Accounting 101 or basic accounting deals with the basic concept of accounting and recording transactions that occur on a daily basis. This means all monetary transactions, such as money coming in and going out, money paid to us and the money paid by us. It also allows you to manage and analyze income and expenses and the total cash flow a business is the production of the final statements the income statement, balance sheet and cash flow statement.
Debits and Credits
method of double entry accounting requires a debit and a credit for each transaction. Each transaction affects two accounts – one must be charged, and must be credited. The general rule of thumb is that debits increasing assets, expenses, dividends and losses and reduce debt and equity, while loans to do the opposite: they reduce assets and increasing liabilities, revenues, earnings and equity. To debit an account, record the amount on the left side of the account; to credit the account, enter the amount right. The abbreviation “DR" represents debit transactions and “CR" represents credit.
Resources and Debts
Assets represent what the company owns; they add economic value to the company. Liabilities are what the company owes and reduce the economic value of the business. Registers balance sheet assets and liabilities of the business. They are often categorized as short-term and long-term assets and / or liabilities. Current assets, also known as current assets, represents the liquidity position of the business and include things like bank accounts, accounts receivable and inventory. Fixed or non-current assets include items such as property and machinery. Short-term or short-term liabilities of operations include items such as creditors and accrued charges, while long-term liabilities include loans and mortgages.
In the end the year, each company is preparing a set of year-end statements. These statements record, manage and analyze all the financial data and activities throughout the year. The income statement is one of these final statements. It describes the revenue and expenditure of the company and the total profit or loss for a given financial period. Even if they are used at various intervals throughout the year, the balance sheet is also a year-end report, and as such, summarizes the assets and liabilities of the business and demonstrate the net worth at the end of the financial year. The cash flow statement is the third balance sheet that is used for reporting financial data and records cash coming in and going out of business.