What is
accounting?
Accounting
is a key function for many businesses. Accounting is based off of fundamental assumptions and principles. Understanding these principles makes understanding accounting a little easier. Accounting is the systematic and comprehensive
recording of financial transactions pertaining to a business. It is also a way
to summarize, analyze, and report transactions to oversight agencies, and tax
collection entities, like the IRS.
Principles of Accounting:
- Revenue Principle- when a good or service is provided, revenue is earned.
- Expense Principle- the expense the business acquires when the business uses a good or service.
- Matching Principle- is the act of matching related revenue and expenses together.
- Cost Principle- states that assets be recorded in cash amount.
- Objectivity Principle- data accountants use should be objective, factual, and verifiable.
- Continuity Assumption- the assumption the business will continue to function properly.
- Unit of Measure Assumption- states that it is fine for U.S businesses to use U.S dollars in their accounting analysis.
- Separate Entity Assumption- states a business entity is different from the business owner.
Basic accounting handles things such as; expenses, assets, liabilities, income statements, balance sheets, and statements of cash flows can be handled by a bookkeeper. While the more advanced accounting covers accounting patterns, operations, foreign currency operations, lease contracts, and pension funds. Advanced accounting is typically handled by qualified accountants who possess either a Certified Public Accountant (CPA) in the U.S, Chartered Accountant (CA), or a Certified General Accountant (CGA).
In order to find the basics of Accounting I had to read multiple articles. At first I thought it was way too complicated to understand, yet it is very simply the analysis of numbers, the accountant just understands where these numbers are coming from and can interpret what they mean. I personally find it easier to read from an article, having the words in front of me. Furthermore, I would like to understand what an accountant can do with their major, and why people go to accountants rather than do the math themselves.
by Katie Howard
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