Fundamentals of Accounting

Introduction to Accounting

Basic Concepts of Accounting

• Transactions: The proper recording and documentation of business transactions are essential for accurate financial reporting and decision-making.

• Accounts: Accounts are used to track and categorize the financial activities of a business or organization.

• Double-entry accounting: Double-entry accounting is a method of bookkeeping that requires every financial transaction to be recorded in at least two accounts, resulting in a balanced accounting equation.

• Debits and credits: debit and credit are two types of entries that are made for each financial transaction as part of the double-entry accounting system.

• Chart of accounts: A chart of accounts is a list of all the accounts used by a business or organization to record financial transactions.

• Journal entries: are used to keep track of all the financial activities of a business or organization.

• Ledger: is to provide a complete and accurate record of financial transactions for an individual or organization.

• Trial balance: summarizes all of the debit and credit balances in the general ledger accounts, and it is prepared at the end of an accounting period, usually at the end of the month or the end of the year.

• Financial statements: Financial statements are documents that provide information about a company's financial performance and position.

• Accruals and deferrals: Accruals and deferrals are two accounting concepts used to record transactions in a company's financial statements.

• Adjusting entries: Adjusting entries are entries made in the accounting system at the end of an accounting period to bring the accounts up-to-date and accurately reflect the financial position of the company.