1. Introduction to Accounting
Accounting is the systematic process of recording, classifying, summarizing, and interpreting financial transactions to aid in decision-making. It involves various branches such as financial accounting, management accounting, and cost accounting, each serving distinct functions. The fundamental accounting equation underscores the balance between assets, liabilities, and owner's equity, which is critical for sound financial management.
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Sections
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What we have learnt
- Accounting provides essential financial information for decision-making.
- The basic accounting equation asserts that assets equal liabilities plus owner's equity.
- Various branches of accounting serve unique purposes, including financial, management, and cost accounting.
Key Concepts
- -- Accounting
- The process of recording, classifying, summarizing, and interpreting financial transactions to provide useful information for decision-making.
- -- Financial Accounting
- Focuses on preparing financial statements for external users and complies with accounting standards.
- -- Management Accounting
- Provides internal users with financial and non-financial information for decision-making and performance evaluation.
- -- Cost Accounting
- Involves recording, classifying, and analyzing costs to improve profitability and manage costs.
- -- Accounting Equation
- A fundamental equation in accounting: Assets = Liabilities + Owner’s Equity.
- -- DoubleEntry System
- A bookkeeping system that requires every transaction to be recorded in at least two accounts, maintaining equilibrium.
- -- Accounting Concepts
- Fundamental principles that underpin the accounting framework, such as Business Entity Concept and Going Concern Concept.
- -- Accounting Conventions
- Long-standing practices in accounting such as Conservatism and Consistency that guide financial reporting.
Additional Learning Materials
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