Fundamentals of Accounting

Few terms are very basic in accounting and bookkeeping area. Business professional should be acquainted with those concepts. This blog is going to highlight few terms and the concepts in brief which merely help you to feel your accounting task as a piece of cake.

Debits and credits are considered to be the backbone of any accounting systems. If you be aware of these fundamentals, you can understand the whole system of accounting well. All the ledger entry contains debit and credit and now the business is all debit must satisfy with the credits. Incase they are not balanced then the balance sheet will become out of balance which results utter loss. Hence, we have to maintain balanced entries from the beginning. Balance sheet provides the understanding about your assets and liabilities. Assets have more value that the company owns. For instance, Cash in bank, own premises, own company car and the machinery that belongs to the company are considered to be the assets of that company. The liabilities are simply opposite to the assets that the loans we have to repay or debt we have to repay the vendor etc.

The next featured term in the balance sheet after liabilities is owner’s equity. Calculating the difference between assets and liabilities gives you the equity value, it’s either called Profit. It will be moved into retained earnings. Hence, the ending year balance will become the beginning balance of the next year. Talking about the income and expenses, it will help you to reduce spending unnecessarily. Therefore, it’s advisable to keep track of them. You would probably establish an income and expenses account, if you are dealing with many lines of businesses. Outsourcing of accounting tasks helps you to reduce most of your burden and stay in peace while your tasks are taken care of.

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One Response

  1. Wonderful post ! Useful for everyone. I really appreciate your efforts in explaining the accounting terms.

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