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The standard definition of accounting is obtaining, measuring, analyzing and ultimately reporting of monetary information to the concerned departments of the company in the picture. It is a methodical process and abides by certain pre-determined principles. Classical accounting principles are known to guide and watch over financial data and their subsequent reporting. Hence both accounting and finance can be regarded as the two faces of the same coin.
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Accounting and bookkeeping
The method of double-entry bookkeeping can be considered as the basis of accounting. Here the recording of data requires a minimum of two entries per transaction. A debit is recorded is an account and a credit in another. This method has its unique way of eliminating ambiguity in the system provided the sum of the credits must equal the sum of debits.
There are some major financial statements that can be obtained using accounting. They are-
- Balance sheet
- Income statement
- Cash outlay statement
These financial statements are prepared by thoroughly referring to accounting principles. These are the most basic contexts of the subject and one cannot proceed further without the knowledge of these. Students must make sure to polish their concepts before diving deeper into the advanced topics. They can always call us at myhomeworkhelp.com when they need someone to Do my accounting homework or require guidance to understand difficult topics.
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Fundamental topics of Accounting
Every subject has certain associated topics that give it the correct and well-constituted definition. Here are some of the sub-topics that closely define accounting and its features-
- Single-entry bookkeeping–
In order to understand the advantages of the more advanced double-entry bookkeeping knowing what the primitive version of single-entry bookkeeping is. It is the simplest method of recording financial data. It resembles a checkbook register and in a single line, every transaction is recorded. This makes it easier to understand.
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- Double-entry bookkeeping–
Using this technique of bookkeeping the basic dual nature of every transaction can be easily analyzed. The two entries recorded by double-entry bookkeeping abides by the accounting equation which is-
Assets = Liabilities + Equity
The main features of double-entry bookkeeping includes-
- Every transaction is integrated into two separate accounts
- Each of these accounts has two separate columns.
- Trial balance–
The most evident feature of double-entry bookkeeping is the fact that it shows the sum of credits equal to the debits of each transaction. But in case of any probable errors where the sum is not equal, the trial balance is introduced. It is evaluated by adding the data obtained from each of the ledger accounts.
- Accounting cycle–
The sequential representation of the events that occur right from the starting of a financial transaction is known as the accounting cycle.
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The various steps of an accounting cycle include-
- Detection of the transaction
- Analysis of the transaction
- Journal entries
- Recording of the entries in the ledger
- Trial balance
- Adjustment of the entries
- Adjustment of the trial balance
- Construction of financial statements
- Closing the entries
- Post-closing trial balance
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