Accounting for beginners or basic accounting deals with the concept of basic accounting or transaction log that occur daily. This involves all monetary transactions such as money coming in and going out, the money you owe and the money that You owe. It also allows you to manage and analyze income and expenses and all cash flow of a business through the preparation of final statements as income, balance sheet and cash flow statement.
Debits and credits
The method of double entry accounting entry requires a debit and credit for each transaction. Each transaction affects both types of account (the first need debited and credited the second needs). The general rule of thumb is that debits increase assets, expenses, dividends and losses and decreases liabilities and actions while loans do the opposite: increase decrease assets and liabilities, income, taxes and actions. To debit an account records the amount on the left side of the bill and to accredit enter the amount on the right side. The abbreviation “dr” represents debit transactions and “cr” stands for credit.
Assets and liabilities
Assets represent what belongs to the company and give financial value to the business. Liabilities is what should the company and reduces its financial value. The balance sheet records the assets and liabilities of the company and is often categorized as assets and / or liabilities in the short and long term. Short-term assets are called current assets represent the liquidity of the company and include things like money in the bank, trade receivables and inventory. Fixed assets and long-term include items like property and machinery. Short-term liabilities and current liabilities of the company include things like creditors and accrued expenses while long-term liabilities include loans and mortgages.
At the end of the fiscal year each business prepares a series of statements by year end . These statements recorded, manage and analyze all the information and financial activities of the year. The income statement is one of these closing statements, a summary of revenues and expenditures of the company and the profit or loss in general for a specific financial period. Although used at various intervals during the year, the balance sheet is also a declaration of end of the year and as such summarizes the assets and liabilities of the company and shows your net worth at the end of the fiscal year. The cash flow statement is the third statement is used to report financial information and register at the entry and exit of cash from the company.