Accounting Basics: an Introduction for Non-Accounting Majors Textbooks by Labyrinth Learning

We’ll also discuss inventory and the “LIFO,” “FIFO” and just-in-time methods to track inventory. We’ll also look at the concept of depreciation, mainly relevant for income and capital gains taxation, and the various depreciation methods and rules. We’ll also look at how to account for intangible assets, securities, debt instruments, leases and capital accounts. In order to function, every business involves some form of accounting because accounting encompasses buying, selling, banking, assets, liabilities and taxes. The basics of business accounting are the same from one company to the next, with differences in the details depending on the type of company and how it does business.

A fiscal year is the https://intuit-payroll.org/ period a company uses for accounting. The start and end dates of your fiscal year are determined by your company; some coincide with the calendar year, while others vary based on when accountants can prepare financial statements. Joe is a hard worker and a smart man, but admits he is not comfortable with matters of accounting. He assumes he will use some accounting software, but wants to meet with a professional accountant before making his selection. He asks his banker to recommend a professional accountant who is also skilled in explaining accounting to someone without an accounting background. Joe wants to understand the financial statements and wants to keep on top of his new business.

Cash flow from operating activities

Therefore, presentation and analysis of accounting data may vary from one organization to another. One step further from financial accounting, management accounting works to know the reasons of profit or loss of an organization. It works to find out the causes for loss and also study the factors which influence the profitability. Therefore, cause and effect is a feature of management accounting. Cash in hand, cash in bank, fixed deposit receipts , inventory, debtors, receivable bills, short-term investments, staff loan and advances; all these come under current assets. In addition, prepaid expenses are also a part of current assets. You should create the chart of accounts prior to recording any financial transactions.

• Accountants should aim to provide full disclosure of all financial and accounting data in financial reports.
• In triple column cash book, one more column of bank is included to record all the transactions relating to bank.
• In module five, we’ll turn to the principles of accounting.

Based on this concept, revenue expenditure and capital expenditure are segregated. Revenues expenditure are debited to the profit & loss account to ascertain correct profit or loss during a particular accounting period.

The Expanded Accounting Equation:

B — Balance sheets are prepared “as of” a specified date. Time value of money, or net present value, is often used by accountants such as for lease accounting. Accounts receivable become less likely to be paid as they age. B — The four sections of the CPA exam are Auditing and Attestation, Business Environment and Concepts, Financial Accounting and Reporting, and Regulation. While knowledge of accounting software, derivative financial instruments and international banking law are helpful, they are not mandatory for licensure.

Basics Of Accounting expenditures are the benefits beyond accounting period. Fixed assets come under category of capital expenditure and maintenance of assets comes under revenue expenditure category. In cost accounting, various budgets are prepared and these budgets are very important tools of costing. Budgets show the cost, revenue, profit, production capacity, and efficiency of plant and machinery, as well as the efficiency of workers. Since the budget is planned in scientific and systemic way, it helps to keep a positive check over misdirecting the activities of an organization.