Another financial statement disclosing the results of the company's activity is known as the income and expense statement.
Such information being obtained mainly from different records, additional funds and time should be invested in bookkeeping and accounting system.
Accounting means identifying, measuring, recording economic information about any business.
The term “asset” means anything of value thatis owned by a company and can be expressed in terms of money.
These assets are the most important factor for obtaining future incomes.
The balance sheet prepared by the company’s accountant is one of the important financial reports showing the value of the total assets, total liabilities and equity on a given date.
Accounting gives the company's management the information to evaluate financial performance over a previous period of time, and to make decisions regarding the future.
Accounting informs the general public, and in particular those who are interested in buying its stock, about the financial position of the company.
Not being generally spread outside the company, this information provides specialized reports for division managers, department heads.
A standard set of financial statements is expected to be prepared regularly by financial accounting.
Being prepared in accordance with accepted accounting principles, these statements include the following items.
Provided the company couldn't generate sufficient cash to finance its activities, it would be necessary to borrow money and it should be indicated in the statement.
Income is considered to be the difference between revenues and expenses.
If the total expenses exceeded the total revenues during the period, the difference would be the net loss of the company.
Revenues are transactions that represent the inflow of assets as a result of operations
Expenses are transactions involving the outflow of assets in order to generate revenue.
The income statement excludes the amount of assets withdrawn by the owners, in a corporation such withdrawal of assets being called dividends.
The separate statement shows investors what has happened to their ownership in the company, how earnings have increased its value, and what dividends were paid.
Being prepared for the use of management, the financial statements contain neither debit nor credit columns.
Accounting and bookkeeping mean identifying, measuring, recording economic information about any business , bookkeeping being considered the preliminary stage and a part of the larger field of accounting.
The task of a bookkeeper is to ensure the record-keeping of accounting
Bookkeeping provides the basic accounting data by systematical recording day-to-day financial information.
Modern accounting system is considered to be a seven-step cycle.
To make a complete bookkeeping record of every transaction in a journal, one should consider interrelated aspects of every transaction.
A typical account is known to have two sides: the items on the left side are called debits, while the items on the right side are credits.
Double-entry bookkeeping means that the same amount of money is always debited to one account and credited to another account , each record having its own effect on the whole financial structure of the company.
Posting data to the ledgers is followed by listing the balances of all the accounts.
This procedure known as the drawing up of a trial balance and those that follow it usually take place at the end of the fiscal year.
By making a trial balance, the record-keeping accuracy can be checked.
The trial balance having been successfully prepared, the bookkeeping portion of the accounting cycle is completed.
The double-entry system of bookkeeping enables every company to determine at any time the value of each item that is owned.
One advantage of the double-entry system is that its information is complete enough to be used as the basis for making business decisions.
Assets are usually classified as current and long-term, both types consisting of tangible as well as of intangible items.
Long-term intangible assets include such items as goodwill, patents, trademarks, copyrights , these assets often being the most important factor for obtaining future incomes.
Liabilities are obligations that a company owes to another organization.
All companies keep proper accounting system in order to know whether or not they are operating profitably.
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