Accounting is a vital and pervasive activity in any ordered economic society. It supplies the information which decision-makers will rely on in the allocation of scarce resources. It enables the performance of the business to be evaluated and ensures that rational decisions are taken about the future operations of thebusiness. For example, the business may want to access finance in the future. …
Accounting policies are the specific principles, bases, conventions, rules and practices applied by a business in preparing its financial statements. An example would be changing from one basis of assigning cost to inventory to another. The impact of events on assets and liabilities is recognised (recorded) in the accounting records in the period when the service is rendered or the sale (revenu…
As a starting point to the accounting process, a company identifi es the economic events relevant to its business. Examples of economic events are the sale of snack chips by PepsiCo, the provision of cell phone services by AT&T, and the payment of wages by Facebook. Once a company like PepsiCo identifi es economic events, it records those events in order to provide a history of its fi nancial …
An account represents a document used to record all similar transactions. It consists of a title, a debit column, and a credit column. The left side of an account is the debit side, and the right side of the account is the credit side. The balance of an account is determined by subtracting the smaller sum (debit or credit) from the larger sum. Initially, all transactions are recorded in a journ…