Learn Basic Accounting

Accounting is a comprehensive and systematic record-keeping of financial transactions related to any business. It is also referring to the process of reporting, analyzing and summarizing these transactions to oversight companies, tax collection entities and regulators. The financial reports that summarize the operations of a large company, cash flows and financial position over a certain period are a concise summary of many financial transactions it may have started into over this period.

It is a very important part of every business which can be done by an accountant or a bookkeeper. All the information gathered is the basis of making new decisions for the future of the business. There are large accounting firms that are hired to work for a certain company. The companies differ from the part of accounting they specialize in like accounting North Vancouver , but most of them offer everything needed.

Debits and Credits

Accounting basically consists of debits and credits, the creation of them or recording the financial transaction of a business using credits and debits. They are always equal meaning that if you have $1000 of debit entries, you will also need to have $1000 worth of credit entries. Debit entries consist of assets and expenses. Credit entries consist of liabilities and sales. Assets are things you own like stock, equipment or property. Liabilities are the things you owe like money and loans. Bank accounts are one example of the asset. If they are in a negative balance, that’s a liability.

Read more about it here: https://www.accountingcoach.com/debits-and-credits/explanation

Accounting Terms

To know the basics of accounting you need to know what they are talking about. There are a lot of important terms that can be learned through economics, accounting, or even business management. Not only accountants need to know these terms, but you also need if you are running the business. It will give you an advantage when you are making decisions about the budget.

Every term has an abbreviation in order to work faster, so, for example, ACCG is the abbreviation for accounting. AR or accounts receivable is the amount of money the clients or customers owe to a company after they received the goods. AP or accounts payable is what the company owes to creditors. A financial report is a balance sheet or BS that summarizes firm’s assets, the owner equity, and liabilities.

CF stands for cash flow which is the expense or revenue that is generated through manufacturing sales etc. An enrolled agent or EA is professional in tax that represents taxpayers. Expenses can be FE or fixed which can be rent, variable or VE which is labor costs that can change over time, AE or accrued expense which is the expense that is about to be paid, operation expenses or OE which is property taxes, advertising costs, and similar expenses.

Individual Retirement Account

An individual retirement account is what individuals use as a tool for retirement savings. IRA has several types you can use like SIMPLE IRAs, Roth IRAs, SEP IRAs, and traditional IRAs. Sometimes applied as individual retirement arrangements, it can be made out of a variety of financial products such as mutual funds, bonds or stocks.

A self-directed retirement account is a kind of Roth IRA or traditional type that enables investors to obtain all of the investment choices for their account and afford access to a wider range of investments such as tax liens, private placements, and real estate. Read more on this page

GAAP

GAAP or generally accepted accounting principles applies to a common set of allowed accounting procedures, standards, and principles which companies and their accountants have to follow when they assemble their financial reports. It is a mixture of authoritative standards and the generally accepted ways of reporting and recording accounting data. These principles improve the clarity of the communication of financial data.

Get more information here: https://www.accounting.com/resources/gaap/

Some of the Main GAAP Principles

The first one is the principle of regularity which implies that the accountant should follow GAAP as a standard. The principle of consistency implies to professionals to explain and disclose any reasons behind any update or change of standards. The principle of sincerity states that the accountant should provide an exact depiction of the financial situation of a company.

The principle of non-compensation says that both positive and negative should be in the report without the assumption of debt compensation and with transparency. The principle of continuity says that they should assume that the business will proceed to operate while valuing assets.