooks are often the best places to start looking for information on unfamiliar topics. Their mission is to define, explain and provide examples for students and practitioners. The Accountants' Handbook. Vol.1: Financial Accounting and General Topics and Vol.2.: Special Industries and Special Topics are both in netLibrary. You must be careful about the date of publication. Many accounting issues are in flux and may be under consideration by the accounting standard setters such as the American Institute of Certified Public Accountants (AICPA ) , the Financial Accounting Standards Board (FASB) , the Public Company Accounting and Oversight Board , the U.S. Securities and Exchange Commission or the International Accounting Standards Board (IASB) . We will learn that is precisely the case regarding Goodwill Accounting. Use ABI/INFORM , Business Source Premier (EBSCO) , Factiva ,  Nexis Uni , and The Wall Street Journal to search for well-written articles in journals, magazines and newspapers. These play an important role in informing professionals and the public about current issues and controversies. The World Wide Web offers a new way to search for information about accounting topics. Google is especially good for quickly finding relevant material. In all cases you must carefully consider the authority, reputation and timeliness of the source of the information. Step 5) Identify Authoritative Pronouncements Accounting research relies heavily on authoritative precedents promulgated by recognized standard setting bodies.  The Financial Accounting Standards Board (FASB ) is currently making available the full text of the FASB Statements on the FASB Website . Users must agree not to store copies on their computers or link directly to the statements. The AICPA Library is now available in RIA Checkpoint . It includes the AICPA Professional Standards with every Statement on Auditing Stanadrds (SAS), the Technical Practice Aids , the Audit and Accounting Guides and Other Audit Risk Alerts .  Nexis Uni   has a variety of AICPA Publications including the Industry Audit Guides and the Statements on Auditing Standards (SAS) , the Miller GAAP and GAAS Guides , The Journal of Accountancy , the CPA Letter and others. We have print subscriptions to many of these publications in the Business Reference area in Library West. New FASB Statements and AICPA Auditing Standards are published in the Journal of Accountancy.   Checkpoint has the AICPA's Statements of Position (SOPs) . Both AICPA and FASB make some information about current issues freely available on their Websites. In June 2001 FASB issued Statement Of Financial Accounting Standards (SFAS) No. 14: Business Combinations and SFAS No. 142: Goodwill and Other Intangible Assets , replacing the Accounting Principles Board Opinions Nos. 16 & !7, that previously guided accounting for goodwill in business combinations. Henceforth, all Business Combinations must be accounted for using the purchase method with Goodwill treated as an asset on the balance sheet that must be regularly reviewed for impairment. The pooling-of-interests method is no longer allowed and Goodwill is not amortized. Step 6) Search for Articles, Case Studies and Examples About the Issues and Their Implications Online article databases including ABI/INFORM , Business Source Premier (EBSCO) , Factiva and  Nexis Uni   offer a tremendous opportunity for finding  background information, literature reviews, specific examples, practical and public policy implications and other material on virtually any substantive accounting issue. The more controversial the issue the more likely it is to be widely discussed in the periodical literature. Step 7) Search the Web Google will help you locate additional materials freely available. Step 8) Examine the Financial Statements Published in SEC Filings U.S. and Foreign Companies whose stock trades publicly in the United States are required to file audited financial statements that meet U. S. Generally Accepted Accounting Principles (GAAP ) with the Securities and Exchange Commission (SEC) . These are made available in the SEC's EDGAR database. You can also retrieve EDGAR filings in Factiva , D&B Hoovers , S&P NetAdvantage ,  Mergent Online , and Statista , as well as Corporate Investor Relations sites. Pay particular attention to the Financial Footnotes published in the 10Ks where significant accounting policies are disclosed These are usually found in Note 1. For example, in AOL's September 2001 10Q (quarterly filing) there are numerous references to "goodwill" due to the substantial negative impact on earnings of amortizing the excess purchase price under current rules. In 2002 under the new FASB Statement 143 the charges to earnings were magically transformed into an asset carried on future balance sheets. Reported earnings greatly benefited. Step 9) Search Investment Research Reports Goodwill is a good example of an accounting issue that has major implications for investment analysis and strategy. Investment banks all have sophisticated research departments that analyze accounting rule changes for their impact on financial statements, corporate strategy and investment opportunities.  D&B Hoovers   has a good selection of reports from leading firms including Credit Suisse, Deutche Banke and others that evaluate the impact of changes in Goodwill Accounting. Refinitiv's After Market Research (AMR) has thousands of current and historical investment research reports. And you will find numerous, detailed reports on all major publicly traded companies. Step 10) Putting It All Together Now you should have command of the topic. You know the accounting terms used to describe the issues. You are familiar with specific information resources. You’ve located overviews, articles and other material that provide a basic understanding and perspective on the issues as well as areas where controversy remains. You’ve identified relevant information sources, databases, books, reports and Web sites and utilized effective search strategies. You know the important published authoritative and semi-authoritative pronouncements and who issued them. You have seen examples in published financial statements. You’re ready to apply all of this information to your specific situation. 1.Thomas R. Weirich and Alan Reinstein. Accounting & Auditing Research . 4th ed. (Cincinatti, Ohio: South-Western College Publishing, 1996), 12. 2. Pablo Galarza. "The Goodwill Games." Money 30 No. 13 (December 2001): 61. In  ABI/INFORM . 3. D.R. Carmichael, Setphen B. Lilien and Martin Mellman. Accountants' Handbook . 9th ed. (New York: John Wiley & Sons, 1999) Volume 1: 17.1.

• Next: Accounting Information Center >>
• Last Updated: Sep 17, 2022 4:55 PM
• URL: https://businesslibrary.uflib.ufl.edu/accountingresearch

Accounting Research for Shaping a Better World

In previous contributions to the Knowledge Gateway, we proposed a long overdue redefinition of accounting as “a technical, social and moral practice concerned with the sustainable utilisation of resources and proper accountability to stakeholders to enable the flourishing of organisations, people and nature”. [1] This proposal unmistakably presents accounting in substance as a multidimensional technical, social and moral practice rather than a mere neutral, benign, technical practice.

In the first of these Knowledge Gateway contributions, entitled “ Redefining Accounting for Tomorrow ”,  we argued “how we define accounting today and what defines accounting tomorrow are fundamental to the purpose, value and identity of the accountancy profession”. The proposed definition “engages with the full dimensions of accounting as an enabling, disenabling and pervasive practice as has emerged in recent decades and reflects the discipline’s growing interdisciplinary orientation”.

Subsequently, an SOS was issued for accounting educators, to contribute to developing accounting and accountants for shaping a better world in the second contribution, entitled “ SOS Accounting Educators: Developing Accounting and Accountants for a Better World ”. Herein, we argued “professional accountants and non-accountants alike need to appreciate and understand the effects of accounting upon organizations, people and nature to help shape a better world”.  Having received overwhelming acceptance and support for our definition from academics, we turn to its implications for accounting research.

Accounting research helps in understanding our past and present, in terms of historical and contemporary studies respectively, so that we apply accounting knowledge and practice in creating a sustainable future. It informs teaching and learning and contributes to understanding the nature, roles, uses and impacts of accounting in the world. This understanding contributes to the capacity of the profession, through cross-disciplinary interaction and engagement combined with an enhanced appreciation of non-financial schemas of value and their potential use in shaping a better world. Accounting education and accounting research are inseparable. One should not be undertaken in any formal, higher education context without the other. This is not negotiable in our view.

As in the second contribution, we urge the international accountancy profession to make accounting research more central to accounting development, particularly to its redevelopment and proposed intention or aspiration “to enable the flourishing of organisations, people and nature.” In addition, accounting educators can be more impactful and enhance their value by teaching students to understand, portray and practice accounting as a multidimensional technical, social and moral practice for shaping a better world.

Accounting researchers are encouraged to become more interdisciplinary in their research to leverage off other disciplines playing paramount roles in dealing with big challenges and perplexing issues in local, national, regional and international contexts. Urgent among them are climate crisis, pandemics, sustainability, human rights, poverty and inequality, oppression and warfare, hunger and food insecurity, water provision and management, global refugee movements, health care provision, habitat and biodiversity, government corruption and accountability, education availability and accessibility. 

Building on accounting research undertaken in the sociological, interpretive, and critical tradition from the early-to-mid 1980s, accounting education will benefit from being strategically oriented towards our proposed new definition of accounting. Such researchers focus attention on exploring and better understanding the enabling, disenabling and pervasive characteristics of accounting. Particularly, they reveal how it impacts human behaviour, shapes organisational and social culture, and address the implications for organisational and social functioning and development.

Paradoxically while the volume and diversity of accounting research conducted and published internationally has strongly grown across the past four decades, the accountancy profession appears to be overlooking accounting research findings and related opportunities for advancement of the public interest and the betterment of society and nature. Accounting educators and researchers, as well as professional accountants and professional accountancy organizations, can further apply themselves to do more to optimize their full potential and grow more connected to each other. Greater cohesive action and connectivity is desirable, for the best interests of accountancy and its stakeholders, including society and the natural environment.

Bridging this unhelpful, extending divide is crucial for the collective accountancy profession to make an optimal and impactful contribution to shaping a better future. In explicit terms, the accountancy profession, including professional accountants and professional accountancy organizations, as well as accounting educators and researchers, all need to be more closely engaged and strategically connected.

Learning from our past, we can shape our future from tomorrow for the greater good of people, nature, and the planet. For instance, a major international evaluation of the impacts of New Public Management (NPM), enabled in action by means of techniques and processes of accounting, is both overdue and necessary. Under NPM, there is growing and concerning evidence of the goal displacement effect towards business profit/commercial returns and a divergence away from community and society service.

Around the world, today’s accountancy students, as well as tomorrow’s, are the next generation of accountants. These students require an appreciation of the big issues society and nature face. They will, with appropriate, stimulating leadership and guidance, react positively and co-operatively to a future integration of accounting educators and researchers and the professional accountancy associations and practicing professional accountants.

A precedent for collaboration exists. During the early-to-late 1970s and the 1980s, academic accountants regularly published articles in professional accounting journals. This and other forms of connection and engagement offer the prospect of a future profession that engages far more proactively with the human issues and their moral, social, institutional, economic and environmental aspects.  Addressing this broad landscape requires the mutual respect and collaboration of all the key players in the accounting discipline if accountancy is to realise its full potential for shaping a better world.

This multifaceted technical, social and moral agenda can be effectively and innovatively deployed in helping to adequately deal with big challenges and perplexing issues confronting society. The notion of “governance by numbers” has gained almost unquestioned currency today. According to Supiot, “governance by numbers gives immense power to those who construct the figures, because this is conceived as a technical exercise which needs not be exposed to open debate” (2017, p. 163). However, as a multifaceted technical, social and moral practice, accounting becomes misunderstood when engaged as merely technical, in operation.

Of importance to a future holistic accounting research strategy, our proposed new definition of accounting offers a framework of key conceptual questions:

• Technical practice: "How do we do accounting?"
• Social practice: "What does accounting do?"
• Moral practice: "What should accounting do"  or  "What should accounting not do?"

Importantly, accounting is more influential in the world and in our lives than many people may think. A broader, clearer, more realistic and ‘game-changing’ definition of accounting, which portrays the discipline as “an instrumental social and moral practice” (Carnegie , et al., 2022, p. 9) is a critical step to take.

In a complex and complicated world, these questions are intended for accounting to be understood and appreciated as being well beyond some supposedly objective set of rules to be applied.  Instead, accounting needs to be “fit-for-purpose”, undertaken with full regard for the diversity of organizational and social contexts in which it operates.  

We encourage professional and academic accountants alike to view accounting more holistically if it is to meet its full potential and responsibility. This lack of connectedness is now seen to be an inherent weakness of the profession. This can and indeed should be ameliorated by leaders on both sides of the international profession for the discipline to become more instrumental in shaping a better world from tomorrow.

   [1]  For in-depth coverage, see Carnegie, et al. (2021) and Carnegie, et al. (2022). 

  References

Carnegie, G., Parker, L. and Tsahuridu, E. (2020), It’s 2020: what is accounting today?  Australian Accounting Review , Vol. 31 No. 1, pp. 65-73, available at:  https://onlinelibrary.wiley.com/doi/epdf/10.1111/auar.12325

Carnegie, G.D., Ferri, P., Parker, L.D., Sidaway, S.I.L. and Tsahuridu, E. E. (2022), Accounting as technical, social and moral practice: the monetary valuation of public cultural, heritage and scientific collections in financial reports,  Australian Accounting Review , 5 April, available at:  https://onlinelibrary.wiley.com/doi/full/10.1111/auar.12371

Supiot, A. (2017),  Governance by Numbers: The Making of a Legal Model of Allegiance , Oxford: Hart Publishing.

Garry Carnegie

Emeritus Professor, Department of Accounting, RMIT University

Garry Carnegie is an Emeritus Professor of RMIT University having served as Head, School of Accounting and Professor of Accounting at RMIT from 2010 to 2017. Prior to joining academe in 1985, Professor Carnegie gained experience in the IT industry, professional accounting services and in financial services. Prior to joining RMIT, he held full-time professorial posts at Deakin University, Melbourne University Private/The University of Melbourne, and at the University of Ballarat (now Federation University Australia). He was the Editor/Joint Editor of Accounting History for a continuous period of 25 years and is an Associate Editor of Accounting, Auditing & Accountability Journal. He is Joint Editor of the EE Handbook of Accounting, Accountability and Governance.

Lee Parker is Research Professor of Accounting, Glasgow University, Scotland . Globally published, Lee is joint founding editor of Accounting, Auditing & Accountability Journal and member of over 20 journal editorial boards. He has been President: Academy of Accounting Historians (USA), American Accounting Association Public Interest section, Vice-President (International) American Accounting Association, President CPA Australia (SA Division), Deputy Chair Australian Institute of Management (SA), member of the Australian Accounting Hall of Fame and the Australian Centre For Social and Environmental Accounting Research Hall of Fame.

Eva Tsahuridu, PhD

Business Ethicist, Board Director

Dr. Eva Tsahuridu is a business ethicist who has been researching, teaching and advising on business and professional ethics for over two decades.  Eva is currently a board director and advisor.  She is the section editor of Practice in Business Ethics of the Journal of Business Ethics, an executive editor of Philosophy of Management and the deputy chair of the Australasian Business Ethics Network. Eva writes for practitioner and academic publications and her research interests include personal and organisational ethical conduct, whistleblowing, ethical and professional standards and philosophy of management.

Empirical Research in Accounting: Tools and Methods

University of Melbourne

25 Mar 2024

This is the on-line version of the work-in-progress edition of Empirical Research in Accounting: Tools and Methods .

The book is being written by Ian D. Gow and Tony Ding . On this page, we detail recent changes to the book as well as materials planned to be added in coming months.

Recent changes

• Many changes to increase consistency of code
• Switch to use of stringr functions throughout
• Improved adherence to R style guidelines
• Added many index entries (PDF version)
• Refined chapters in Part I
• Replaced material in 4  Causal inference
• Completed remaining portion of 5  Statistical inference
• Completed 23  Beyond OLS and 24  Extreme values and sensitivity analysis
• Removed incomplete chapter on selection models
• Extensive proofreading
• Added chapter on GLMs
• Added appendix on parquet data
• Added material on extreme values and matching
• Prepared templates for Part III
• Converted source code from bookdown to Quarto . One benefit is a much better search engine for this site
• Switched from the magrittr pipe ( %>% ) to the native pipe ( |> ).
• Updated references to “R for Data Science” given recent release of the second edition of that book
• Switched to native form of anonymous functions ( \(x) )
• Migrated from stargazer to modelsummary
• Migrated from lfe to fixest
• Prepared templates for most of Part I and Part II
• Polished material on the efficient markets hypothesis
• Polished chapter on event studies
• Added repository of Quarto templates for exercises.
• Many edits to Part I of the book.
• Added “data science bootcamp” chapter ( 2  Describing data )
• Added chapter on prediction ( 26  Prediction )
• Added material on Zhang (2007) to 13  Event studies (event studies)
• Refined chapter on matching
• Added material on Beaver (1968).
• Added more material to SQL primer (appendix)
• Organized book into parts. See 1.1 Structure of the book for more on how the book is structured.
• Initial draft of second chapter on natural experiments
• Added material on evaluating natural experiments and the parallel trends assumption to 19  Natural experiments revisited
• Filled out chapter on accrual anomaly (Sloan, 1996)
• Added chapter on earnings management mostly focused on DSS (1995)
• Added separate chapter on FFJR (1969)
• Added separate chapter on Ball and Brown (1968)
• Added chapter on RDD
• Added simulation from Leone et al. (2019)
• Added chapter on natural experiments
• Added chapter on panel data
• Extensive revisions to material on IV

Materials to come

Below is our current work plan.

Econometrics (January 2024)

• Replace discussion of history of econometrics

Methods (January 2024)

• Finalize chapter on matching

Methods (online 2024)

• Complete chapter on selection models

More accruals (online 2024)

• Build up simulations using (somewhat) realistic models of actual business and accounting processes
• Coverage of accrual quality models, including Dechow and Dichev (2002)

Structural models (online 2024)

• Include material on structural models from Gow, Larcker and Reiss (2016)
• Explicitly discuss weaknesses implicit in Gow, Larcker and Reiss (2016) material
• Add an application, perhaps the one from Bertomeu, Beyer, and Taylor (“BBT”)
• Examine a modification of BBT’s model

If you have suggestions for the book or requests, please feel free to contact either Ian or Tony . Alternatively, you may create a new issue describing your suggestion in the repository for the companion package for this course here .

An official website of the United States government

The .gov means it’s official. Federal government websites often end in .gov or .mil. Before sharing sensitive information, make sure you’re on a federal government site.

The site is secure. The https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely.

• Publications
• Account settings

Preview improvements coming to the PMC website in October 2024. Learn More or Try it out now .

• Advanced Search
• Journal List
• Comput Intell Neurosci
• v.2022; 2022

This article has been retracted.

Analytical study of financial accounting and management trends based on the internet era.

College of Accountancy, Shanxi Technology and Business College, Taiyuan 030000, Shanxi, China

Associated Data

The experimental data used to support the findings of this study are available from the author upon request.

With the development of Internet technology and computer technology, the network has provided convenience to enterprises while putting forward new requirements for the development of the accounting industry. The combination of traditional financial accounting methods and computerized information technology enables accurate and rapid transmission of financial data. At the same time, the application of network technology optimizes the financial accounting process of enterprises and greatly improves the efficiency of accounting work and accountants can devote more time and energy to the analysis of enterprise financial information. However, with the application of Internet technology, the change in financial accounting has also generated new problems. The article focuses on the topic of financial accounting; first, it briefly introduces the development history of financial accounting and the Internet; second, it discusses the changes in accounting work mode and its characteristics under the network environment and analyzes the advantages and problems of combining network technology and financial accounting; and finally, it puts forward the countermeasures to solve the “Internet+” era financial accounting work for the current situation. Finally, the countermeasures to solve the financial accounting work in the era of “Internet+” are proposed to improve the professional ability of financial personnel.

1. Introduction

Compared with the previous enterprise financial management work, financial management in the Internet era has distinct advantages, which effectively expands the scope of enterprise financial management and allows comprehensive supervision of the entire financial management work [ 1 ]. In the Internet era, corporate financial management generates more information and requires rapid transmission of information in a short period of time [ 2 ]. If they want to meet the development needs of the times, enterprises need to have a clear understanding and awareness of the importance of financial and accounting management work to innovate the working model ( Figure 1 ). At the same time, enterprises also need to improve the dissemination of financial information and manage financial accounting information in a diversified way, which can not only effectively improve the efficiency of enterprise financial management, but also optimize the working environment comprehensively [ 3 ]. In the Internet era, intelligence has become the main direction of enterprise financial management work, which is an important basis for enterprise financial management in the Internet era and an inevitable trend of the market economy, which can not only effectively improve the market competitiveness of enterprises, but also facilitate the implementation of scientific management by relevant financial and accounting departments and lay a solid foundation for the efficient development of financial accounting [ 4 ]. Therefore, in the Internet era, enterprises need to pay more attention to the informationization and intelligence of financial accounting management, fully meet the development trend of the times, and actively promote the development of enterprises [ 5 ].

New model of financial accounting.

Nowadays, China has entered the Internet era, and the vigorous development of the Internet has directly changed the financial accounting management work, significantly improved the management quality of financial accounting, and the content involved in financial accounting has become more extensive [ 6 ]. For this reason, relevant personnel must deeply analyze the financial accounting management trends in the Internet era in order to do their jobs well.

1.1. Expanded Scope of Financial Management

In the Internet era, the management efficiency of enterprises has been significantly improved, and the financial accounting management mode has been changed [ 7 ]. The most significant change is that it extends the scope of financial management and enriches the work of financial management. For example, the use of the Internet not only enables direct procurement and management but also the ability to discipline suppliers and later sales to ensure the integrity of management [ 8 ].

1.2. Improving the Timeliness of Financial Management

Real-time and timeliness are the most significant advantages of Internet technology, so for financial accounting management work, it is also necessary to improve the speed of information transmission to help users get accurate information [ 9 ]. Financial and accounting management pays more attention to the timeliness of information, and the existence of Internet technology helps meet this need effectively [ 10 ]. The use of Internet technology enables financial management to be more timely and changes the method of communication, increasing communication and exchange between personnel [ 11 ]. For example, the use of the Internet makes it possible to lay out the relevant work content and to monitor the implementation of the work; the use of the Internet also makes it possible to give feedback to the company on specific work situations, significantly improving efficiency [ 12 ].

1.3. Orderly Operation within the Enterprise

Financial accounting management work in the Internet era can deliver financial information in a timely manner and make financial management work more flexible and orderly [ 13 ]. Financial accounting management work is the focus of enterprise management. In enterprise financial accounting management, it is difficult to achieve obvious management effects if we still rely on the older way to implement management. At this time, the use of Internet technology can manage the financial and business work scientifically and ensure the orderliness of the internal operation of the enterprise.

At present, China is in the era of intensified economic globalization and extremely rapid transmission of information, and the competition among enterprises is increasingly fierce. In the face of the increasingly competitive market environment, leaders need to conduct enterprise management not only to consider the traditional factors of competition between enterprises, but also to start from the management level, relying on strong and excellent financial management to help managers to make appropriate corporate decisions [ 14 ]. Therefore, real-time and comprehensive financial management information plays a pivotal role for managers to make decisions.

2. Related Work

Financial accounting is a branch of business accounting that, together with management accounting, forms the two main areas of business accounting, known as “traditional accounting” because it follows traditional manual accounting records, and therefore also known as “external reporting accounting” because it focuses on the business external stakeholders' decision-making needs and financial reporting outside the enterprise [ 15 ]. Financial accounting is an economic management activity that is carried out through comprehensive and systematic accounting and monitoring of the financial flows carried out by the enterprise, with the main purpose of providing economic information about the financial position and profitability of the enterprise to external investors, creditors and relevant government agencies that have an economic interest in the enterprise (refer to Figure 2 ).

Traditional financial accounting.

Financial accounting plays a pivotal role in enterprise management and can provide useful information to decision-makers through various accounting procedures, actively participate in the management decisions of the enterprise, improve the efficiency of production and operation activities of the enterprise, and promote the healthy and normal development of the market economy. Therefore, financial accounting is crucial and indispensable in the course of the development of enterprises [ 16 ].

The Internet was born in the 1960s and 1970s as a large global network consisting of a series of common protocols [ 17 ]. As the economy grew, the development of the Internet accelerated, and by the 1980s and 1990s, it had matured, become more sophisticated, and gradually began to spread around the world [ 18 ]. Throughout the early development of the Internet, fundamental changes occurred almost every decade [ 19 ]. In China, the adoption of the Internet began around 1994 [ 20 ].

With the increasing popularity of mobile Internet, cloud computing, big data, and other technologies, human beings have stepped into the Internet era. Whether it is attendance records and online shopping, daily commuting to and from work, or software used in daily work, Internet technology is necessary [ 21 ]. It can be seen that technology has a decisive influence on the development of society, and the development of network technology will continue to push human society into a new era.

By applying Internet technology to financial accounting and management, the transport linkage of computer data and automatic calculation of data are realized, which in turn improves the accuracy of financial data in a comprehensive manner [ 22 ]. In addition, with the support of Internet technology, workers effectively enhance the degree of information sharing in daily financial accounting or management and create good conditions for the smooth implementation of financial supervision [ 23 ]. For example, in daily work, when workers need relevant financial information, they can quickly obtain the required information with the help of information sharing. Although Internet technology has improved the efficiency and quality of financial accounting and management work, the content of financial accounting and management work in the new era is gradually diversified and complicated [ 24 ].

With the gradual diversification of financial management content, the financial management staff of institutions can fully understand the importance of this work and continuously improve their Internet technology and financial management knowledge and skills to better meet the needs of the real work, and then give full play to the maximum value of financial management work [ 25 ].

3. Methodology

3.1. basic model.

An accounting information system (AIS) is a system that incorporates all accounting information. AIS is an important application of computer technology in the field of accounting; the generation of AIS brings accounting from the original era of manual bookkeeping to the era of machine bookkeeping, realizing computerization of accounting is an important reform in accounting practice. Its essence is the use of computers for an accounting information system.

The mechanism of its role is that the accounting information system first collects some of the data produced by the front-end business process that meet the definition of accounting, then carries out corresponding accounting processing according to these accounting data, completes accounting, generates accounting information, and finally, managers use this accounting information to make business decisions. Analysis and organization of the role mechanism of AIS is shown in Figure 3 .

Mechanism of accounting information system.

In this article, “whether the accounting information system can realize the sharing of business and financial data” is taken as the mark of the division between traditional and financial integration accounting information systems; from this perspective, the traditional accounting information system has gone through five rounds of evolution, as shown in Figure 4 .

Evolution of traditional AIS.

Although the accounting information system in the first 4 stages could also record some business information, the content of the recording was very limited, and business information still needed to be transferred between business and finance departments through paper-based original vouchers. Compared with the first 4 stages, the most significant feature of this stage is that the front-end business module is incorporated into the AIS, which helps the AIS record not only the business data conforming to the accounting definition, but also other types of business data so that the AIS system provides managers with richer data and enables managers to see the original business picture more intuitively through the system.

Through the above 5 stages of development of an accounting information system, we can see that the traditional accounting information system mainly solves 2 problems: first, for the paperless bookkeeping vouchers, accounting personnel use computers instead of manual bookkeeping; second, recognizing that business data play a very important role in enterprise management, business department data and financial data are integrated into the accounting information system, so that the accounting information system can further play its efficient management role.

Through the above development history of traditional accounting information system, it can be seen that traditional AIS provides accounting information to managers and then provides services for their management decisions, although the MIS (management information system) stage can already provide business information to managers, but because business and financial information cannot be shared resulting in a lower degree of this information used by managers, so by organizing the traditional AIS functions as shown in Figure 5 .

Traditional AIS function diagram.

Industry financial integration AIS means an accounting information system that can realize business financial integration, which is an effective platform and tool for enterprises to realize business financial integration by using various modern computer technologies, advancing the financial work of enterprises to the business end, through which enterprises can not only obtain management information in terms of financial analysis, but also obtain management-related information directly from business data, and managers can use this business-side information for more in-depth analysis, realizing the integration of information flow and data flow.

The accounting information system of the combination of production and finance realizes the information sharing of business and financial data, breaks through the limitation that traditional accounting information systems basically can only use accounting information to participate in management, improves the utilization of business information, and promotes a deeper combination of accounting and management; the combination of accounting and management makes accounting a powerful assistant of enterprise management. The functions of financial accounting and management accounting are therefore mutually reinforcing and inseparable, as shown in Figure 6 .

Functional diagram of AIS for business finance integration.

3.2. Improvement Model

Based on the aforementioned problems of rigid accounting, rigid management, and rigid business processes in the application process, the design goal of the flexible financial integration AIS is to make the financial integration AIS flexible, improve the self-adaptability and scalability of the system itself to changes in external requirements, and then shorten the system redevelopment cycle and reduce the cost of redevelopment, specifically including flexible input and data structure, flexible data flow, flexible business process, and flexible data output.

3.2.1. Flexible Input and Data Structure Design

Traditional industry and finance integration AIS for the development of data structure design is usually only specific database tables and fields, that is, the premise that the default later database table structure does not change, the data table in the data items does not change. This rigid system does not take into account the possible adjustment of the data structure in the subsequent use of the enterprise during the initial design, and of course, there is no input space reserved for the user to configure the data structure at the front end, so the developed system lacks self-adaptability for the user to a certain extent in terms of input and data structure.

Two important concepts in the database related to the input and data structure design of the flexible industry financial integration AIS are triggers and stored procedures. The trigger mechanism ensures that the trigger action is executed only when the trigger event occurs and the trigger limits are met. Each table in the database can set a trigger, and the role is to establish the connection of multiple tables in the database to achieve the linkage of data in multiple tables. A stored procedure is a set of statements to complete a specific function, through the parameters set so that when the user performs similar operations on the database, there is no need to repeat the compilation, so the use of stored procedures can improve the efficiency of the database operation.

The design of the data structure in the flexible financial integration AIS is not only the specific database tables and fields, but also the “data dictionary,” which stores not the general specific user data, but the structural data of various data items, and establishes the connection between the data dictionary and the entity database tables through triggers and stored procedures, so that when the structural data in the data dictionary changes, the corresponding entity table structure will also change accordingly.

The design of input in the flexible business financial integration AIS is to present the data dictionary stored in the database on the page to the user by setting up the data dictionary function card interface, reserving the input space for the user to configure the data structure. Using this function, the following two kinds of operations can be performed: first, you can create new original documents and enter the specific data items related to the content; second, you can modify the original documents in the data items (such as special enterprises in financial accounting or managerial decision-making needs may add some special data items on business documents, which you can add or modify in the original database forms) and thus meet the changing needs of enterprises for the data structure.

The “data dictionary” is a “warehouse” that can be used to store a variety of structural data. It should include the following two tables: one is the detail table (to store the content of the data items of each table of the database, including field names and field types), and the table structure as shown in Table 1 .

Table of contents.

The flexible implementation process of input and data structure is shown in Figure 7 . The data update linkage between the business and finance fusion AIS and the corresponding entity tables in the database is done through triggers and stored procedures. When the user performs the operation of adding, deleting, or changing in the data dictionary function card of the AIS, the corresponding database is called using the database interface; the corresponding data changes are recorded in the detail table; the operation of adding, deleting, or changing then triggers the trigger embedded in the detail table; the data modified by the user in the front-end page is recorded in the temporary table; the corresponding stored procedure is executed; and then, the corresponding entity table is modified. The modification of the entity table will be presented on the interface of the AIS in real-time, so that the user can realize the change in the data structure of the corresponding form in the database through the data dictionary function card on the AIS, which realizes the flexibility of the input and data structure.

Design diagram of input and data structure flexibility.

3.2.2. Flexible Data Flow Design

Since the data structure in the traditional AIS is fixed, the flow of data items between them is also fixed. Although the flow of data items between documents, between documents and vouchers, and between documents/vouchers and reports is possible in the traditional rigid AIS, this flow is solidified and does not allow users to configure themselves, for example, some data grievances exist only in upstream documents and not in downstream documents, but managers need to add these data items that exist only in upstream documents to downstream for management purposes The administrator also needs to add these data items that exist only in the upstream documents to the downstream documents for management purposes. If the new data items do not exist in the upstream and downstream documents, it is difficult to configure the process of these extended data items in the system.

The design of the data flow in the flexible financial integration AIS focuses on the establishment of visualized document conversion rules between upstream and downstream documents, between various documents and vouchers, and between documents and reports, which can be configured by users. The specific design diagram is shown in Figure 8 .

Data flow flexible design diagram.

Document conversion rules: Document conversion rules are designed to make the data conversion between documents more convenient, and through the method of parameter configuration, the conversion rules are no longer rigid and unchangeable but can be flexibly deployed. With the rules to achieve data filtering, grouping, and merging, calculation and other configurations meet the business needs of the document conversion process. Document conversion rules are broadly divided into single-head conversion rules, entry conversion rules, auxiliary configuration, etc. The parameter configuration through the single-header conversion rules can establish the association of each data item between documents, and the parameter setting in the journal entry conversion rules can realize the reconfiguration of generated vouchers.

3.2.3. Flexible Business Process Design

In the traditional rigid business finance system, due to the fixed setting of business processes, business users cannot adjust business processes according to their actual needs, and the integration of business and financial processes can only set up financial indicators according to business needs, and cannot optimize business processes according to the financial indicators of enterprises, and the setting of business processes can only realize the one-way business process of A-B-C one-way business process. With the large number of business needs of enterprises, the traditional rigid business process structure can no longer meet the needs of the complexity of enterprises today.

The core of business process design in flexible AIS is that users themselves can realize business process customization. Business process customization means that the system provides a common business process model in advance to support users to personalize the operation according to their needs, allowing users to realize the dynamic combination of processes or dynamic definitions without changing the source code, increasing the flexibility of business processes in the financial system. The flexible AIS provides users with the function of freely configuring business processes, and realizes the close connection between business process management and the AIS of financial integration.

The flexibility of business process customization is reflected in the following aspects, and the overall process of its operation is shown in Figure 9 .

Business process flexibility design diagram.

3.2.4. Flexible Data Output Design

The traditional financial integration system is relatively fixed in the final output report format and content, for example, the format of the four commonly used financial statement templates are relatively fixed, and the content is relatively fixed, so if the project name or data source inside the template report changes, the enterprise cannot change and adjust in time by itself, so the rigid financial integration AIS has caused the limitation of management analysis to a certain extent.

The design of flexible data output in the flexible industry financial integration AIS focuses on the user's ability to configure the content and format of information output, as mentioned above, for the final financial accounting reports and management accounting reports, the manager can choose the output content and format at will, and if the items in the reports defined in the system template do not meet the actual needs, the user can customize the report format and content to meet the personalized needs of managers. Flexible AIS supports customizable report function, which allows users to design the report format, report items, sources, calculation, and processing methods by using the visualized pages provided and combining them with the actual situation of the unit and the department. The system will automatically generate the reports that the user wants according to his or her definition. Once the user's needs change, the user can modify the original report design or design a new report to meet his or her needs without modifying the accounting information system itself. That is, the core of the design of data output flexibility lies in the implementation of the custom report function, the specific design process of which is shown in Figure 10 .

Design of custom reports.

4. Case Study

A company is a large integrated modern enterprise group. With the gradual expansion of the group's scale, it became difficult to adapt the original financial and business model to the group's management needs, which to a certain extent hindered the group's development. To keep pace with the times, in the context of the Internet, it is imperative to make full use of new information technology tools for reform. We first show the degree of approval of different employees for the management upgrading of the financial accounting system in Figure 11 .

Different employees' opinions on the management upgrading of the financial accounting system.

Before the implementation of financial sharing, the finance department of a company was mainly responsible for daily accounting, expense reimbursement, current account management, fundraising and operation, investment management, budget management, tax reporting, statement preparation and analysis, and other work, mainly centralized financial management. With the development of a company, the number of subsidiaries, overseas branches, and strategic business units gradually increased, the group reformed and adopted the organizational form of group customer divisions, and established financial divisions within each division; from a centralized financial management mode to a decentralized financial management mode, each divisional financial division is responsible for its own local business corresponding to the expense reimbursement accounting and other work. Then, each business unit regularly sends business-related data to the accounting staff of the business unit, and the accounting department of each business unit submits the processed financial and business analysis data to the headquarters group for data aggregation and analysis.

4.1. Analysis of the Main Problems of a Company before the Integration of Industry and Finance

• High Labor Cost and Low Value Creation . A company's customer business units establish the same function as the finance department: repeatedly building a finance department is time-consuming and labor-intensive, and a large number of accounting staff increase the group's operating costs. The heavy accounting volume of each finance department takes up a lot of energy of accounting staff, making it difficult for them to withdraw business management and provide decision support for business strategy management.
• Poor Information Communication . First of all, a company arranges accounting personnel with the same functions in different group customer divisions, and the financial information is first aggregated and analyzed by the divisional accounting personnel and then submitted to the group headquarters, which may lead to the redundancy of personnel and departments, resulting in the untimely collection of financial information from the group headquarters, operational errors and problems such as information asymmetry between online and offline. Second, there is no good communication mechanism between business information and financial information, and the core data cannot be unified and centralized in the same system for business analysis and management. The dual-track system of business and finance makes it impossible to allocate and apply enterprise resources efficiently. In addition, the value application and decision analysis of financial management cannot provide support for business development quickly and timely, and the efficiency of business execution is low.

4.2. Implementation of a Company's Financial Integration in the Internet Era

4.2.1. background and significance of implementation.

With the continuous development of computer technology, approaching the “Internet” and reshaping the accounting process to break the “information silo” are undoubtedly crucial to realize the integration of business and finance of enterprises. In the background of the group's increasing business and continuous expansion, reshaping the correlation between business and finance, through the integration of business and finance, is conducive to breaking the awkward situation of information isolation of various departments, so that finance can provide timely and true feedback on business facts, and provide efficient support to the group's internal decision-making and control, to achieve “business pulling finance, finance supporting business.” The key to the integration of business and finance lies in achieving the “two-wheel drive” of finance and business. The key to the integration of business and finance lies in how to reorganize the accounting process from the group business process reorganization. The following is an example of a company's implementation path, explaining how it uses the financial sharing platform to integrate business and finance and empower management.

4.2.2. Implementation Path

To realize the integration of business and finance for management empowerment, a company makes full use of the financial sharing platform. A company's financial sharing center is an integrated and unified accounting platform based on front-end business pull-through. All transactions, invoices, reconciliations, payments, and other processes in the front-end are collected as data collection points, and a large amount of data resources are collected and entered into the data platform in real-time to store the information, and the stored data are extracted, summarized, apportioned, offset and consolidated, and converted into caliber. The stored data are extracted, aggregated, apportioned, offset and consolidated, transformed, and then aggregated and displayed through the management dimension (see Figure 12 ).

Variable conversion model of a company under the integration of industry and finance.

We further analyzed the changes in different links of financial accounting operations in Figure 13 .

The distribution of different accounting operations.

Based on the report format and unified index system, the group establishes corresponding analysis models; creates a unified financial data and report platform; prepares financial statements; provides the group with standardized financial accounting, multi-dimensional cost and profitability analysis, and other services; and provides support for relevant information disclosure, group management, and decision-making (see Figure 14 ).

The process of preparing a unified data report of a company.

Based on the group's financial sharing unified data platform, the shared finance center has also built a multi-dimensional indicator analysis system, establishing multi-dimensional accountability indicators and analysis systems corresponding to main business income; profit before tax; operating net cash flow; major quality issues at the operation level, management level, and decision-making level, respectively; and using the group's big data platform for analysis and display. In Figure 15 , we analyze the relationship between financial management and business management.

The value of financial management with business management.

Based on the group's financial sharing unified data platform, the shared finance center has also built a multi-dimensional indicator analysis system, establishing multi-dimensional accountability indicators and analysis systems corresponding to main business income; profit before tax; operating net cash flow; major quality issues at the operation level, management level, and decision-making level, respectively; and using the group's big data platform for analysis and display.

After reshaping the financial process, a company's internal financial sharing center platform unified the entire process and buried information on key links, so that financial rules fully penetrate the whole process of related transactions, laying a solid data foundation for the group's later monthly reconciliation and data management analysis and improving the efficiency and timeliness of data provision. It also solves the problems of high labor cost and low enterprise value creation under the decentralized financial management model. The sharing center can also generate two sets of financial reports based on the corporate structure and management reports based on the management structure. After the integration of industry and finance, the operating budget execution report can be issued in real-time, allowing the group to monitor the specific implementation of the budget in real-time and providing strong support for group managers and decision-makers.

5. Conclusion

In conclusion, for enterprises, financial accounting management is crucial, and it is the basis of enterprise development, especially in the Internet era; enterprises need to strengthen the innovation of the financial accounting management mode to help meet the development needs of the times. But at present, it is difficult to adapt some enterprises' financial accounting management work to the development of the network era, and the management concept has not been updated in time. Enterprises must pay more attention to this, take reasonable decisions to optimize it, and further expand the field of financial accounting management by strengthening the construction of information technology and clarifying the outstanding problems, so that enterprises can obtain new development and improve the level of financial accounting management comprehensively.

Data Availability

Conflicts of interest.

The author declares no conflicts of interest regarding this work.

Applied Accounting Research

Master the research process used in the accounting profession..

Credits: 3

Format: Online

Duration: 8 weeks

The auditing and accounting profession evolves daily to meet the needs of a complex business environment in both the U.S. and internationally. Research skills in accounting, auditing, and tax are critical if you want to advance in the profession. In ACC 550 Applied Accounting Research, you’ll develop those skills and learn to apply them to research questions commonly faced by practicing accountants and financial managers.

Course Overview

Throughout this capstone course, you will concentrate on accounting research as well as review factors and skills needed for the CPA exam. You’ll strengthen your critical thinking ability, an asset that helps professional accountants add value to their services. As you come to understand the importance of accounting research, its nature, definition, and its role, you’ll view research from the perspective of the Securities Exchange Commission (SEC). You’ll learn the expectations of the SEC in research and in drafting client letters, emails, and memos to a file.

You’ll discover how authoritative literature such as that of the Financial Accounting Standards Board (FASB) and Governmental Accounting Standards Board (GASB) is used during the research process. In mastering the five steps of database research strategies, you’ll reveal challenges common to accounting research and see how these obstacles can be overcome.

You’ll learn the contents of the FASB Accounting Standards Codification Research System (the Codification) and understand how to use it effectively and efficiently.

Effective Writing Skills

Learn how competent writing and critical thinking skills can help professional accountants add value to their services in ACC 550.

You’ll address the international accounting research environment, reviewing the methods and tools used to adhere to International Financial Reporting Standards (IFRS) and its related International Accounting Standards Board (IASB) structure and standard setting process.

Accountants and auditors perform a wide range of functions. Throughout the course, you will gain an understanding of the specific types of assurance and consulting services performed by accounting professionals. You’ll review the authoritative auditing support resources along with the key oversight entities such as the Public Company Accounting Oversight Board (PCAOB). You’ll also discuss the AICPA’s Standards and Code of conduct and the concepts of professional judgment and skepticism in audit research. Research is also a key component in forensic accounting and fraud research. To that end, you’ll examine the various research tools and technologies used in fraud examinations/investigations.

Sample Assignment

Identify an accounting issue and write a research paper that effectively communicates your findings and contributes to the profession using techniques covered in the course.

Course Topics

Throughout each week of the course, you will focus on a core topic or theme. Sample topics are listed below and are subject to change based on the instructor.

• Introduction to Applied Professional Research
• Critical Thinking and Effective Writing Skills for the Professional Accountant
• The Environment of Accounting Research
• Financial Accounting Research Tools
• The Environment of International Research
• Assurance Services and Auditing Research
• Redefining the Research Process
• Forensic Accounting Research

What You’ll Learn

You will focus on critical thinking and writing skills through a research process in ACC 550.

• Understand applied professional research within the practice of accounting.
• Demonstrate critical thinking and effective writing skills by completing various foundational, research, discussion, and writing assignments.
• Examine current ethical, financial, international, forensic, and assurance/auditing research topics.
• Know the most recognizable practitioner accounting journals and learn to apply research tools and techniques to investigate and report on current accounting topics.

Through ACC 550, you’ll improve your research, writing, and presentation skills as they relate to the field of accounting. For more information about this course or other courses in The University of Scranton’s online Master of Accountancy degree,  request more information or call us today toll-free at (866) 373-9547.

The content presented on this page is representative information for example purposes and is subject to change as course and student needs change over time.

Programs that include this course

• Online Master of Accountancy (MAcc) Degree

US Negotiating the Definition of Digital Taxes in Global Treaty

By Lauren Vella

The US Treasury Department is working with counterparts at the OECD to define digital services taxes in a multilateral treaty after concerns from corporate taxpayers and members of Congress that the convention’s text wouldn’t shield businesses from all forms of these levies.

The US has been negotiating the issue of DSTs “extensively” over the past few weeks, Scott Levine, acting deputy assistant secretary for international tax affairs at Treasury, said Thursday.

Discussions among members of the Inclusive Framework—countries’ delegates who are involved in negotiating the multilateral convention—are generally “headed in the right direction,” he said, noting that the DST question ...

Learn more about Bloomberg Tax or Log In to keep reading:

Learn about bloomberg tax.

From research to software to news, find what you need to stay ahead.

Already a subscriber?

Log in to keep reading or access research tools.

We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here . By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service .

New to Zacks? Get started here.

Member Sign In

Don't Know Your Password?

• Zacks #1 Rank
• Zacks Industry Rank
• Zacks Sector Rank
• Equity Research
• Mutual Funds
• Mutual Fund Screener
• ETF Screener
• Earnings Calendar
• Earnings Releases
• Earnings ESP
• Earnings ESP Filter
• Stock Screener
• Premium Screens
• Basic Screens
• Research Wizard
• Personal Finance
• Money Managing
• Real Estate
• Retirement Planning
• Tax Information
• My Portfolio
• Create Portfolio
• Style Scores
• Testimonials
• Zacks.com Tutorial

Services Overview

• Zacks Ultimate
• Zacks Investor Collection
• Zacks Premium

Investor Services

• ETF Investor
• Home Run Investor
• Income Investor
• Stocks Under $10
• Value Investor
• Top 10 Stocks

Other Services

• Method for Trading
• Zacks Confidential

Trading Services

• Black Box Trader
• Counterstrike
• Headline Trader
• Insider Trader
• Large-Cap Trader
• Options Trader
• Short Sell List
• Surprise Trader
• Alternative Energy

You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.

If you wish to go to ZacksTrade, click OK . If you do not, click Cancel.

Image: Bigstock

Myriad Genetics (MYGN) Wins Foundational Patent for MRD Assay

Myriad Genetics, Inc. ( MYGN Quick Quote MYGN - Free Report ) recently announced the issuance of a patent by the United States Patent and Trademark Office, which will strengthen its ability to deliver a tumor-informed, high-definition, molecular residual disease (MRD) assay to the market. U.S. patent 11,932,910, entitled Combinatorial DNA Screening, covers the company’s foundational and proprietary method of preparing cell-free DNA.

The latest development showcases some of Myriad Genetics’ novel proprietary technology that could strengthen its position as a precision medicine leader — both via its Precise MRD offering and potential licensing opportunities in the MRD space.

News in Detail

Myriad Genetics’ patented method describes a key aspect of tumor-informed MRD assays that detect circulating tumor DNA (ctDNA) through sequencing. Specifically, it relates to the manner in which a sample is sufficiently enriched with ctDNA so that it can be detected, if present, with high sensitivity and specificity. The company filed the patent in 2016 at the advent of MRD development, envisioning the potential role of tumor-derived cell-free DNA in the expanding field of cancer diagnostics.

The Precise MRD assay leverages MYGN’s existing technology, laboratory systems and processes, infrastructure and intellectual property and builds upon its FDA-approved MyChoice companion diagnostic and FirstGene platforms. According to the company’s representative, their distinctive capabilities enable them to profitably commercialize Precise MRD, advancing oncology care for patients in the emerging under-penetrated MRD market.

Advancements in the Precise MRD Test

The company has made significant strides in developing its Precise MRD assay. The test is currently being installed in the new state-of-the-art laboratory facility in Salt Lake City, where it will soon undergo further validation to enable its use in a range of applications, including biopharma studies and interventional prospective trials.

Moreover, Myriad Genetics announced several important research collaborations, including a retrospective study of MRD efficacy in metastatic breast cancer with researchers at Memorial Sloan Kettering and a retrospective analysis of MRD utility in metastatic renal cell carcinoma with clinicians at The University of Texas MD Anderson Cancer Center. The company plans to present initial findings from retrospective MRD studies at the upcoming conferences and anticipates full results from the renal study later this year.

MYGN is on track to process samples for biopharma partners by the fourth quarter of 2024 and submit them by year-end to the MolDX (Molecular Diagnostic Services Program), which was developed to identify and establish coverage and reimbursement for molecular diagnostic tests. Commercial launch is targeted for the second half of 2025. The approach described in the granted patent is fundamental to the Precise MRD test, which has been refined over the years since the initial filing.

Precise MRD is available for use in joint research studies between Myriad and academic or pharmaceutical investigators. The company plans Precise MRD to monitor ctDNA levels throughout a cancer patient’s clinical care, starting immediately after diagnosis and continuing through survivorship monitoring. MYGN recognizes a significant opportunity to pair Precise MRD with the MyRisk hereditary cancer test and the recently acquired Precise Tumor and upcoming Precise Liquid tests to offer a comprehensive set of easy-to-use clinical decision support tools for oncologists to advance the care of patients.

Industry Prospects

Per a research report , the global MRD testing market was valued at $1.89 billion in 2022 and is expected to witness a CAGR of 11.5% up to 2030.

Notable Developments

Last month, Myriad Genetics announced a research collaboration with the National Cancer Center Hospital East in Japan to study the prognostic and predictive value of MRD testing. The SCRUM-MONSTAR-SCREEN-3 study will use Precise MRD to monitor ctDNA over time in patients diagnosed with a wide array of solid tumors and hematological cancers. The study aims to generate high-quality, prospective clinical evidence showing MRD testing can be broadly applied across cancer types and to patients with different disease severity or staging.

Price Performance

In the past six months, MYGN shares have increased 27.9% compared with the industry ’s rise of 1.8%.

Zacks Rank and Key Picks

Myriad Genetics currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are Cardinal Health ( CAH Quick Quote CAH - Free Report ) , Stryker ( SYK Quick Quote SYK - Free Report ) and DaVita ( DVA Quick Quote DVA - Free Report ) . While Cardinal Health and Stryker each carry a Zacks Rank #2 (Buy), DaVita sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here .

Cardinal Health’s stock has surged 54% in the past year. Earnings estimates for Cardinal Health have risen from $7.28 to $7.29 in fiscal 2024 and from $8.02 to $8.04 in fiscal 2025 in the past 30 days.

CAH’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 15.6%. In the last reported quarter, it posted an earnings surprise of 16.67%.

Estimates for Stryker’s 2024 earnings per share have remained constant at $11.86 in the past 30 days. Shares of the company have moved 26.3% upward in the past year compared with the industry’s rise of 5.2%.

SYK’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.09%. In the last reported quarter, it delivered an average earnings surprise of 5.81%.

Estimates for DaVita’s 2024 earnings per share have moved up from $8.97 to $9.23 in the past 30 days. Shares of the company have surged 74.8% in the past year compared with the industry’s 22.3% rise.

DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 35.57%. In the last reported quarter, it delivered an average earnings surprise of 22.22%.

Unique Zacks Analysis of Your Chosen Ticker

Pick one free report - opportunity may be withdrawn at any time.

Stryker Corporation (SYK) - $25 value - yours FREE >>

DaVita Inc. (DVA) - $25 value - yours FREE >>

Cardinal Health, Inc. (CAH) - $25 value - yours FREE >>

Myriad Genetics, Inc. (MYGN) - $25 value - yours FREE >>

Published in

This file is used for Yahoo remarketing pixel add

Due to inactivity, you will be signed out in approximately: