To accomplish this, all employees at SRC took basic accounting courses and Ethics in financial reporting • Generally accepted accounting principles •. CFI's Principles of Accounting book is free, available for anyone to download as a PDF. you need to know to have a solid foundation in simple, plain language. basic of accounting musicmarkup.info - Download as PDF File .pdf), Text File .txt) or read online.
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Know development of accounting principle. •. Explain the importance An accountant is a person who does the basic job of maintaining accounts as he is the. BASIC ACCOUNTING PRINCIPLES. INTRODUCTION. We have studied economic activities which have been converted into business activities. In business. Managerial Accounting Basics. SO 1 Explain the distinguishing features of managerial accounting. a. Is governed by generally accepted accounting principles.
Accounting Concepts, Principles and Basic Terms Definition and introduction The worldview of accounting and accountants may certainly involve some unhelpful characters poring over formidable figures stacked up in indecipherable columns. However, a short and sweet description of accounting does exist: Accounting is the language of business efficiently communicated by well-organised and honest professionals called accountants. A more academic definition of accounting is given by the American Accounting Association: The process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information. The American Institute of Certified Public Accountants defines accounting as: The art of recording, classifying, summarising in a significant manner and in terms of money, transactions and events which are, in part at least of financial character, and interpreting the results thereof. Accounting uses a formalised and regulated system that follows standardised principles and procedures. The job of accounting is done by professionals who have educational degrees acquired after years of study. While a small business may have an accountant or a bookkeeper to record money transactions, a large corporation has an accounts department, which supplies information to: Managers who guide the company.
It is wrong to recognize revenue on all sales, but charge expenses only on such sales as are collected in cash till that period. This concept is basically an accrual concept since it disregards the timing and the amount of actual cash inflow or cash outflow and concentrates on the occurrence i.
This concept calls for an adjustment to be made in respect of prepaid expenses, outstanding expenses, accrued revenue, and unaccrued revenues.
Matching does not mean that expenses must be identifiable with revenues. Expenses charged to a period may or may not be related to the revenue recognized in that period, e. Full Disclosure Principle According to this principle, the financial statements should act as a means of conveying and not concealing.
The financial statements must disclose all the relevant and reliable information which they purport to represent so that the information may be useful for the users. Chapter 2 - Basic Accounting Concepts and Financial Statements The basic principles of accounting are best understood by considering some simple businesses and how they might document their financial activities.
Chapter 3 - Cash Accounting The main limitations of cash accounting are that: Chapter 4 - Accrual Accounting Accrual accounting is considered to be the standard accounting practice for most organizations, and is mandated for organizations of any real size.
It provides a more accurate financial picture, but is more difficult to administer. Chapter 5 - Basic Accounting Terms Terms like 'revenue,' 'expenses,' 'gross profit,' 'depreciation,' 'bad debt,' and 'fixed assets' have precise definitions when used in business accounting.
You need to understand exactly what is meant by accounting terms like these. Chapter 6 - Revenue Recognition Principle Revenue is something that is generated by the business in exchange for goods or services. It does not include things like bank loans or overdraft facilities. Any payment for a service or product in advance of any work being performed is a 'receipt.
Chapter 7 - Matching Principle The matching principle aims to minimize any mismatch in timing between when an organization incurs costs and when it realizes any associated revenue. Chapter 8 - Example Income Statement An income statement is an accounting of revenue, expenses, and profit for a given period. This can also be an internal document that can be used to make management decisions about almost any activity where you have a record of the money spent and the associated return.
I Was Never One for Finance Like any manager, my focus was on getting the best out of my team and improving the bottom-line of the company.
As a result, I was constantly devising strategies and plans to enhance productivity and commitment. I was never one for finance.
My aim was to make my team the best in the organization. Yet, at my position, I could no longer ignore the importance of accounting statements of the company.
The people in finance kept trying to explain what the statements showed but I didn't learn too much from them. Their eBook on Accounting Principles takes the technical aspect out of financial statements and strips them down to their bare bones.
For a non-accounting person like me, this is something very important. Now I have a clear idea of what the three major statements, i.
Not only that, I can measure the performance of my team in terms of tangible numbers, something I previously used to overlook. Perhaps the most important thing I realized was how the company spent cash. I never paid much attention to the spending and income simply because I didn't have the time or inclination for it. When I finally got around to seeing it, I saw the company wasn't in the best shape with regards to cash flow.
We were spending much more than the cash we had on hand. After reading Accounting Principles, I started working in tandem with the accountants to find ways to curb the outflow of cash. This is an achievement for someone unfamiliar with even the basic accounting concepts before then.
In the current economic climate, it is important for business managers to have a keen insight into the accounting aspect of their company. Maintaining a healthy cash flow balance is as important as retaining profitability. I learned my lesson and so should you. At first, I thought that the eBook was too basic in terms of execution. It gave a primer on the main financial statements but didn't elaborate in much detail. Though this information is important, companies record only events that can be measured in money.
It may be a company such as Crocs, Inc. Louis District 48 , or a church Southern Baptist. The economic entity assumption requires that the activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities. A business owned by one person is generally a proprietorship. Small service-type businesses plumbing companies, beauty salons, and auto repair shops , farms, and small retail stores antique shops, clothing stores, and used-book stores are often proprietorships.
Usually only a relatively small amount of money capital is necessary to start in business as a proprietorship.
The owner proprietor receives any profits, suffers any losses, and is personally liable for all debts of the business. There is no legal distinction between the business as an economic unit and the owner, but the accounting records of the business activities are kept separate from the personal records and activities of the owner. A business owned by two or more persons associated as partners is a partnership.
In most respects a partnership is like a proprietorship except that more than one owner is involved. Typically a partnership agreement written or oral sets forth such terms as initial investment, duties of each partner, division of net income or net loss , and settlement to be made upon death or withdrawal of a partner.
Each partner generally has unlimited personal liability for the debts of the partnership. Like a proprietorship, for accounting purposes the partnership transactions must be kept separate from the personal activities of the partners.
Partnerships are often used to organize retail and service-type businesses, including professional practices lawyers, doctors, architects, and certified public accountants.
The Do It exercises ask you to put newly acquired knowledge to work. They outline the Action Plan necessary to complete the exercise, and they show a Solution. A business organized as a separate legal entity under state corporation law and having ownership divided into transferable shares of stock is a corporation.
The holders of the shares stockholders enjoy limited liability; that is, they are not personally liable for the debts of the corporate entity. Stockholders may transfer all or part of their ownership shares to other investors at any time i.
The ease with which ownership can change adds to the attractiveness of investing in a corporation. Because ownership can be transferred without dissolving the corporation, the corporation enjoys an unlimited life. Although the combined number of proprietorships and partnerships in the United States is more than five times the number of corporations, the revenue produced by corporations is eight times greater.
DO IT! The three steps in the accounting process are identification, recording, and communication. The two most common types of external users are investors and company officers. Congress passed the Sarbanes-Oxley Act of to reduce unethical behavior and decrease the likelihood of future corporate scandals. The cost principle dictates that companies record assets at their cost.
In later periods, however, the market value of the asset must be used if market value is higher than its cost. True 2. Under the cost principle, the company must also use cost in later periods as well.
But making a sale is meaningless unless it is a profitable sale.
Marketing people must be sensitive to costs and benefits, which accounting helps them quantify and understand. These fields rely heavily on accounting. In all of them you will regularly examine and analyze financial statements.
In fact, it is difficult to get a good finance job without two or three courses in accounting. Real estate: Are you interested in being a real estate broker for Prudential Real Estate?