Accounting Basics

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Key Basic Accounts for Balance Sheets and Income Statements

A bookkeeper tracks all the financial transactions of a business and is responsible for identifying the account in which each transaction should be recorded. Accounting provides the structure you must [more…]

Understanding a Bookkeeper’s Chart of Accounts

The Chart of Accounts is the roadmap that a business creates to organize its financial transactions. Essentially, this chart lists all the accounts a business has, organized in a specific order; each account [more…]

Balance Sheet Accounts: Current Assets, Long-Term Assets

The Chart of Accounts for a business includes balance sheet accounts that track what the company owns — its assets. The two types of asset accounts are [more…]

Liabilities and Owners’ Equity in Balance Sheet Accounts

The Chart of Accounts for a business includes balance sheet accounts that track liabilities and owners’ equity. Liabilities include what your business owes to others, such as vendors and financial institutions [more…]

Tracking Income Statement Accounts for a Chart of Accounts

The income statement portion of a Chart of Accounts includes revenue and expense accounts. The income statement shows how much money a business generated from sales and how much money it spent to generate [more…]

A Bookkeeper's Key Functions for Paying Bills

After recording purchase transactions for a business, the bookkeeper takes primary responsibility for making sure that the bills are paid for both the inventory and the supplies purchased. Usually, you'll [more…]

Accounting Basics: Reporting Cash Flows and Profit and Loss

When examining the financial statements for a business, the statement of cash flows and the income statement (also called the profit and loss statement) differ from the balance sheet in one important respect [more…]

Comparing Bookkeeping with Related Accounting Functions

Business managers must ensure that their company’s bookkeeping and accounting system is adequate and reliable. The steps in the bookkeeping cycle have corresponding accounting functions. It’s important [more…]

How Accounting Focuses on Transactions

Business accounting focuses on transactions. A good bookkeeping system unfailingly captures and records every transaction that takes place. Understanding accounting, to a large extent, means understanding [more…]

The Eight Steps of the Accounting Cycle

As a bookkeeper, you complete your work by completing the tasks of the accounting cycle. It’s called a cycle because the accounting workflow is circular: entering transactions, manipulating the transactions [more…]

Knowing Your Debits from Your Credits

Accountants and bookkeepers record transactions as debits and credits while keeping the accounting equation constantly in balance. This process is called [more…]

Examining a Balance Sheet Model for a Business

The balance sheet is one of the primary financial statements prepared for businesses. Examining a balance sheet model for a fictional company can help you to understand the content and structure of a typical [more…]

How to Set Up a Chart of Accounts for Bookkeeping

There’s no secret to knowing how to set up a Chart of Accounts for your business — just make a list of the accounts that apply to your business. Don’t panic if you can’t think of every type of account [more…]

Using Income Statements in Accounting

The income statement, also known as a profit and loss statement, summarizes a firm's revenues and expenses for a particular period of time. Revenues represent amounts that a business earns by providing [more…]

Using Balance Sheets in Accounting

The balance sheet is the second-most-important financial statement that an accounting system produces, after an income statement. A balance sheet reports on a business's assets, liabilities, and owner [more…]

Understanding the Basic Principles of Accounting

Accounting rests on a rather small set of fundamental assumptions and principles. People often refer to these fundamentals as generally accepted accounting principles [more…]

Key Financial Accounting Terms and Definitions

In a financial accounting class, and on the job as an accountant, you need to know some jargon. Following is a glossary of words and phrases crucial to the accounting profession. [more…]

Mind the GAAP: U.S. Accounting and Financial Reporting Standards

In the United States, business accountants must follow specific rules — called Generally Accepted Accounting Principles (GAAP) — when reporting business financials. The Generally Accepted Accounting Principles [more…]

Looking at International Accounting and Reporting Standards

The International Accounting Standards Board, or IASB, based in London, is the main authoritative accounting standards setter outside the United States. [more…]

Accounting and Reporting by Government and Not-For-Profit Entities

Accounting and financial reporting standards have evolved and been established for U.S. government and not-for-profit entities. Financial reporting by government and not-for-profit entities is a broad [more…]

Things to Remember about Budget Analysis

A budget truly gives a business owner or manager a way to plan out the year's operation, think about what's most important, and quantify what the firm should achieve over the year. While formulating your [more…]

Understanding Activity Ratios in Bookkeeping

Activity ratios provide an indication of how efficiently a firm runs its operations. For example, all other factors being equal, a firm that keeps a very modest amount of inventory is in better shape than [more…]

Understanding Profitability Ratios in Bookkeeping

The profitability ratios analyze a firm's profitability. In a sense, these profitability ratios are the most important ratios that you can calculate. They typically provide terribly useful insights into [more…]

Understanding Traditional Overhead Allocation on an Income Statement

The problem in many businesses using traditional overhead allocation is that their overhead expenses or operating expenses don't cleanly tie to products or services. Without good allocation of overhead [more…]

Understanding Activity-Based Costing

To create an activity-based costing (ABC) product line income statement, you attempt to trace the overhead cost directly to products or services. For example, suppose that in the case of an imaginary hot [more…]


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