Q1. How have accounting techniques changed in recent years? How do they resemble practices in Italy during the Renaissance?
According to McCrie (2016), one of the great innovations which emerged during the Renaissance was that of double-entry bookkeeping. This technique, still used today, records the organization’s assets in one column or book versus liabilities, or claims on those assets (p.252). The term “dual entry” came into practice given both records were listed in dual columns. Still, some substantial innovations have taken place since the early days of double-entry bookkeeping, most notably the advent of technology such as computers to compute assets and store data. The actual book of originally-recorded assets in real time now called a journal and the book which records the cumulative data is called a ledger. Debits and credits are the terms are now the preferred terms for assets and liabilities. But while terminology has changed and techniques have improved, the same principle holds steadfast of the need to record inputs and outputs.
Q2. Discuss the importance of notes to consolidated balance sheets and statements of operations.
Although most of the entries on a balance sheet will be in numerical form, consolidation on the balance sheet can be useful...
It is possible to distinguish between current and fixed assets and liabilities. These financial elements are in a constant state of flux. For example, current assets take the form of cash or assets which can be easily converted to cash such as inventory (McCrie, 2016, p.253). As a result, they can be used to purchase fixed assets such as new factories, equipment, and machinery. But even this is not enough detail, as the depreciation costs of such inventory must be taken into consideration.
Liabilities are also distinguished by long-term and short-term liabilities. While short-term liabilities include accounts payable, notes payable, and regular accrued expenses such as wages owned to employees, long-term liabilities include long-term debt that must be paid by the company, such as to lenders (McCrie, 2016). Dividends payable to shareholders are all forms of liabilities (McCrie, 2016). Again, the different character of these liabilities must be taken into consideration for a full portrait of the company’s financial picture. While excessive liabilities in the form of costs are problematic, not all liabilities are equally so.
In general, debts to lenders must be paid back (including bondholders) while holders of equity are acknowledged to have…
