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Accounting is the practice of "...maintaining, auditing and processing financial information

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Introduction

Accounting Assignment Helen Clayfield Emma Carnell Foundation Degree Business Accounting is the practice of "...maintaining, auditing and processing financial information..." (http://en.wikipedia.org/wiki/Accounting) for the purpose of a company, persons or organisation. There are some fundamental parts of accounting which are; "Identifying, measuring and communicating" (Black, 2000). You need to identify the important financial sections of a company, person or organisation which will include the companies assets, liabilities, capital, income and of course expenditure. You will also need to measure "... monetary values of the key financial components in a way which represents a true and fair view of the organisation" (Black, 2000). Finally there is the communication side of accounting, it is vital that a company, person or organisation can communicate all of the financial information gathered so in turn users, whether they are internal or external, will be able to receive the correct financial information and be able follow it. There are two forms of accounting they are Financial Accounting and Management Accounting. Financial Accounting is concerned with the preparation of financial accounts for the benefit of people outside a company or organisation. Management Accounting is financial information used by managers within a company or organisation to make financial decisions based on the information that the accounts provide. There are many people who would be interested in company's accounts, they are divided up into two groups; External Users and Internal Users. ...read more.

Middle

A Balance Sheet is a summary or statement not an account of a company, persons or organisations financial statements showing the assets, liabilities and capital of the company that is what a business owns (assets) and what a business owes (liabilities), these statements are usually prepared at the end of a Fiscal or Financial Year this is a 12 month period used to annually calculate financial reports the 12 month period however does not have to be a calendar year i.e. from January to December, however a balance sheet unlike a profit and loss account only applies to a particular time and not the whole period so as it informs a business of its financial position a balance sheet can be done at the end of a day, month or year. The balance sheet has two separate sections one is Assets which is written as a Debit(DR) entry the other side is Liabilities which is written as a Credit(CR) entry each of these two sides must of course balance, if the accounts do not balance then that means there is a discrepancy within the balance sheet somewhere. A balance sheet can be written in two different formats the first is known as a Vertical Format which when the information contained within the balance sheet is written down the page the second is the Horizontal Format which is when the information is written across the page. ...read more.

Conclusion

There will always be one Debit (DR) entry and one Credit (CR) entry made. A Debit entry would be made if there was an increase for example in any of the following; Assets, Drawings, Accounts Receivable, these are debts that are owed TO a company, person or organisation but as yet have not been paid, Expenses and Losses of course if there was a decrease in any of the above it would be a Credit entry. A Credit entry would be made if there was an increase in any of the following for example; Liabilities, Accounts Payable which are debts owed BY a company, person or organisations which, at present have not been paid, Capital, Income and finally Revenue and as before if there was a increase in any of the above it would be a Debit entry. For example if a company, person or organisation was to purchase a fixed asset such as a building or piece of machinery this would be an increase in that company, person or organisations assets and would therefore be a Debit entry, the other side of the entry would be a Credit entry as there would be a decrease in the bank account of the company, person or organisation. The Double Entry Bookkeeping is essential in order for a company, person or organisation to keep track of all financial transaction as Double Entry is a very detailed financial account and everything that comes in or out of the business is written in a Double Entry Account. ...read more.

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