Accounting Terms And Principles
Accounting is the science of gathering information about the financial activities of an entity. The information gathered in this scientific process is used to decide an entity’s future and performance. Accountants are the people who analyze this data, come up with reports, and make recommendations about improving the performance of the entity concerned.
Basic accounting: The process involved in accounting is fundamental accounting. This is also referred to as managerial accounting. The primary aim of managerial accounting is to meet the needs of managers by providing financial reports that are timely and accurate. Basic accounting is very often confused with cost accounting, which is a different kind of accounting. Cost accounting deals with items that affect value Creation vs. cost – Effectiveness.
Cost accounting: Cost accounting deals with business decisions made concerning the price element of the production. It is sometimes called raw material accounting or physical asset accounting. A firm can be represented by a set of materials or by a collection of things. In the case of firms, managers can represent the firm by cost accounting. There is considerable correspondence between managerial accounting and cost accounting.
Accounting Term: Cash Flows The Cash Flow is the flow of funds, more specifically, the change in the total amount of cash that accumulates within a period of time. The term Cash Flow can refer to a variety of situations and events. When a firm is in the process of building, for example, cash flows are needed. Cash flows can be a positive or negative indication of whether or not a firm is making progress towards its goals. A “cash-flow” is simply the difference between the beginning balance and the ending balance in accounting terminology. This is basically a good way to track the progress that has been or will be made in managing a firm’s assets and liabilities.
Accounting Term: Current Accounts A company’s current accounts list all the financial transactions that have taken place since the start of the fiscal year. All financial transactions include those that are created or converted during a specific period of time. This includes sales, purchases, incurring of debt, payments, and so on. Generally, current accounts do not include debt balances, expenses, or capital investments. Because most accountants use a basic accounting format for most current accounts, most CPAs also understand general ledger accounting.
Accounting Term: Financial Statement The Financial Statements provide an accounting summary that summarizes all the significant events and financial transactions during a specified period. The purpose of a financial statement is to allow a CPA to produce an accurate prediction of how revenue will be generated, spent, and maintained throughout the enterprise. All of the events and transactions included in a financial statement must occur within the accounting period. These particular financial statements are prepared for a single year or an accounting period.
CPA: Financial Accountant The term CPA refers to an accountant who has been licensed by the American Institute of Certified Public Accountants. Certified Public Accountants (CPA) specialize in assisting businesses, corporations, and government agencies to prepare and submit their yearly and quarterly reports. They help them maximize their financial performance through sound financial management practices and advice concerning their tax returns and audits.
There are many accounting terms and accounting principles used in the accounting world. They include a profit and loss statement, balance sheet, cash flow statement, credit statement, income statement, and journal. Some of these are complex and technical, and a beginner needs to become familiar with them as soon as possible. A good accountant will always explain these concepts to a newcomer in just a few minutes.