100’s of Accounting Concepts Explained

Learn financial accounting online. Free notes on accounting principles, accounting cycle, ratios and more …

Source: accountingexplained.com

Financial Accounting Topics by Steven Bragg CPA

Steven Bragg, CPA, is one of the most prolific accounting authors in the world. He holds an MBA from Babson College, a Master of Finance degree from Bentley College, and a BA from the University of Maine. He also manages the Accounting Best Practices podcast.

Source: www.accountingtools.com

He has written articles on basic accounting concepts:
> Accounting Principles
> Equity
> Payroll Accounting
> Assets
> Financial Ratios
> Present & Future Value
> Bank Reconciliation
> Financial Statements
> Receivables & Bad Debts
> Bookkeeping Basics
> Fixed Assets
> Revenue Recognition
> Chart of Accounts
> Inventory Accounting
> Taxation
> Cost Accounting
> Liabilities
> Variance Analysis

What is the difference between accounting and accountancy?


Accounting purpose

Accounting Vs Accountancy

Accounting is the action or process of keeping financial accounts. Accountancy describes the duties of an accountant, the person whose job is to keep, inspect and interpret financial accounts.

In relation to business, accountancy is, in effect, the total of all actions taken by a business to:

  • to record financial transactions
  • to produce reports that allow stakeholders (such as managers, investors, funders, owners) of the business to make informed decisions about the financial resources under their control.

The main reasons why a business has a vital interest in accountancy are listed below.

  • Government compliance: Tax laws require a business to report to the government on its revenue and income. Accountancy provides a process to meet this requirement.
  • Funding: Banks, investors and finance institutions require reports on the financial performance and position of a business before they invest in, or loan funds to, that business. Accountancy provides these reports in the form of an Income Statement and a Balance Sheet.
  • Financial performance: A prime function of management is to ensure that the business will endure. Accountancy provides a reporting mechanism (by way of an Income Statement) that details a business’s revenue, expenses and resulting profit. Managers can use this statement to make informed decisions to ensure the sustainability of the business.
  • Budgeting and control: Financial information provided by the accountancy system allows managers to prepare budgets that become a benchmark for performance and a means of controlling the finances under their control.
  • Comparison: Accountancy, because it is universally applied using accounting standards, allows businesses to be compared. This comparison provides benchmarks by which the performance of a business can be judged (that is, under- or over-performing) relative to either an industry average, previous periods or against the entire business world.

Learn Accounting & Bookkeeping For Free

Free Bookkeeping and Accounting Courses and Tutorials. You don’t have to be a rocket scientist to learn bookkeeping!

Source: www.dwmbeancounter.com

This Introduction discusses the types of business organizations, types of business activities, users of financial information, bookkeeping systems, accounting rules, and the cash and accrual basis of accounting.

  • Lesson 1 The Bookkeeping Language introduces you to some of the terminology and definitions used in the accounting and bookkeeping language.
  • Lesson 2 Property and Property Rights explains Property & Property Rights, the Accounting Equation, double entry bookkeeping, and how business transactions affect the equation.
  • Lesson 3 Debits and Credits introduces and explains Debits and Credits and how they affect the Accounting Equation and are used to record business transactions.
  • Lesson 4 Recording Business Transactions explains and uses examples to illustrate how business transactions are properly analyzed, recorded, and summarized.
  • Lesson 5 The General Ledger and Journals explains what General Ledger and Journals are, how they’re used, and what bookkeeping purposes they serve.
  • Lesson 6 Financial Statements explains what financial statements are, how they’re created, and how they’re used.
  • Lesson 7 Review of Major Concepts reviews the major definitions, concepts, and bookkeeping records previously discussed and necessary for an understanding of bookkeeping.

Free Accounting Lessons through Video.

In these Accounting Tutorials, Daniel Dickson teaches the basics of accounting and how to make money by learning accounting. The Accounting Video Lessons are Free.

Source: www.freeaccountingschool.com

On this website, certified public accountant (CPA) Daniel C. Dickson will teach you the basics of accounting through (8) free online videos – no strings attached. Whether you are a newbie or want to re-learn forgotten accounting, you have come to the right place.

See on Scoop.itBasic Accounting Concepts

What is the meaning of “balance sheet”?

It is known as the ‘balance sheet’ because it is a fundamental accounting truth that the total value of the assets of the business is equal to the total value of the claims that others have over those assets. i.e. the business itself owns nothing and it only has control of assets that are actually provided by others and which are ultimately owned by them.

This truth is represented by the accounting equation which is also the basis of the structure of the ‘balance sheet’ report:

Accounting Equation

So in accounting there is always a perfect balance between the value of the assets of a business and the claims by others over those same assets. The financial statement that demonstrates this relationship is known as the ‘Balance Sheet’ or more recently it has become known as “The Statement of Financial Position”.

What is the meaning of “balance sheet”?

What is accounting?

What is accounting?

Accounting is a financial recording and reporting system (see Figure 1).

Accounting identifies and classifies financial transactions; it then summarises these financial transactions into financial reports. Financial reports communicate relevant financial information to interested persons called stakeholders. This information allows stakeholders to decide how to best use the economic resources of the accounting entity (that is, the business or enterprise).

Figure 1 The accounting system

Definition of accounting

Here is a simple definition:

Accounting is a system that provides numeric information about the finances of an accounting entity.

Here is another definition:

Accounting is the systematic recording, reporting and analysis of the financial transactions of a business.

Yet another definition is as follows:

Accounting is a tool for recording, reporting and evaluating—in monetary terms—the transactions, events and situations that impact on an enterprise.

The American Accounting Association defines accounting as: the process of identifying, measuring and communicating information to permit judgment and decision by users of accounts.

An even simpler definition is this: accounting is the language of business.


  • Accounting is a system that operates for as long as the accounting entity exists.
  • Accounting is interested only in the financial or monetary transactions of the accounting entity.
  • The first phase of accounting is to identify, collect, measure, classify and record financial transactions; a second phase is to calculate, summarise, report and evaluate financial information.
  • The intent of accounting is to communicate the financial information of the accounting entity to decision makers.
  • Accounting deals with maintaining and storing financial results.

Accounting is not an end in itself. It is not, like art in a museum, to be displayed as a ‘beautiful set of numbers’ (even if you hear businesspeople speaking this way). Accounting is primarily a means to an end. This means that accounting is a process.

Accounting provides the most relevant and reliable financial information possible so that the real work of an accounting entity (for example, a business) can be done. The real work is to make the best possible decisions about how to use the economic resources of the entity.

Summary—definition of accounting

Based on the above definitions and conclusions, accounting can be divided into two broad elements:

1.   Accounting is an information process that identifies, classifies and summaries the financial events and transactions that impact on a business.

2.   Accounting is a reporting system that communicates relevant financial information to interested person (stakeholders). This information allows stakeholders to assess performance, make decisions about and/or control the economic resources of a financial entity.

When people do “accounting by hand”, what do they include on the paper?

My read of the expression ‘accounting by hand’ is that it is the description of the way an enterprise’s financial transactions were recorded before the arrival of computerised accounting some 30+ years ago. What people recorded on paper when doing ‘accounting by hand’ was all the financial transactions of the enterprise.

Accounting by hand

Accounting by hand

Now the initial information recorded included all the details relating to all the financial transactions that took place in the enterprise (i.e. date, description, accounts with the amounts allocated to the appropriate debit and credit columns). This information was recorded by hand in the journals or the ‘day book’ as it was called.

All the information contained in the journals was then transferred (posted) by hand into the general ledgers which grouped the transactions by their common and shared attributes (assets, liabilities, owners equity, revenue and expenses). Posting included further notations by hand in the journal to explain where the information from the journal went to.

After the general ledger where checked for accuracy with a trial balance (being prepared by hand), the accountant was then able to prepare the financial statements by hand which grouped the appropriate accounts to calculate the COGS and Gross Margin. Follow Peter Baskerville on Quora

Debits and Credits – Founding principles

Free accounting courses

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