Basic Definition of Accounting
Accounting
~An operation for utilities.
~Its purpose is to provide quantitative information on economic entities, mainly of a financial nature, which is intended to be useful in economic decision-making and in making reasoned choices with the alternative courses of action.
Accountant
~Provides resources and provides quantitative data presented in terms of money that is useful to accounting data users.
Accounting information categorized by two users
~External users are decision makers who have no direct access to the data generated by the company's activities.
~Internal users serve an entity's administrators or decision-makers and they need accounting information for their company to run continuously.
Users that affects the accounting information for their decision makings.
1.) Investors
2.) Creditors/Suppliers/Lenders
3.) Government and their agencies
4.) Employees/Labor unions
5.) General Public and Customers
Investors
~Accounting information will help them to determine if they need to decide whether to make additional investments, hold or sell their shares of stocks.
Creditors/Suppliers/Lenders
~Accounting information will help them to determine if they need to decide whether to extend credit or loans being applied by businesses.
Government and their agencies
~Accounting information will help them to determine if they need to decide whether if an entity is abiding the implemented government rules and regulations.
Employees/Labor unions
~Accounting information will help them to know if they are interested in the stability and profitability of the company.
General Public and Customers
~Accounting information will help them to determine if they need to decide whether to know if the company would provide them.
Two main branches of accounting
1.)Financial Accounting
2.)And Management Accounting.
Financial Accounting
~It is the method of preparing accounting reports known as financial statements that illustrate the financial results and status of the company to persons outside the company, such as creditors and clients.
Management or also know as Managerial Accounting
~Designed in providing accounting information and operational needs for use by the internal users, the management.
~Financial analysis, budgeting and planning , cost analysis, and business decision assessment are included.
Four Areas of Accounting
1.) Public Accounting
2.) Private Accounting
3.) Government Accounting
4.) Accounting for Education
Public Accounting
~ Accountants practicing public accounting are licensed professionals known as Certified Public Accountants.
~Provides its clients accounting and related services on a fee basis.
~The preparation, review and audit of the company's financial statements, tax services and consulting involving accounting systems, mergers and acquisitions are some of the services provided.
Private Accounting
~It provides accounting services for a particular corporation and is an integral part of any organization's success.
~By experience with the full functioning of the company's corporate interests, private accountants provide a higher quality of services.
Government Accounting
~Several areas of government activities were set to include its targets.
~Described as one that involves the process of evaluating, classifying, summarizing and communicating all transactions involved in the receipt and disbursement of, and understanding the effects of, all government funds and assets.
Accounting For Education
~An Accountant that use to teach students.
~Teaching students, aspiring accountants or accounting professionals with accounting skills, pursuing continuing education and updates.
The Accounting Cycle
also known as, The accounting period is a collective method for the recognition, review, and documentation of a company's accounting events. It is a typical 8-step procedure that starts when a transaction occurs and ends in the financial statements with its inclusion.
STEPS:
Collecting Business Transactions.
1.) Documentation.
2.) Journalizing.
3.) Posting.
4.) Preparation of the trial balance.
5.) Compilation of data needed for adjustments.
6.)Preparation of the worksheet.
7.) Preparation of the Financial Statements.
8.) Adjusting entries are journalized and posted to the ledger.
9.) Closing entries are journalized and posted to the ledger.
10.) Preparation of the post-closing trial balance.
11.) Reversing entries are journalized and posted to the ledger.
Easy way to determine the debit and credit
DEBIT
Increases in assets.
Decreases in liabilities.
Decreases in equity/capital.
· drawings.
· decrease in revenue.
· increase in expense.
CREDIT
Decreases in assets.
Increases in liabilities.
Increases in equity/capital.
· investments.
· increase in revenue.
· decrease in expense.
