What is Accounting Basics?

Accounting basics refer to the fundamental concepts and principles of accounting, which form the foundation of the subject. These concepts and principles include:

Accounting Period: The time span of a financial statement or operation is established by an accounting period. The three-month calendar quarters, fiscal years, and calendar years are a few examples of frequently used accounting periods. Some businesses also employ monthly intervals. One full accounting cycle is covered by each accounting period. An eight-step process used by accountants to monitor, check and track financial transactions over a specific time period is known as an accounting cycle.

The accounting equation: This states that assets equal liabilities plus equity.

Double-entry accounting: This is a system of accounting in which every financial transaction is recorded in at least two accounts, with equal and opposite entries.

Assets: Assets are important resources or commodities that a company owns or has control over. There are numerous types and classes of assets. Types include physical and intangible, operating and non-operating, and current and noncurrent.

The financial statements: These are the primary reports that summarize a company’s financial performance and position. The main financial statements are the balance sheet, income statement, and statement of cash flows.

The accounting cycle: The process involves documenting, classifying, and summarising financial transactions for creating financial statements.

Debits and credits: These are the two sides of a financial transaction that are recorded in the accounting system. An asset or expense account is increased by a debit, while an expense account is decreased by a credit.

Understanding these accounting basics is essential for anyone who wants to learn about financial management and analysis, whether for personal or professional purposes.