Legal Aspect of the Business Accounting




Accounting is the practice of recording or settling accounts in financial transactions and determining income and expenses for tax and other financial purposes. In a legal setting, it is often used to determine the nature and extent of damages in a lawsuit, or can even be a remedy in some cases.

There are several types of accounting commonly used, which include, among others:

Accrual: the accrual method shows expenses incurred and income earned for a given period of time whether or not such expenses and income have been actually paid or received by that time.

Cash: the cash method records income and expenses only when monies have actually been received or paid out.

Completed Contract: the completed contract method reports gains or losses on certain long-term contracts. Gross income and expenses are recognized in the tax year the contract is completed.

Installment: the installment method of accounting is a way regulated utilities calculate depreciation for income tax purposes.

The accounting profession, which is largely self-regulated, suffered through a series of scandals since the late 1990's. These controversies required the FASB and the SEC, as well as other regulatory organizations, to consider new rules designed to improve financial reporting. Between 1996 and 2002, investors lost an estimated $200 billion in earnings restatements and stock meltdowns following failures in auditing processes.


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Financial Statements

A financial statement (or financial report) is a formal record of the financial activities of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form that is easy for a reader to understand. A financial statement, also sometimes referred to as a "balance sheet," reports a company's assets, liabilities, and ownership equity at a given point in time. For large corporations, these statements are often complex and may include an extensive set of notes describing each item. While often used for a similar purpose, financial statements are less formal or thorough than a full audit of a company's financial records. The resources below further describe the practical and legal considerations of the financial statement.
  • Balance Sheets

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  • Cash Flow Forecasting

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Accounting Legal Aspects

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  • Accounting and Auditing Enforcement Releases

    The list below provides links to financial reporting related enforcement actions concerning civil lawsuits brought by the Commission in federal court and notices and orders concerning the institution and/or settlement of administrative proceedings. This list only highlights certain actions and is not meant to be a complete and exhaustive compilation of all of the actions that fall into this category.

  • Accounting Terminology Guide

    The NYSSCPA has prepared a terminology glossary as an educational tool for journalists who report on and interpret financial information.

  • Ethical and Legal Obligations for Accounting

    The SEC was established in 1934 by Congress to help ensure stability in the market and protect investors. The Securities Exchange Act was also established in 1934, both of which were used to protect investors and help keep the securities market ethical.

  • Financial Accounting Standards Board (FASB)

    The mission of the Financial Accounting Standards Board (FASB) is to establish and improve standards of financial accounting and reporting that foster financial reporting by nongovernmental entities that provides decision-useful information to investors and other users of financial reports.

  • Governmental Accounting Standards Board (GASB)

    The mission of the Governmental Accounting Standards Board is to establish and improve standards of state and local governmental accounting and financial reporting that will result in useful information for users of financial reports and guide and educate the public, including issuers, auditors, and users of those financial reports.

  • IFRS Foundation

    The IFRS Foundation is an independent, not-for-profit private sector organization working in the public interest to develop a single set of international financial reporting standards through its standard-setting body, the International Accounting Standards Board (IASB).

  • Malpractice: Tax/Accounting Style - PCAOB

    The Public Company Accounting Oversight Board (PCAOB) is a private-sector, nonprofit corporation created by the Sarbanes-Oxley Act of 2002 to oversee the auditors of companies in order to protect investors and the public interest by promoting informative, fair, and independent audit reports.

  • Occupational Outlook Handbook - U.S. Department of Labor

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