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WHAT IS ACCOUNTING?

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Accounting is an information science that is used to collect and organize financial data for organizations and individuals.

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What is accounting?

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Accounting is an information science that is used to collect and organize financial data for organizations and individuals.

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What type of information?

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Accounting organizes financial information. It is about money. It is quantitative in nature and measures money. Accounting isn’t an abstract science – it is much more practical than theoretical. It’s one of those things that you’ll learn best by doing.

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TYPES OF ACCOUNTING

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What types of accounting are there?

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What types of accounting are there?

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  • Bookkeeping: ensures that financial information has been gathered systematically
  • Financial Accounting: prepared for the company’s ownership, its lenders, financial analysts, and for other external stakeholders
  • Managerial Accounting: looks into topics like pricing, competition, marginality, budgeting
  • Tax Accounting: determines the amount of taxes that a company has to pay

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PAYING RENT

A payment is made before the invoice

A Company Pays Rent

Landlord

Invoice $1,000

1

A payment is made before the invoice

2

A payment is made at the time of the invoice

3

A payment is made after the invoice

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INCOME STATEMENT ITEMS

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Revenue, Other Revenue, Cost of Goods Sold

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Revenue

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Represents an inflow of economic resources. Usually, the main type of revenue for a given firm are its day-to-day sales – customers buying goods that the firm sells.

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Other Revenue

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Earnings money by performing activities that are outside the core area of operations

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Cost of Goods Sold

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Expenses that are sustained in order to produce the goods that the firm sells and are directly attributable to the production process

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THE COMPANY DELIVERS THE PRODUCTS

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Payment options

Company Selling Office Equipment

Client Firm

Payment of $10,000

1

A payment is made at delivery

2

A payment is made before delivery

3

A payment is made after delivery

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INCOME STATEMENT

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Purpose

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Purpose

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  • How did the company perform throughout the period under consideration?
  • Did it produce a profit or a loss?

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