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Accounting, also known as accountancy, is the process of recording and processing information about economic entities, such as businesses and corporations. Accounting measures the results of an organization's economic activities and conveys this information to a variety of stakeholders, including investors, creditors, management, and regulators. Practitioners of accounting are known as accountants. The terms "accounting" and "financial reporting" are often used interchangeably.
Bookkeeping is the recording of financial transactions, and is part of the process of accounting in business and other organizations. It involves preparing source documents for all transactions, operations, and other events of a business. Transactions include purchases, sales, receipts and payments by an individual person, organization or corporation. There are several standard methods of bookkeeping, including the single-entry and double-entry bookkeeping systems. While these may be viewed as "real" bookkeeping, any process for recording financial transactions is a bookkeeping process.
In financial accounting, a balance sheet is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a business partnership, a corporation, private limited company or other organization such as government or not-for-profit entity. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a "snapshot of a company's financial condition". It is the summary of each and every financial statement of an organization.
Double-entry bookkeeping, also known as double-entry accounting, is a method of bookkeeping that relies on a two-sided accounting entry to maintain financial information. Every entry to an account requires a corresponding and opposite entry to a different account. The double-entry system has two equal and corresponding sides, known as debit and credit; this is based on the fundamental accounting principle that for every debit, there must be an equal and opposite credit. A transaction in double-entry bookkeeping always affects at least two accounts, always includes at least one debit and one credit, and always has total debits and total credits that are equal. The purpose of double-entry bookkeeping is to allow the detection of financial errors and fraud.
This page is an index of accounting topics.
An audit is an "independent examination of financial information of any entity, whether profit oriented or not, irrespective of its size or legal form when such an examination is conducted with a view to express an opinion thereon." Auditing also attempts to ensure that the books of accounts are properly maintained by the concern as required by law. Auditors consider the propositions before them, obtain evidence, roll forward prior year working papers, and evaluate the propositions in their auditing report.
Debits and credits in double-entry bookkeeping are entries made in account ledgers to record changes in value resulting from business transactions. A debit entry in an account represents a transfer of value to that account, and a credit entry represents a transfer from the account. Each transaction transfers value from credited accounts to debited accounts. For example, a tenant who writes a rent cheque to a landlord would enter a credit for the bank account on which the cheque is drawn, and a debit in a rent expense account. Similarly, the landlord would enter a credit in the rent income account associated with the tenant and a debit for the bank account where the cheque is deposited.
A trial balance is an internal financial statement that lists the adjusted closing balances of all the general ledger accounts contained in the ledger of a business as at a specific date. This list will contain the name of each nominal ledger account in the order of liquidity and the value of that nominal ledger balance. Each nominal ledger account will hold either a debit balance or a credit balance. 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 trading profit and loss statement and balance sheet and other financial reports can then be produced using the ledger accounts listed on the same balance.
In bookkeeping, a general ledger is a bookkeeping ledger in which accounting data are posted from journals and aggregated from subledgers, such as accounts payable, accounts receivable, cash management, fixed assets, purchasing and projects. A general ledger may be maintained on paper, on a computer, or in the cloud. A ledger account is created for each account in the chart of accounts for an organization and is classified into account categories, such as income, expense, assets, liabilities, and equity; the collection of all these accounts is known as the general ledger. The general ledger holds financial and non-financial data for an organization. Each account in the general ledger consists of one or more pages. It includes details such as the date of sale, invoice number, customer details, and the amount due. This ledger helps businesses track outstanding receivables and manage cash flow efficiently. An organization's statement of financial position and the income statement are both derived from income and expense account categories in the general ledger.
In May 2003, following the invasion of Iraq in March of that year, the Central Bank of Iraq-Development Fund for Iraq (DFI) account was created at the U.S. Federal Reserve Bank of New York at the request of the Coalition Provisional Authority (CPA) Administrator. A part of the fund has been transferred to Baghdad and Iraq, and the DFI-Baghdad account was opened at the Central Bank of Iraq "for cash payment requirements". The fund also eventually received money from seized and "vested" Iraqi bank accounts and funds seized by coalition forces. $650 million of this amount belongs to Uday Saddam Hussein, the older son of the former Iraqi president. The DFI have been disbursed mainly for "the wheat purchase program, the currency exchange program, the electricity and oil infrastructure programs, equipment for Iraqis security forces, and for Iraqi civil service salaries and ministry budget operations".
A general journal is a daybook or subsidiary journal in which transactions relating to adjustment entries, opening stock, depreciation, accounting errors etc. are recorded. The source documents for general journal entries may be journal vouchers, copies of management reports and invoices. Journals are prime entry books, and may also be referred to as books of original entry, from when transactions were written in a journal before they were manually posted to accounts in the general ledger or a subsidiary ledger.
The imprest system is a form of financial accounting. The most common is petty cash. The basic characteristic of an imprest system is that a fixed amount is reserved, which after a certain period or when circumstances require, because money was spent, will be replenished. This replenishment will come from another account, e.g. petty cash may be replenished by cashing a cheque drawn on a bank account or using an ATM.
Single-entry bookkeeping, also known as, single-entry accounting, is a method of bookkeeping that relies on a one-sided accounting entry to maintain financial information. The primary bookkeeping record in single-entry bookkeeping is the cash book, which is similar to a checking account register, except all entries are allocated among several categories of income and expense accounts. Separate account records are maintained for petty cash, accounts payable and receivable, and other relevant transactions such as inventory and travel expenses. To save time and avoid the errors of manual calculations, single-entry bookkeeping can be done today with do-it-yourself bookkeeping software.
Materiality is a concept or convention within auditing and accounting relating to the importance/significance of an amount, transaction, or discrepancy. The objective of an audit of financial statements is to enable the auditor to express an opinion on whether the financial statements are prepared, in all material respects, in conformity with an identified financial reporting framework, such as the Generally Accepted Accounting Principles (GAAP) which is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC).
The following outline is provided as an overview of and topical guide to accounting:
Special journals are specialized lists of financial transaction records which accountants call journal entries. In contrast to a general journal, each special journal records transactions of a specific type, such as sales or purchases. For example, when a company purchases merchandise from a vendor, and then in turn sells the merchandise to a customer, the purchase is recorded in one journal and the sale is recorded in another.
A waste book was one of the books traditionally used in bookkeeping. It consisted of a daily diary of all transactions in chronological order. It differs from a daybook in that only a single waste book is kept, rather than a separate daybook for each of several categories. The waste book was intended for temporary use only; the information needed to be transcribed into a journal in order to begin to balance one's accounts. The name of the book derives from the fact that, once its information was transferred to the journal, the waste book was unneeded.
The history of accounting or accountancy can be traced to ancient civilizations.
Edward Preston Moxey Jr. was an American accountant, and the first Professor of Accounting at the Wharton School of Finance and Commerce at the University of Pennsylvania. He is known for his early works on cost-keeping in factories, which describe the elementary principles of cost accounting.
References
- ↑ P. Hosein (29 July 1988). Principles of Accounts (Cxc). Heinemann. p. 92. ISBN 978-0-435-98309-3.
- ↑ Alan Trenerry (1999). Principles of Internal Control. UNSW Press. pp. 125–. ISBN 978-0-86840-401-1.
- ↑ Irfan Imtiaz. "Petty Cash Balance Confirmation Letter Format for Audit".
- ↑ Peggy M. Jackson (28 November 2006). Sarbanes-Oxley for Small Businesses: Leveraging Compliance for Maximum Advantage. John Wiley & Sons. pp. 101–. ISBN 978-0-470-05004-0.
- ↑ Diane Canwell; Jon Sutherland (2005). BTEC First Business. Nelson Thornes. pp. 105–. ISBN 978-0-7487-9431-7.