Elements of Accounting Assignment Help
Accounting is the “procedure of determining, measuring and interacting economic information to allow informed judgments and decisions by users of the information”. There are five kinds of accounting systems such as cost, financial, tax and management accounting all with various accounting functions, goals and elements. The three standard elements of all accounting systems develop a standardized structure as to the functionfor the information that is identified, measured and communicated. By convention, financial accounting consists of five essential components, when people prepare financial records; each activity will handle a minimum of amongst these aspects. Debit and credit entries in an accounting journal are simply entries made in the particular right and left columns.
Assets describe resources owned and controlled by the entity as a result of past transactions and occasions from which future economic advantages are expected to stream to the entity. In simple terms, assets are rights or properties owned by the company. They may be classified as current or non-current.
Liabilities are financial commitments or payables of business. Company assets come from two major sources such as loaning from creditors or loan providers, and contributions by the owners. The very first describes liabilities; the second to capital. Liabilities represent claims by other parties aside from the owners against the assets of a company. Assets and liabilities might be categorized as either non-current or current.
The purpose of accounting is to provide a precise financial snapshot of the business operations. By convention, financial accounting consists of five standard elements, and when people prepare financial records, each activity will contact among these elements. The accounting convention even more discusses ways to tape these elements, whether as improves or reduces in debit and credit columns. Debit and credit entries in an accounting journal are simply entries made in the right and left columns. Each transaction needs a double entry, one is to record the debit and the other is to record the credit.
Assets are the resources people use to conduct their business activities. To record an item as a possession, they should own it or have a right to manage and use it. For instance, if people own a delivery business, the delivery truck most likely fulfills this demand. Assets also have to provide some future economic advantage to the business. Economic advantages can include money and credit sales. Considering that people use the truck to provide products to their customers, the truck enables them to reap financial advantage such as sales and fulfill this requirement. To record an increase in an asset, people should debit the account, and a credit records an increase. They occur from past events such as getting a loan to purchase equipment for the business. People commonly move assets to settle liabilities. To issue a paycheck is the transfer of the asset such as money.
The three fundamental elements of accounting and management is recognizing the most efficient use of capital resources, measuring the impacts of the cost controls and communicating the information throughout the company. Cost accounting focuses on the costs associated with products, resources, services and departments. The collected economic data is collected into useful data points and reports are drafted and interacted to management and external users for their decision making procedure. By recognizing and determining costs, management can reallocate capital in an effort to improve performances and minimize costs.
Basically, the three fundamental elements of all accounting systems offer a standardized framework to identify financial and economic patterns and aspects to provide an empirically based standard measurement for interacting the financial health and tax of businesses and economies. Management accounting determines a particular period in time to assess against another comparable period in time. By determining the financial results of a specific duration directly with a comparable period such as one month or one year, accountants have the ability to offer an analysis of the financial health of the company based on appropriate empirical data. An asset can be a product without the company that would not operate. For example, for an automobile rental company, an asset can be the piece of paper made to sign up information about the customers who pertain to lease a car. For the same company, assets can be the automobile that a customer comes to lease.
A liability might be money that a business owes to an entity such as a bank. Expect an individual begins a doughnut store. Business starts operating and ends up being effective so much that the business becomes unable to satisfy the new immediate needs. Business owner finds out that he requires a new doughnut machine however that costs more money than the business owner. He would borrow cash from a bank to purchase the valuable and necessary device to fulfill his expectations. The cash owed becomes a liability. In simple term, Accounting is the process or work of keeping financial accounts. It is a systematic recording and studying of transactions pertaining to a company. It also refers to the process of summing up, examining and reporting these transactions by preparing financial statements such as Income Statement and Balance Sheet.
Financial Accounting is based on double-entry system which indicates every business transaction will include two accounts. Double entry system enables the accounting formula to always remain in balance. Accounting involves five standard Elements. They are as follows:
- Owner’s Equity
The first three elements relate to the statement of balance sheet while the latter two relate to income statement.
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