Every business operates using money, and all these transactions need to be recorded. Basic accounting will make tracking money a breeze.

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What is basic accounting?

Basic accounting refers to the operation of documenting business transactions. It involves analysis, a summary, and reports of transactions to economic entities and institutions.

The financial statements utilized in basic accounting are a short synopsis of financial negotiations over a period of time, recording a company's cash flow, behavior, and financial position.

Who performs basic accounting?

An accountant or a bookkeeper performs basic accounting. For larger companies, it is conducted by a finance department with numerous employees.

What is included in basic accounting?

Basic accounting has three branches, namely: the medium of data recording, principles, and business transactions. They are as follows:

The medium of data storage

  • Assets. Assets are anything that the economic entity owns. Such examples are cash, investments, office tools, equipment, and vehicles.
  • Liabilities. Liabilities are anything with which the economic entity is legally and financially obliged to. These are incurred during business operations and are settled as time passes by transferring company resources like money.
  • Equity. Equity refers to the value of the shares issued by a company expected to return to its shareholders after its assets are liquidated and all debts are settled.
  • Expenses. Expenses are generally referring to the cost of operations and services. Examples are employee wages, sales commissions, and the costs of goods purchased.
  • Revenue. Revenue refers to the income that an economic entity earns from its business. In other terms, it is the "sales" or profit.

Principles

  • Revenue Recognition Principle. This is where companies identify their revenues through their income statements.
  • Cost Principle. Recording assets after purchasing a product or service can assist business' expenses.
  • Expense Principle. Expenses should be connected to the revenues identified in the same accounting period when the expense was incurred.
  • Documentation & Accuracy Principle. The data gathered on financial statements should be complete and precise to prevent errors.

Business Transactions

  • Sales. Sales are simply transactions where products or services are transferred from one party to another. Sales transactions are recorded commonly in the form of receipts.
  • Purchases. These are transactions that businesses need to acquire materials and services essential to achieving their goals.
  • Receipts. These are transactions that refer to a company getting paid for giving services or goods to customers. The receipt negotiations are documented in the journal for the seller as a credit to accounts acquirable and a debit to cash.
  • Employee's Compensation. This transaction is how employees are compensated or paid. This is determined through the data gathered, such as the number of hours employees labor and their pay rate.
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Best places to learn basic accounting

The best places to learn basic accounting include:

School

School is the most common place to learn basic accounting. Enroll in a university or college and take the required courses.

Internships

Schools often require an internship to graduate. Often, students will intern at prestigious companies to learn the basics of accounting. While their job may be menial tasks, they will learn how an accounting firm operates and how basic accounting is used in the real world.

Work

The majority of office or managerial work requires some basic accounting knowledge, but it can be quickly learned with coaching and practice. Many workplaces use accounting programs that do the heavy lifting, so as long as you enter the correct data in the proper field, basic accounting should be a breeze.