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This article was co-written by Ara Oghoorian, CPA. Ara Oghoorian is a financial accountant (CFA), financial planner (CFP), certified public accountant (CPA) and founder of ACap Advisors & Accountants, an accounting and wealth management firm. Packages in Los Angeles, California. With over 26 years of experience in the financial industry, Ara founded ACap Asset Management in 2009. He previously worked for the Federal Reserve Bank of San Francisco, the US Department of Treasury and the US Department of Finance and Economics. Republic of Armenia. Ara holds a bachelor of science degree in accounting and finance from San Francisco State University, is a banking ombudsman working through the Federal Reserve Board of Governors, holds a specialist degree in financial analysis (CFA) , a financial planner (CFP), holds a certified public accountant (CPA) degree and holds a Series 65 license.
There are 13 references cited in this article that you can view at the bottom of the page.
This article has been viewed 5,825 times.
Accounting, the meticulous recording of financial transactions, is an extremely important process, essential to the success of every business large and small. While large businesses often have large accounting departments with many employees (as well as using the services of independent auditing firms), smaller businesses may have only one accountant. In a one-member company, the business owner may have to take care of the accounting by himself without using any other employees. Whether you are looking to manage your own finances or are interested in applying for an accounting position at another company, learning the basics of accounting is a useful first step for you.
Steps
Improve your accounting skills
- Bookkeepers and accountants can work together to bring the highest level of service to the business.
- In many cases, the distinction between these two titles is formalized by degrees, certifications or industry organizations. [1] XResearch Source
- Introduction to Accounting by Pru Marriott, JR Edwards, and Howard J Mellett is a widely used introductory textbook and is considered an excellent primer for accounting in particular and all disciplines in general. [2] XResearch Source
- Cplege Accounting: A Career Approach by Cathy J. Scott is a widely used college textbook for accounting and financial management courses. You can also choose to purchase the Quickbooks Accounting software CD-ROM: it can be an invaluable asset to aspiring accountants.
- Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports by Thomas R. Ittelson is a best-selling introductory book to financial reporting, and it could be the perfect start to your entry into the field. accountant.
Practice basic accounting
- Debit is a entry entered on the left side of the T account and there is a entry on the right side. Here, we are talking about the standard T-account journal used to record movements on either side of the vertical portion of the “T”.
- Assets=Debts + Equity. This is the accounting equation, the most important one of all. Memorize this equation. It will serve as a guide for debit and credit entries. With the left hand side of “=”, debits increase the account value and credits decrease it. With the right side, debits depreciate the account and credits increase its value.
- Think that when you debit an asset account, such as a cash account, that account will increase. However, when debiting debit accounts, such as accounts payable, these accounts decrease. [4] XResearch Sources
- Learn to record common transactions, such as paying an electric bill or receiving a cash payment from a customer.
Learn about financial statements
- Once the accounts have been adjusted and correct, the accountant can enter a summary of the information contained in those accounts into the financial statements. [7] XResearch Sources
- Revenue is the cash inflow over time that a business earns from providing goods and services. Here, however, the money is not necessarily paid immediately in that accounting period. Revenue can include both immediate payments and accruals. When accruals are included in the income statement, sales for that week or month will be billed for that period, even if the money has not been collected until the next reporting period. . Therefore, the purpose of the income statement is to show how profitable a business was during the period in which it was recognized, not exactly how much money the business made during that period. [9] XResearch Source
- Expenses are the total amount of money that a company uses, whether it is the cost of materials or labor. Like revenue, expenses are reported in the period in which they are incurred rather than when the company is actually paid. [10] XResearch Source
- The matching principle of accounting requires a business to match revenues and expenses when possible in order to determine the true profitability of the business over a given period of time. When a business is profitable, it is likely that we will obtain a cause-and-effect relationship where an increase in sales will increase the revenue as well as the corresponding operating costs of the business: demand for store and sales commissions, if any, will both increase. [11] XResearch Source
- Assets are all the things that a company owns. It can be viewed as the totality of all resources that a company has the right to dispose of, such as vehicles, cash, supplies, and equipment that the company owns at a given time. [15] XResearch Resources Assets can be tangible (such as plant, equipment) or intangible (patents, trademarks, reputation).
- Debts are any amounts owed by a business at the time of the balance sheet. Debt can include outstanding debts, unpaid purchases of goods or employee salaries. [16] XResearch Source
- Capital is the difference between assets and liabilities. Sometimes, equity is seen as the “book value” of a company or business. [17] XSource of Research If it is a large corporation, the capital may belong to the shareholders. When the company belongs to an individual, we have equity. [18] XResearch Sources
Learn accounting principles
- Economic Entity Assumption: an accountant working for a private company (a company owned by an individual) must have a separate ledger for business transactions and not include costs or expenses. owner’s personal transaction. [20] XResearch Sources
- The currency assumption is the agreement under which economic activity, at least in the United States, will be measured in US Dollars and therefore, only activity that is convertible to US Dollars will be recognised. [21] XResearch Source
- The time period assumption is the agreement under which all economic transactions are expressed over certain time periods and these periods are accurately recorded. They are usually relatively short: Businesses need at least annual reports. However, in many companies, the report is usually prepared on a weekly basis. The report must also state the beginning and the end of the period for which it is recorded. In other words, it is not enough just to mention the date of the report: the accountant must clarify whether the report is prepared for a week, a month, a quarter, or an economic year. [22] XResearch Source
- The cost principle refers to the amount spent at the time of a certain transaction, excluding inflation. [23] XResearch Sources
- The principle of complete information requires accountants to disclose relevant financial information to all interested parties, especially investors and creditors. This information must be disclosed in the body or notes at the end of the financial statements. [24] XResearch Sources
- The going concern principle assumes that the company will continue in business for the foreseeable future and requires the accountant to disclose all information regarding the uncertain future or inevitable failure of the company. company. In other words, if it is believed that the company will go bankrupt in the near enough future, the accountant is obligated to disclose that information to investors and any other parties interested in that matter. [25] XResearch Sources
- The matching principle requires that expenses be matched with revenues in all financial statements. [26] XResearch Source
- The revenue recognition principle is an agreement whereby revenue will be recognized at the time the transaction is completed, not when cash is actually paid to the business. [27] XResearch Source
- A principle of materiality is a guideline by which an accountant can judge, based on professional judgment, whether a given amount is significant for reporting. However, this principle does not mean that accountants can misreport. Instead, it refers to decisions made by accountants, such as rounding numbers, in financial transactions. [28] XResearch Sources
- The prudential principle states that accountants can report potential losses of a business (actually, reporting these losses is the accountant’s obligation) but cannot report potential gains. as the actual revenue. From there, do not let investors have an inaccurate view of the company’s financial situation. [29] XResearch Sources
- The principle of authenticity, verifiability, and objectivity requires that parameters reported by one accountant be agreed upon by other accountants. It is concerned not only with the professional dignity of the accountant but also with the assurance that all future transactions will be fair and honest. [30] XResearch Source
- Consistency requires accountants to be consistent in applying financial reporting practices and procedures. For example, when there is a change in a business’s cost-flow assumption, the firm’s accountants are obligated to report the change. [31] XResearch Source
- Comparability requires accountants to adhere to certain standards, such as GAAP, in order to easily compare financial statements between companies. [32] XResearch Source
Advice
- To become a licensed public accountant (CPA), you need to have a bachelor’s degree in accounting and related economics and pass the CPA exam and the Ethics exam. [33] XResearch Sources
This article was co-written by Ara Oghoorian, CPA. Ara Oghoorian is a financial accountant (CFA), financial planner (CFP), certified public accountant (CPA) and founder of ACap Advisors & Accountants, an accounting and wealth management firm. Packages in Los Angeles, California. With over 26 years of experience in the financial industry, Ara founded ACap Asset Management in 2009. He previously worked for the Federal Reserve Bank of San Francisco, the US Department of Treasury and the US Department of Finance and Economics. Republic of Armenia. Ara holds a bachelor of science degree in accounting and finance from San Francisco State University, is a banking ombudsman working through the Federal Reserve Board of Governors, holds a specialist degree in financial analysis (CFA) , a financial planner (CFP), holds a certified public accountant (CPA) degree and holds a Series 65 license.
There are 13 references cited in this article that you can view at the bottom of the page.
This article has been viewed 5,825 times.
Accounting, the meticulous recording of financial transactions, is an extremely important process, essential to the success of every business large and small. While large businesses often have large accounting departments with many employees (as well as using the services of independent auditing firms), smaller businesses may have only one accountant. In a one-member company, the business owner may have to take care of the accounting by himself without using any other employees. Whether you are looking to manage your own finances or are interested in applying for an accounting position at another company, learning the basics of accounting is a useful first step for you.
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