Financial Accounting

Financial Accounting

Financial accounting is the field of accounting that is concerned with the preparation of all the financial statements of the business.  Every business aims to create the maximum value for their shareholders and for the business itself. It is best achieved when there  is a method for the management and directors to monitor the business.  Financial accounting provides some assistance in the monitoring by providing relevant, reliable and timely information to the shareholders. All of the amounts that are used in financial accounting, is supported…

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Management accounting

Management accounting

What is management accounting? Management Accounting is the process of preparing management reports and accounts. The aim is to provide accurate and timely financial and statistical data that is required by the managers of the organisation to make day-to-day and short-term decisions. How is management accounting implemented? Management accounting extends to the following three areas: Strategic management—advancing the role of the management accountant as a strategic partner in the organization. Performance management—developing the practice of business decision-making and managing the performance of the organization. Risk…

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Cost accounting

Cost accounting

Cost accounting is an accounting process that aims to identify the company’s production costs by assessing the input costs of each and every step of the production process. The fixed costs such as depreciation of capital equipment is also included in the calculations. Cost accounting will first measure and record these costs individually. It will then compare the input results to output or actual results to help the company to measure its financial performance. Types of cost accounting. There are several types of cost accounting…

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GAAP

GAAP

GAAP stands for “generally accepted accounting principles”. GAAP is an international convention of good accounting practices. It is based on a few core principles. Some circumstances would allow an accountant to be held liable for deviating from these principles: The basic objectives of GAAP: Useful to present the financial state of the business to potential investors, creditors and users. Assessing all the financial activities must be easier. Financial decisions are made easily. Long-term decisions and event can be planned more accurately. The performance of the…

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Double entry accounting

Double entry accounting

What is double entry accounting? Double entry accounting is a method of accounting. Every entry that is entered into an account requires a similar and opposite entry to a different account. These accounts must be relevant to the entry that is made. Every transaction, the debits must be equaled to the credit. In this sens, the basic accounting equation is followed at all times. Assets + Expenses= Liabilities + Owners Equity + Revenue. Some basic rules of the double entry accounting system: Expenses are always…

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Trial balance

Trial balance

What is a trial balance? A trial balance is a list of all the General ledger account contained in the ledger of a business. This list will contain the name of the ledger account and the value of that account. The value of the ledger will hold either a debit balance value or a credit balance value. The debit balance values will be listed in the debit column of the trial balance and the credit value balance will be listed in the credit column. The…

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Book value of equity

Book value of equity

Book value of equity: The term book value of equity refers to the net worth of a business. It consists of the total assets of the business minus the total liabilities. The book value of equity will change in the case of the following events: Changes in the company’s assets related to its liabilities. Depreciation: Equity will decrease. Issue of new equity in which the firm obtains new capital increases the total shareholders’ equity. Share repurchases in which a company gives back money to its…

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Bank Reconciliation

Bank Reconciliation

What is a bank reconciliation statement? A Bank reconciliation statement is a report which compares the bank balance as according to the company’s accounting records with the balance shown on the bank statement. Why is bank reconciliation necessary? It is normal for a company’s bank balance according to its accounting records to differ from the balance as on the bank statement due to timing differences. Certain transactions are recorded by the business that are updated in the bank’s system after a certain time lag.  Some…

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Payroll Journal

Payroll Journal

What is a payroll journal? A payroll journal is a detailed record of transactions that are related to the company’s payroll. Smaller organizations often choose to record their transactions directly in the general ledger. Larger companies will find that the numbers of these entries will fill the general ledger. In light of this, they record payroll-related transactions in the payroll journal, and then record a single entry in the general ledger that reflects all of the transactions recorded in the journal. When they use accounting…

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Cash Receipts journal

Cash Receipts journal

The Cash Receipts journal is the first place you record incoming cash for your business. The majority of cash received each day comes from daily sales. Other possible sources of cash income include deposits of capital from the company’s owner, customer bill payments, new loan proceeds, and interest from saving accounts. Each entry in the Cash Receipts journal must indicate how the cash was received but it must also show the account into which the cash will be deposited. In double-entry bookkeeping, every transaction is…

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