Basic Accounting Principles

Accounting was defined by the University of Michigan Accounting Professor William A Paton as having a fundamental function: “facilitating the administration of economic activity. This function has two closely related phases: 1) measuring and collecting economic data; and 2) communicate the results of this process to stakeholders. – interested party. ”

For example, business accountants periodically measure profits and losses for a month, quarter, or fiscal year and post these results in an income statement called the income statement. These statements include items such as credits (what is owed to the company) and debts (what is owed to the company). It can also get very complicated with topics like retained earnings and accelerated depreciation. This happens at higher accounting levels and within the organization.

Most accounting also deals with basic accounting. This is the process that records each transaction; every bill paid, every penny owed, every dollar and penny spent and accumulated.

But the owners of the companies, which can be individual owners or millions of shareholders, pay the utmost attention to the synthesis of these operations, which are contained in the financial statements. The financial statements summarize the company’s assets. The value of an asset is how much it cost when it was first purchased. Financial statements also record what the source of the asset is. Some assets are in the form of loans that need to be repaid. Profits are also a business asset.

Liabilities are also summarized in the so-called double-entry accounting. Obviously, a company wants to show a larger amount of assets to offset the liabilities and show a profit. The management of these two elements is the heart of accounting.

There is a way to do this; not all companies or individuals can design their own accounting system; the result will be messed up!

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