What is Accounting? Accounting is the process of systematically recording, measuring, and communicating information about financial transactions.
At its highest level, accounting sets up the basics of record keeping and a process to track financial accounts according to the following classifications:
1. Assets: These are items owned, purchased, or acquired which have economic value. Note that assets usually include cash and intangible items such as goodwill and patents.
2. Liabilities: These are obligations of the business, to be paid at a later date.
3. Equity: This is found by simply subtracting liabilities from assets.
4. Revenue: This is the amount received from customers in exchange for the goods or services provided. Revenue may be recognized by the company under an accrual or cash basis.
5. Expenses: This is the cost associated with producing the product or service or the assets spent or consumed during a given timeframe.
6. Transactions: These are the financial movements and events within the classifications above.
7. Reporting: Once all of the above business transactions settle, it is the controller’s role to present the net profit or loss for a given time frame. Learn More>>>