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12.1 Basic Accounting

  • Accounting is the process of organizing, analyzing, and communicating financial information that is used for decision making.
  • Financial accounting measures performance using financial reports and communicates results to those outside of the organization who may have an interest in the company’s performance, such as investors and creditors.
  • Managerial accounting uses both financial and nonfinancial information to aid in internal decision making.

12.2 Financial Functions in Microsoft Excel

  • The time value of money theory, or the theory that money loses value as time passes, is the basis of many financial decisions and can be useful in helping decision makers understand the long-term impacts of their choices now.
  • The time value of money variables are PV, RATE, NPER, PMT, and FV. They allow you to calculate the time value of money.
  • Depreciation is a mathematical formula that allows business owners to quantify how much value an asset loses over time so that they can plan for replacing the asset.

12.3 Integrating Microsoft Excel and Accounting Programs

  • QuickBooks is an accounting software suite. It is a different kind of software from Excel, and they both have their advantages and disadvantages for use in accounting.
  • Accounting software programs can better keep track of revenues and expenditures and do so automatically and following IRS rules.
  • Accounting software programs do not do well in data analysis, because the database is designed to be for financial analysis. You would have to export data from the program to an Excel file, then use Excel to further analyze the data.
  • Excel’s extensive data analysis capabilities meet the needs of managerial accounting. Excel also integrates well with accounting software programs.

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