Accounting Equation

Accounting Equation

The accounting equation is the foundation of the double-entry accounting system in use today. It is quite simple to understand and to use. It represent the relationship between the assets, liabilities and the equity of a business. It can be best described in an equation: Assets=Capital+Liabilities. In a corporation, the capital mentioned in the equation, would be the shareholder’s equity. Every business transaction affects at least two of the company’s accounts. The accounting equation will always be in balance. It means that the left side…

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Equity method

Equity method

The equity method in accounting is the process of treating equity investments in associate companies. The investor keeps his or her equities as an asset. The investor’s proportional share of the associate company’s net income increases the investment but the opposite is also true if a net loss is recorded. Even the proportional payment of dividends decreases it. In the investor’s income statement, the proportional share of the investee’s net income or net loss is reported as a single-line item. Equity accounting is usually applied…

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Social accounting

Social accounting

What is social accounting? Social accounting is the process of communicating the social and environmental effects due to the business’ economic actions to the society and to people who find a huge interest in the business. It is mostly used in the aspect of business or corporate social responsibility. Any organization such as a NGO, charity or the government may use it. This method may also be used with Community-Based Monitoring. The emphasis is put on corporate accountability but the term is also used an…

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Fund Accounting

Fund Accounting

Fund accounting is the main type of accounting that is used primarily by the government and non-profit organizations in the United States of America. It is used to record and monitor the money and assets that were entrusted, awarded, appropriated or contributed to their coffers. The funds or assets were conveyed in order for the entity to carry out its mission or fulfill its purpose. Overview of fund accounting: Non-profit organizations and government agencies have a set of special requirements that must be shown in…

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Forensic Accounting

Forensic Accounting

Forensic Accounting is a special practice in the accounting industry that focuses on investigating a business in the event that any criminal charges were made against it.  Forensic actually means that it is useful in the court of law. The accountings that specialize in forensic  accounting is often referred to as forensic auditors or investigative auditors. It happens very often that a forensic must provide the evidence at a trial. Most of the large and medium-sized accounting firms to have a staff of forensic accountants.…

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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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