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Finance Accounting Accounts: Reviews on Basic Principals and Personal Accounting
Finance Accounting Accounts: Reviews on Basic Principals and Personal Accounting
| Accounts: Reviews on Basic Principals and Personal Accounting |
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| Written by Louis Soul |
| Wednesday, 03 December 2008 12:38 |
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With accounting, if everyone involved in the process of accounting followed their own system, or no system at all, there's be no way to truly tell whether a company was profitable or not. Most companies follow what are called generally accepted accounting principles, or GAAP, and there are huge tomes in libraries and bookstores devoted to just this one topic. Unless a company states otherwise, anyone reading a financial statement can make the assumption that company has used GAAP. With GAAP, if GAAP is not the principles used for preparing financial statements, then a business needs to make clear which other form of accounting they're used and are bound to avoid using titles in its financial statements that could mislead the person examining it. Owners of a company, which can be individual owners or millions of shareholders, are most concerned with the summaries of these transactions, contained in the financial statement. The financial statement summarizes a company's assets. A value of an asset is what it cost when it was first acquired. The financial statement also records what the sources of the assets were. Some assets are in the form of loans that have to be paid back. Profits are also an asset of the business. Personal accounting On personal accounting, you balance your checkbook to note any charges in your checking account that you haven't recorded in your checkbook. Some of these can include ATM fees, overdraft fees, special transaction fees or low balance fees, if you're required to keep a minimum balance in your account. You also balance your checkbook to record any credits that you haven't noted previously. They might include automatic deposits, or refunds or other electronic deposits. Your checking account might be an interest-bearing account and you want to record any interest that it's earned. It's important not to confuse profit with cash flow. Profit equals sales revenue minus expenses. A business manager shouldn't assume that sales revenue equals cash inflow and that expenses equal cash outflows. In recording sales revenue, cash or another asset is increased. The asset accounts receivable is increased in recording revenue for sales made on credit. Many expenses are recorded by decreasing an asset other than cash. For example, cost of goods sold is recorded with a decrease to the inventory asset and depreciation expense is recorded with a decrease to the book value of fixed assets. Also, some expenses are recorded with an increase in the accounts payable liability or an increase in the accrued expenses payable liability. Standard deduction - some personal expenditures or business expenses can be deducted from your income to reduce the taxable amount of income. These expenses include items such as interest paid on your home mortgage, charitable contributions and property taxes. About the Author: The Magical Formula Review supplies more reviews, check out this link: Your Ultimate Guide To Starting An Online Business. Get a totally unique version of this article from our article submission service Kindly provided by LJ-Marketing.dk You are welcome to use this article on your own website, if you include the link just before this text. |
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