Bookkeepers and Accountants may works in tandem to provide a full level of service to a business. In many cases, the distinction between the two is formalized by a professional degree, state certification, or industry organization. [1] X Research source
Introduction to Accounting, by Pru Marriott, JR Edwards, and Howard J Mellett, is a widely used introductory textbook that is considered an excellent primer for both general education purposes as well as for learners who intend to specialize in accounting. [2] X Research source College Accounting: A Career Approach by Cathy J. Scott is a widely used college textbook for accounting and financial management courses. The book also has the option of coming with a Quickbooks Accounting CD-ROM that can be invaluable for aspiring accountants. Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports by Thomas R. Ittelson is a best-selling introduction to financial reports, and may be a good first step for learners interested in entering the field of accounting.
Not everything needed to be a great accountant can be learned in a course.
Debit means the record goes in the left side of the t-account and credit means you should use the right side. This refers to a standard t-account journal in which records are made on either side of the vertical portion of the “T”. Assets=Liabilities+Owner’s Equity. This is the accounting equation. Memorize this above all else. It works as a sort of guide to debits and credits. For the portion left of the “=,” debits increase the account and credits decrease it. For the right side, the opposite is true. This means that when asset accounts, like cash, are debited, they are increased. However, when liability accounts, like accounts payable, are debited, they decrease. [4] X Research source Practice by working out how you would enter different common transactions, like paying your electric bill or receiving a cash payment from a customer.
When the accounts are adjusted and correct, the accountant can enter summaries of the information contained in them into the financial statements. [7] X Research source As you study financial statements, you should aim to be able to create them on your own and be able to identify what all of the numbers on a certain statement mean. [8] X Expert Source Ara Oghoorian, CPACertified Public Accountant Expert Interview. 11 March 2020.
Revenue is the inflow of cash in exchange for goods and services earned over time —though not necessarily the money actually paid to the company over that period of time. Revenue may include cash transactions as well as accruals. If accruals are included in the income statement, then the revenue of a given week or month takes into account the invoices and bills that were sent out during that time, even if the money will not be collected until the next income statement’s period. Income statements are therefore intended to show how profitable a business was during that recorded period of time, not necessarily how much money a business took in during that time. [10] X Research source Expenses are any use of money to the company, whether due to the cost of materials and supplies or labor/wages. Much like revenues, expenses are reported during the period of time in which those expenses were incurred, not necessarily when the company paid for those expenses. [11] X Research source The matching principle of accounting requires a company to match related expenses and revenues together whenever possible in order to ascertain a company’s actual profitability over the course of a given time period. In a successful business this should more or less result in a cause-and-effect relationship, where, for example, increased sales will increase the company’s revenue while also resulting in business-related expenses: an increased need to buy more supplies for the store and an increase in expenses for sales commissions, if applicable. [12] X Research source
Assets are what a company owns. It may be helpful to think of assets as all of the resources a company has at its disposal: namely, the vehicles, cash, supplies, and equipment a company owns at that given point in time. [16] X Research source Assets can be tangible (a plant, equipment) and intangible (patents, trademarks, goodwill). Liabilities are any amount that is owed to others at the time of the balance sheet’s creation. Liabilities can include loans that must be paid back, any money that is owed for supplies given on credit, and any wages owed to employees that have not yet been paid. [17] X Research source Equity is the difference between the assets and the liabilities. Equity is sometimes thought of as the “book value” of a company or business. [18] X Research source If the company is a large corporation, the equity may belong to stockholders; if the business is owned by one single person, then the equity is an Owner’s Equity. [19] X Research source
The Economic Entity Assumption is the requirement that an accountant working for a sole proprietorship (a business where a single person owns the company) must maintain a separate ledger for business transactions that does not include the business owner’s personal expenses or transactions. [21] X Research source The Monetary Unit Assumption is the agreement that economic activity, at least in the United States, will be measured in US currency, and therefore only activity that can be translated into US currency will be recorded. [22] X Research source The Time Period Assumption is the agreement that all business transactions will be represented in distinct time intervals, and that those intervals will be recorded accurately. These intervals are typically relatively short: at the very least an annual report is made, though reports are often made at weekly intervals in many companies. The report must also specify when that time interval began and ended. In other words, it’s not enough to include the date of the report; an accountant must clarify in that report whether the report corresponds to one week, one month, one financial quarter, or one year. [23] X Research source The Cost Principle refers to the amount of money spent at the time of a given transaction, without taking inflation into account. [24] X Research source The Full Disclosure Principle requires accountants to disclose relevant financial information to any interested parties, particularly investors and lenders. This information must be disclosed either in the body of a financial statement, or in the notes at the end of that statement. [25] X Research source The Going Concern Principle assumes that the company will remain in operation for the foreseeable future, and requires the accountant to disclose any information regarding the compromised future or certain failure of a company. In other words, if an accountant believes the company will go bankrupt in the foreseeable future, he is obligated to disclose that information to investors and any other interested parties. [26] X Research source The Matching Principle mandates that expenses be paired with revenues in all financial reports. [27] X Research source The Revenue Recognition Principle is an agreement that revenue will be recorded as having occurred at the time the transaction is completed, not when the money is actually paid to the business. [28] X Research source Materiality is a guideline which grants accountants some degree of professional judgment in determining whether or not a given amount is insignificant to the report. This does not mean an accountant may report inaccurately; rather, it addresses an accountant’s decision to round to the nearest dollar, for example, in reporting on a business’s financial transactions. [29] X Research source Conservatism is a principle that advises that an accountant may report potential losses for a business (in fact, he has an obligation to report such losses), but he may not report potential gains as actual gains. This is to prevent investors from having an inaccurate picture of the company’s financial situation. [30] X Research source
Reliability, verifiability, and objectivity principles require accountants to report on numbers that other accountants would agree on. This is both for the professional dignity of the accountant and to ensure that any future transactions are fair and honest. [31] X Research source Consistency requires an account to be consistent in how he applies various practices and procedures to a financial report. If, for example, a business changes its cost flow assumption, the accountant for that business has an obligation to report on that change. [32] X Research source Comparability requires accountants to conform to certain standards, such as the generally accepted accounting principles (GAAP), to ensure that one company’s financial reports can be easily compared to another company’s financial reports. [33] X Research source
