Learn Accounting Basics

Historical Cost concept

Accounting transactions (assets) should initially be measured at their historical cost to the business.

Transactions

An event between two or more persons

Financial Accountants

Are concerned with the record keeping of the business and preparing financial statements

Time period concept

Covers the period for which the income has been measured

Right or wrong, honest or dishonest, fair or not fair

Ethics are the standards of conduct by which one's actions are judged as:

Expense Recognition / Matching principle

Expenses incurred by the business should be included regardless of when money is paid for them

Proprietorship. Partnership. Corporation

Forms of business ownership

Generally Accepted Accounting Principles

GAAP stands for

Revenue recognition concept

In general, revenue is recognized when an exchange has taken place Irrespective of Cash or Credit

Monetary Unit Assumption / Money-measurement concept

Only transactions which can be measured in monetary value should be recognized in the financial statements.

Managerial Accountants

Service the internal users of the business by providing special analysis of financial statements and assist with decision making

Business entity concept/Economic Entity Assumption

The concept states that the business exists separately and distinct from its owners

Accounting

The process of identifying, recording and communicating business transactions

Internal and External

There are two broad groups of users of financial information:

Income Statement and Balance Sheet

Two of the financial statements prepared by a company are

Cash and Credit Purchase

Two types of purchases are

Cash and Credit Sale

Two types of sales are

Accounts Payable

When you purchase goods on credit

Accounts Receivable

When you sell goods on credit