ACC-L1+L2

Accounting

Process of identifying, measuring, recording, classifying, summarizing, and communicating financial information.

First Step of Accounting

Identifying: Determining which business transactions and events are relevant and have financial value.

Second Step of Accounting

Measuring: Assigning a specific monetary value (price tag) to a financial event.

Third Step of Accounting

Recording: Systematically entering transaction financial effects into accounting records (Journal).

Fourth Step of Accounting

Classifying: Grouping recorded transactions according to the accounts they affect in the Ledger.

Fifth Step of Accounting

Summarizing: Organizing accounting information into useful totals and reports (Trial Balance).

Sixth Step of Accounting

Communicating: Providing accounting information to interested users in a useful form.

Identifying

Determining which business transactions and events are relevant and have financial value.

Measuring

Determining the monetary amount associated with a transaction or accounting item.

Recording

Systematic process of entering financial effects of transactions into accounting records.

Journal

Accounting record in which transactions are first recorded in chronological order.

Chronological

In order of time, from earliest to latest.

Classifying

Process of grouping transactions according to the accounts they affect.

Ledger

Accounting record that contains individual accounts and organizes information by account.

Summarizing

Process of organizing accounting information into useful totals and reports.

Trial Balance

List of accounts and their balances prepared at a particular stage of accounting.

Communicating

Process of providing accounting information to interested users in a useful form.

Bookkeeping

Part of accounting concerned with systematic recording and classification of transactions.

Ethics

Principles of right conduct that guide responsible decisions and appropriate behavior.

Accounting Framework

Organized set of concepts and principles guiding recognition, measurement, and reporting.

Recognition

Determining whether and when an item should be included in accounting records.

Reporting

Process of presenting and communicating financial information.

Economic Entity Assumption

Requires business activities to be kept separate from personal activities of the owner.

Going Concern Assumption

Assumes a business will continue operating indefinitely unless evidence suggests otherwise.

Monetary Unit Assumption

Requires transactions to be recorded in a single, stable currency unaffected by inflation.

Time Period Assumption

Allows the continuing life of a business to be divided into reporting periods.

Historical Cost Principle

Requires assets to be recorded at their original purchase price rather than current market value.

Objectivity Principle

Financial information must be based on verifiable evidence like invoices and receipts.

Realization Principle

Revenue should only be recognized when it is earned, regardless of when payment is received.

Matching Principle

Requires businesses to record expenses in the same period as the revenues they help generate.

Consistency Principle

Using accounting methods and treatments consistently from one period to another.

Conservatism Principle

Anticipate and record potential losses, but do not record gains until realized.

Materiality Principle

Only transactions that significantly impact financial statements should be recorded/disclosed.

Financial Accounting

Focuses on financial information primarily for external users.

Managerial Accounting

Focuses on information for internal users to help with planning and decision-making.

Cost Accounting

Focuses on determining, analyzing, and controlling costs.

Auditing

Examining financial information and supporting evidence as a quality check.

Taxation

Applying tax laws and regulations.

Public Accounting

Providing professional accounting services (auditing, tax, advisory) to clients.

Private Accounting

Working as an accountant within a specific private organization.

Government Accounting

Working within government or public-sector organizations.

Sole Proprietorship

A business owned by one person.

Partnership

A business owned by two or more persons who agree to operate together.

Corporation

A business recognized by law as a legal entity separate from its owners.

Service Business

A business that primarily earns revenue by providing services to customers.

Merchandising Business

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