1. Basic Accounting Principles:
Entity Concept: The business is treated as a separate entity from its
owners.
Going Concern Concept: Assumes that the business will continue to
operate indefinitely.
Money Measurement Concept: Only transactions that can be expressed
in monetary terms are recorded.
2. Double Entry System:
Every transaction has equal and opposite effects on at least two accounts.Debit and Credit entries must always balance.
3. Types of Accounts:
Asset Accounts: Resources owned by the business (e.g., cash, inventory).
Liability Accounts: Obligations owed by the business (e.g., loans, accounts
payable).
Equity Accounts: Owner's interest in the business.
Revenue Accounts: Income generated from business operations.
Expense Accounts: Costs incurred to generate revenue.
4. Financial Statements:
Income Statement: Shows revenues and expenses, resulting in net income
or loss.
Balance Sheet: Provides a snapshot of a company's financial position at a
specific point in time.
Cash Flow Statement: Illustrates cash inflows and outflows over a specific
period.
5. Recording Transactions:
Journal Entry: The initial record of a transaction.
Ledger: A collection of accounts where transactions are classified and
summarized.
6. Accounting Cycle:
Analyzing Transactions: Identifying, measuring, and recording
transactions.Journalizing: Recording transactions in the journal. 1 / 2
Posting: Transferring journal entries to the ledger.
Trial Balance: Ensuring debits equal credits.
Adjusting Entries: Entries made at the end of the accounting period to
update accounts.
Financial Statements: Preparing income statements, balance sheets, and
cash flow statements.
Closing Entries: Transferring temporary account balances to the owner's
equity account.
7. GAAP (Generally Accepted Accounting Principles):
Standardized accounting principles and guidelines followed by companies to ensure consistency and comparability of financial statements.
8. Auditing:
Examination of financial statements by an independent auditor to ensure accuracy and compliance with accounting standards.
9. Taxation:
Accounting plays a crucial role in determining taxable income and fulfilling tax obligations.
- International Financial Reporting Standards
(IFRS):
A set of international accounting standards that provide a common global language for business affairs.
11. Budgeting:
The process of creating a plan to achieve financial goals, incorporating revenue and expenditure forecasts.
12. Ratio Analysis:
Examining relationships between different financial variables to assess a company's performance and financial health.
13. Depreciation:
Definition: The allocation of the cost of a long-term asset over its useful life.
- / 2