Introduction to Accounting
You likely have a common concept of what accountants do. They collect information about the transactions and events of the business, and sum up that activity in reports which are used by persons interested in that particular entity. But, you do not realize the complexity of accomplishing and finishing this task. This task involves a talented and brilliant blending of technical knowledge and measurement artistry that can only be entirely appreciated via extensive study of the subject. The best analogy is to say that you probably know and understand what a heart surgeon does, but you no doubt appreciate that significant knowledge and skill is necessary to successfully treat a patient. If you were studying to become a surgeon, you would likely start with some basic anatomy class. In this chapter, you will start your study of accounting by looking at the overall body of accounting and the basic anatomy of the reporting.
We advised that a true understanding and knowledge of accounting does not come easily. It only comes with determination dedication and hard work. But, if you stick with, you will be surprised at what you discover and revel about accounting. Knowledge and understanding of accounting is very valuable to business success. And, once you conquer the basics, accounting is in fact quite an interesting subject.
It seems fitting to start with a more formal definition of accounting: Accounting is a set of concepts, ideas and techniques which are used to measure the financial information about an economic unit. The economic unit is basically considered to be a separate enterprise. The information is potentially reported to a number of different types of interested parties. These include business managers, creditors, owners, governmental units, financial analysts, and even employees. In one way or the another, these users of accounting information tend to be concerned more about their own interests in the entity. Business managers require accounting information to make sound leadership decisions. Investors hold out hope for profits that may ultimately lead to distributions from the business (e.g., "dividends").
Creditors are always worried about the entity's ability to repay its obligations. Governmental units require information to tax and regulate. Analysts use accounting data to form their opinions on which they root their investment recommendations. Employees want to work for the successful companies to advance their individual careers, and they many times have bonuses or options tied to the enterprise performance. Accounting information about particular entities helps satisfy the requirement of all these interested parties. The diversity and variety of interested parties leads to a logical separation in the discipline of accounting: the financial accounting and the managerial accounting. Financial accounting is concerned and deals with external reporting of information to parties outside the firm. In contrast, managerial accounting is primarily concerned and dealt with providing information for internal management. You may have some trouble considering why a distinction is required; after all aren't we just reporting financial facts? Let's look from close at the distinctions.
Learning theory of accounting basics
Accounting basics theory is interesting to learn, to command on basic knowledge of accounting, your learning concepts should be clear and accurate. These details of accounting basics will introduce you to many basic principles of accounting, accounting terminology and accounting concepts. Once you become familiar with some of those concepts, terms and theory, you will feel more relaxed navigating through the puzzles, explanations, drills, and other features of Accounting.
Some of the basic accounting terms that you will learn involve expenses, revenues, assets, liabilities, balance sheet, income statement and statement of cash flows. All of you will become familiar with accounting debits & credits as we explain you how to record complex transactions. You will also see why two basic accounting principles, the matching principle and revenue recognition principle and, assure that an organization's income statement reports a company's profitability.
In these explanations of accounting basics theory, and throughout the entire web portal, www.tutorsglobe.com will often skip some of accounting information or details and complexities in order to present clear and brief explanations. This means, you should always look for professional advice for your specific task or circumstances.
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