basic-accounting

Fundamentals of Accounting

The basic principles and concepts associated with the financial management and accounting of a business.

Double Entry System

An accounting method where every transaction affects at least two accounts, maintaining the accounting equation.

Trial Balance

A statement that lists the balances of all ledgers to check the arithmetical accuracy of accounts.

Assets

Resources owned by a business that are expected to provide future economic benefits.

Liabilities

Obligations of a business to settle debts or provide services in the future.

Revenues

Incomes earned by a business from its normal operations, usually through sales of goods or services.

Expenses

Costs incurred in the process of earning revenues, reducing overall profit for the period.

Balance Sheet

A financial statement that shows a company's assets, liabilities, and equity at a specific point in time.

Income Statement (Profit and Loss Account)

A financial statement that summarizes revenues and expenses over a period to show net profit or loss.

Depreciation

The systematic allocation of the cost of a tangible asset over its useful life.

Accrual Basis of Accounting

An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when cash is exchanged.

Prepaid Expenses

Payments made for expenses that will be incurred in the future; recognized as assets until they are used.

Outstanding Expenses

Expenses that have been incurred but not yet paid as of the balance sheet date.

Provision for Bad Debts

An estimation of debts that may not be collectible, reducing accounts receivable value.

Journal Entry

A record of a financial transaction in the accounting books that shows the accounts affected and the amounts.

Cash Book

A financial journal that contains all cash receipts and payments, including bank transactions.

Trial Balance Equation

Assets = Liabilities + Owner's Equity, ensuring all financial data in the accounting equation balances.

Capital Expenditure

Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings, or equipment.

Revenue Expenditure

Expenses that are incurred in the day-to-day running of a business, which are fully deducted in the accounting year they were incurred.

Recording Transactions

The process of documenting all financial transactions in accounting records.

Financial Statements

Structured reports that provide an overview of the financial performance and position of a business.