BLOG FINANCIAL ACCOUNTING

Introduction to Project English

 

Accounting is the carrer I choose. I have choosen it because all kind of companies requiere this service. This carrer is very rentable, it also gives good profits because of the management and capacity to make decisions on tax and financial scopes. 

ACCOUNTING 

Accounting is the systematic and comprehensive recording of financial transactions pertaining to a business. Accounting also refers to the process of summarizing, analyzing and reporting these transactions. The financial statements that summarize a large company's operations, financial position and cash flows over a particular period are a concise summary of hundred of thousands of financial transactions it may have entered into over this period. Accounting is one of the key functions for almost any business; it may be handled by a bookkeeper and accountant at small firms or by sizable finance departments with dozens of employees at larger companies. 

The accounting equation (or basic accounting equation) offers us a simple way to understand how these three amounts relate to each other. The accounting equation for a sole proprietorship is:

1. Assets (what it owns): Assets are on the left side of the accounting equation. Asset account balances should be on the left side of the accounts.
2. Liabilities (what it owes to others): Liabilities are on the right side of the accounting equation. Liability account balances should be on the right side of the accounts.
3. Stockholders' Equity (the difference between assets and liabilities): Stockholders' equity is on the right of the accounting equation. Stockholders' equity account balances should be on the right side of the accounts.

Assets are a company's resources—things the company owns. Examples of assets include cash, accounts receivable, inventory, prepaid insurance, investments, land, buildings, equipment, and goodwill. From the accounting equation, we see that the amount of assets must equal the combined amount of liabilities plus owner's (or stockholders') equity.

Liabilities are a company's obligations—amounts the company owes. Examples of liabilities include notes or loans payable, accounts payable, salaries and wages payable, interest payable, and income taxes payable (if the company is a regular corporation). Liabilities can be viewed in two ways:

(1) as claims by creditors against the company's assets, and

(2) a source—along with owner or stockholder equity—of the company's assets.

Owner's or stockholders' equity also reports the amounts invested into the company by the owners plus the cumulative net income of the company that has not been withdrawn or distributed to the owners.

FINANCIAL STATEMENTS OF ACCOUNTING 

Accounting is divided in four financial state:

• FINANCIAL SITUATION STATE. Which shows actual situation of the company in a specific moment.

• RESULTS STATE. Is a document, which inform tidily the utilities of the company. It also informs the incomes, losts, profits and expenses in each period. 

• CHANGES EQUITY STATE. Explain the changes of founds, the contribution of the partners and the utilities's distribution.

• CASH FLOW STATE. Informs the moments of cash, generates for the operation's activities, financing and investments. 

   FINANCIAL SITUATION STATE

                            CHANGES EQUITY STATE                                         

   

CASH FLOW STATE

The income statement is the financial statement that reports a company's revenues and expenses and the resulting net income. While the balance sheet is concerned with one point in time, the income statement covers a time interval or period of time. The income statement will explain part of the change in the owner's or stockholders' equity during the time interval between two balance sheets. 

VIDEO: THE BALANCE SHEET

The balance sheet is also known as the statement of financial position and it reflects the accounting equation. The balance sheet reports a company's assets, liabilities, and owner's (or stockholders') equity at a specific point in time. Like the accounting equation, it shows that a company's total amount of assets equals the total amount of liabilities plus owner's (or stockholders') equity.

  

CLASSIFICATION ACCOUNTING