What are the Basics of Accounting?

What are the Basics of Accounting? What You Need to Know

Introduction: What is Accounting?

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What are the Basics of Accounting? Accounting is the process of keeping records of business transactions and preparing financial statements based on those records.

Accounting goes back to ancient civilizations. The word accounting is derived from the Latin word “accomptare” which means to count or reckon. Accounting has been around since the beginning of civilizations when people started trading goods with each other and the basics of accounting.

Accounting Principles

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Accounting Principles is a section of accounting that deals with the recording, summarizing, and reporting of financial transactions.

Accounting principles are often referred to as “the rules” for how to record and report transactions in an organization’s accounting records. In other words, these principles govern how organizations keep track of their income and expenses.

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The four basic accounting principles are:

1) The Principle of Recording Transactions

2) The Principle of Matching

3) The Principle of Accrual

4) The Principle of Disclosure.

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Accounting Processes

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The accounting process is a series of steps that can be used to record, measure and communicate economic transactions.

The accounting process is an important part of any organization because it provides the records necessary to make sound financial decisions.

The process begins with the recording of transactions. These are then summarized in what is called a “trial balance” or “balance sheet” which provides the basis for preparing financial statements such as the income statement, statement of retained earnings, and statement of changes in equity.

The final step in this process is communicating these results to stakeholders by issuing financial reports.

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Basic Financial Statements

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A balance sheet is a financial report that summarizes a company’s assets, liabilities, and owners’ equity at a specific point in time. The income statement is the other type of financial report that summarizes the company’s revenues, expenses, and profits for a specific period and the Basics of Accounting.

The balance sheet is also known as the statement of financial condition. It lists all assets owned by the company on one side and all liabilities owed by the company on the other side. Basics of Accounting Assets include cash, inventory, buildings, land, machinery and equipment etc. Liabilities include short-term debts payable in one year or less such as accounts payable and short-term loans etc. Owners’ equity includes common stock issued to investors plus retained earnings from past operations minus dividends paid out to shareholders (if any).