Accounting is a process of recording, classifying, summarizing, processing, and presenting data, transactions, and events related to financing. The results of accounting can be used to help make decisions for the parties concerned. This makes a lot of company owners hire the best Accountant near their business location.
There are three main things you should know to understand this basic accounting. First, the name and account number and the normal balance. Second, the basic accounting equation and the third is the accounting cycle. This time we will discuss them one by one as follows:
1. Name, Account Number and Normal Balance
There are many accounts that are commonly used in accounting. Each account must have a different number and normal balance. Understanding the name, number and normal account balance will make it easier for you to complete the accounting cycle. The account prefix number cannot be changed, but each account number will develop according to company needs. So it could be that the overall account number in each company is different.
2. Understanding Basic Accounting
What is included in the basics of accounting?
– Debit credit concept
– Posting to ledgers
– Making a trial balance
– Presentation of financial statements
Well, outside of the 5 fundamentals above, you also have to understand the equation. This basic accounting equation is the relationship between assets, debt, and capital owned by a company. We used to recognize this basic equation in the form of:
“Asset = Debt + Capital”
This equation will be the basis for recording the accounting system, which is the double-entry system. Where every transaction that occurs will be recorded in two aspects, namely the assets and liabilities. In accounting, we know the term that changes that occur because of transactions must not damage the financial balance. So the final result of the assets and liabilities will remain balanced.
3. Accounting Cycle
This term refers to the stages that must be passed in order to get correct and systematic accounting information. The accounting cycle can also be interpreted as the process of preparing financial statements so that the results can be accepted and accounted for. Basically there are 3 stages in accounting, namely recording, and classification, making an overview of financial statements, and preparing and presenting financial statements.