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The accounting department is a very crucial department for any business because it handles the accounts of the company and helps the business comply with government ruling. It is for this reason that the subject plays a very heavy role when one goes to school and enrolls in a business course. For those who do not really know much about accounting cayucos, here are some of the basics to learn.
Now, when one would think of this topic, he would usually think of a lot of numbers and heavy math. When it comes to handling accounts, it is not really about math but more of classifying the figures and knowing where to put them in the right place. This can all be summed up by the most basic formula which is assets equals liabilities plus equity.
First, it is very important to know what an asset, a liability, and equity is. Assets are the things that can contribute to income such as merchandise, equipment, cash itself, or even trademarks. Liabilities, on the other hand, refer to the expenses that the company needs but cannot generate income. Finally, the equity is simply the capital that is placed into the business,
Now, the entire principle of accounting circulates around the whole concept of balancing the accounts. As a rule, the assets must always have the same value as the liabilities and equity. They must always be balanced otherwise there was a mistake made along the way.
This concept is vividly seen in the recording of day to day transactions through debit and credit of accounts. As a general rule, one transaction must always have a debit and a credit. The debit and the credit must always equal each other to balance the account.
This process is also called journalizing and is done per day. With journalizing, it is possible to see the outflow and inflow of liabilities and the assets. The debits and credits are collected together to be placed into the ledger accounts which will be brought to the trial balance.
The trial balance is very important because it gives the accountant an idea as to whether the balance sheet or statement of financial position is correct. From there, he will make the income statement of the company. The income statement will tell the accountant whether the business is at a net loss or net gain by subtracting total income with total expenses.
Lastly, one will make the equity statement which will show how the equity, or the capital of the business has changed throughout the year. One will know if the capital decreased, increased, or just stayed the same. The balance sheet, equity statement, and income statement are the three main financial statements that can tell the status of the company and have to be submitted the main government body handling company accounts.
Now the basic lesson that one must learn when it comes to accounting is the accounting process. The whole process was actually given above and is the most basic thing that anyone, whether an accountant or not, should learn. As long as one knows the details of the process, then he will know how handling the company accounts will work.
Now, when one would think of this topic, he would usually think of a lot of numbers and heavy math. When it comes to handling accounts, it is not really about math but more of classifying the figures and knowing where to put them in the right place. This can all be summed up by the most basic formula which is assets equals liabilities plus equity.
First, it is very important to know what an asset, a liability, and equity is. Assets are the things that can contribute to income such as merchandise, equipment, cash itself, or even trademarks. Liabilities, on the other hand, refer to the expenses that the company needs but cannot generate income. Finally, the equity is simply the capital that is placed into the business,
Now, the entire principle of accounting circulates around the whole concept of balancing the accounts. As a rule, the assets must always have the same value as the liabilities and equity. They must always be balanced otherwise there was a mistake made along the way.
This concept is vividly seen in the recording of day to day transactions through debit and credit of accounts. As a general rule, one transaction must always have a debit and a credit. The debit and the credit must always equal each other to balance the account.
This process is also called journalizing and is done per day. With journalizing, it is possible to see the outflow and inflow of liabilities and the assets. The debits and credits are collected together to be placed into the ledger accounts which will be brought to the trial balance.
The trial balance is very important because it gives the accountant an idea as to whether the balance sheet or statement of financial position is correct. From there, he will make the income statement of the company. The income statement will tell the accountant whether the business is at a net loss or net gain by subtracting total income with total expenses.
Lastly, one will make the equity statement which will show how the equity, or the capital of the business has changed throughout the year. One will know if the capital decreased, increased, or just stayed the same. The balance sheet, equity statement, and income statement are the three main financial statements that can tell the status of the company and have to be submitted the main government body handling company accounts.
Now the basic lesson that one must learn when it comes to accounting is the accounting process. The whole process was actually given above and is the most basic thing that anyone, whether an accountant or not, should learn. As long as one knows the details of the process, then he will know how handling the company accounts will work.
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