Monday, February 9, 2009
Origins of the word Inventory
The word inventory was first recorded in 1601. The french term inventaire, or "detailed list of goods," dates back to 1415. inventory
Origins of the word Inventory
The word inventory was first recorded in 1601. The french term inventaire, or "detailed list of goods," dates back to 1415. inventory
Inventory
From Wikipedia, the free encyclopedia
Jump to: navigation, search
This article is about business inventory. For other uses, see Inventory (disambiguation).
"Overstock" redirects here. For the online retailer, see Overstock.com.
Inventory is a list for goods and materials, or those goods and materials themselves, held available in stock by a business. It is also used for a list of the contents of a household and for a list for testamentary purposes of the possessions of someone who has died. In accounting inventory is considered an asset.
Contents[hide]
1 Origins of the word Inventory
2 Business inventory
2.1 The reasons for keeping stock
2.2 Special terms used in dealing with inventory
2.3 Typology
2.4 Inventory examples
2.4.1 Manufacturing
2.4.2 Logistics or distribution
2.5 High level inventory management
2.6 Accounting perspectives
2.6.1 The basis of Inventory accounting
2.6.2 Accounting for Inventory
2.6.3 Financial accounting
3 The role of a cost accountant on the 21st-century in a manufacturing organization
3.1 FIFO vs. LIFO accounting
3.2 Standard cost accounting
3.3 Theory of Constraints cost accounting
4 National accounts
5 Distressed inventory
6 Inventory credit
7 See also
8 References
9 Further reading
10 External links
Jump to: navigation, search
This article is about business inventory. For other uses, see Inventory (disambiguation).
"Overstock" redirects here. For the online retailer, see Overstock.com.
Inventory is a list for goods and materials, or those goods and materials themselves, held available in stock by a business. It is also used for a list of the contents of a household and for a list for testamentary purposes of the possessions of someone who has died. In accounting inventory is considered an asset.
Contents[hide]
1 Origins of the word Inventory
2 Business inventory
2.1 The reasons for keeping stock
2.2 Special terms used in dealing with inventory
2.3 Typology
2.4 Inventory examples
2.4.1 Manufacturing
2.4.2 Logistics or distribution
2.5 High level inventory management
2.6 Accounting perspectives
2.6.1 The basis of Inventory accounting
2.6.2 Accounting for Inventory
2.6.3 Financial accounting
3 The role of a cost accountant on the 21st-century in a manufacturing organization
3.1 FIFO vs. LIFO accounting
3.2 Standard cost accounting
3.3 Theory of Constraints cost accounting
4 National accounts
5 Distressed inventory
6 Inventory credit
7 See also
8 References
9 Further reading
10 External links
Inventory
From Wikipedia, the free encyclopedia
Jump to: navigation, search
This article is about business inventory. For other uses, see Inventory (disambiguation).
"Overstock" redirects here. For the online retailer, see Overstock.com.
Inventory is a list for goods and materials, or those goods and materials themselves, held available in stock by a business. It is also used for a list of the contents of a household and for a list for testamentary purposes of the possessions of someone who has died. In accounting inventory is considered an asset.
Contents[hide]
1 Origins of the word Inventory
2 Business inventory
2.1 The reasons for keeping stock
2.2 Special terms used in dealing with inventory
2.3 Typology
2.4 Inventory examples
2.4.1 Manufacturing
2.4.2 Logistics or distribution
2.5 High level inventory management
2.6 Accounting perspectives
2.6.1 The basis of Inventory accounting
2.6.2 Accounting for Inventory
2.6.3 Financial accounting
3 The role of a cost accountant on the 21st-century in a manufacturing organization
3.1 FIFO vs. LIFO accounting
3.2 Standard cost accounting
3.3 Theory of Constraints cost accounting
4 National accounts
5 Distressed inventory
6 Inventory credit
7 See also
8 References
9 Further reading
10 External links
Jump to: navigation, search
This article is about business inventory. For other uses, see Inventory (disambiguation).
"Overstock" redirects here. For the online retailer, see Overstock.com.
Inventory is a list for goods and materials, or those goods and materials themselves, held available in stock by a business. It is also used for a list of the contents of a household and for a list for testamentary purposes of the possessions of someone who has died. In accounting inventory is considered an asset.
Contents[hide]
1 Origins of the word Inventory
2 Business inventory
2.1 The reasons for keeping stock
2.2 Special terms used in dealing with inventory
2.3 Typology
2.4 Inventory examples
2.4.1 Manufacturing
2.4.2 Logistics or distribution
2.5 High level inventory management
2.6 Accounting perspectives
2.6.1 The basis of Inventory accounting
2.6.2 Accounting for Inventory
2.6.3 Financial accounting
3 The role of a cost accountant on the 21st-century in a manufacturing organization
3.1 FIFO vs. LIFO accounting
3.2 Standard cost accounting
3.3 Theory of Constraints cost accounting
4 National accounts
5 Distressed inventory
6 Inventory credit
7 See also
8 References
9 Further reading
10 External links
Payments
"Cash and cash equivalents", when used in the context of payments and payments transactions refer to currency, coins, money orders, paper checks, and stored value products such as gift certificates and gift cards.
If in adjustment of cash flow it is written that investment is short term you should not consider that investment as a part of cash and cash equivalent,
This economics or finance-related article is a stub. You can help Wikipedia by expanding it.
This accounting-related article is a stub. You can help Wikipedia by expanding it.
Retrieved from "http://en.wikipedia.org/wiki/Cash_and_cash_equivalents"
If in adjustment of cash flow it is written that investment is short term you should not consider that investment as a part of cash and cash equivalent,
This economics or finance-related article is a stub. You can help Wikipedia by expanding it.
This accounting-related article is a stub. You can help Wikipedia by expanding it.
Retrieved from "http://en.wikipedia.org/wiki/Cash_and_cash_equivalents"
Cash and cash equivalents
Cash and cash equivalents are the most liquid assets found within the asset portion of a company's balance sheet. Cash equivalents are assets that are readily convertible into cash, such as money market holdings, short-term government bonds or Treasury bills, marketable securities and commercial paper. Cash equivalents are distinguished from other investments through their short-term existence; they mature within 3 months whereas short-term investments are 12 months or less, and long-term investments are any investments that mature in excess of 12 months. Another important condition a cash equivalent needs to satisfy is that the investment should have insignificant risk of change in value. Example: an investment in shares cannot be considered a cash equivalent, but preference shares acquired shortly before their specified redemption date can be.
Cash and cash equivalents
Cash and cash equivalents are the most liquid assets found within the asset portion of a company's balance sheet. Cash equivalents are assets that are readily convertible into cash, such as money market holdings, short-term government bonds or Treasury bills, marketable securities and commercial paper. Cash equivalents are distinguished from other investments through their short-term existence; they mature within 3 months whereas short-term investments are 12 months or less, and long-term investments are any investments that mature in excess of 12 months. Another important condition a cash equivalent needs to satisfy is that the investment should have insignificant risk of change in value. Example: an investment in shares cannot be considered a cash equivalent, but preference shares acquired shortly before their specified redemption date can be.
Assets
Current assets
Cash and cash equivalents
Inventories
Accounts receivable
Prepaid expenses
Long-term assets
Property, plant and equipment
investment property, such as real estate held for investment purposes
Intangible assets
Financial assets (excluding investments accounted for using the equity method, accounts receivables, and cash and cash equivalents)
Investments accounted for using the equity method
Biological assets, which are living plants or animals. Bearer biological assets are plants or animals which bear agricultural produce for harvest, such as apple trees grown to produce apples and sheep raised to produce wool.[17]
Cash and cash equivalents
Inventories
Accounts receivable
Prepaid expenses
Long-term assets
Property, plant and equipment
investment property, such as real estate held for investment purposes
Intangible assets
Financial assets (excluding investments accounted for using the equity method, accounts receivables, and cash and cash equivalents)
Investments accounted for using the equity method
Biological assets, which are living plants or animals. Bearer biological assets are plants or animals which bear agricultural produce for harvest, such as apple trees grown to produce apples and sheep raised to produce wool.[17]
Assets
Current assets
Cash and cash equivalents
Inventories
Accounts receivable
Prepaid expenses
Long-term assets
Property, plant and equipment
investment property, such as real estate held for investment purposes
Intangible assets
Financial assets (excluding investments accounted for using the equity method, accounts receivables, and cash and cash equivalents)
Investments accounted for using the equity method
Biological assets, which are living plants or animals. Bearer biological assets are plants or animals which bear agricultural produce for harvest, such as apple trees grown to produce apples and sheep raised to produce wool.[17]
Cash and cash equivalents
Inventories
Accounts receivable
Prepaid expenses
Long-term assets
Property, plant and equipment
investment property, such as real estate held for investment purposes
Intangible assets
Financial assets (excluding investments accounted for using the equity method, accounts receivables, and cash and cash equivalents)
Investments accounted for using the equity method
Biological assets, which are living plants or animals. Bearer biological assets are plants or animals which bear agricultural produce for harvest, such as apple trees grown to produce apples and sheep raised to produce wool.[17]
Corporate balance sheet structure
Guidelines for corporate balance sheets are given by the International Accounting Standards Committee and numerous country-specific organizations.
Balance sheet account names and usage depend on the organization's country and the type of organization. Government organizations do not generally follow standards established for individuals or businesses.[11][dead link][12][13][dead link][14][15]
If applicable to the business, summary values for the following items should be included on the balance sheet:[16]
Balance sheet account names and usage depend on the organization's country and the type of organization. Government organizations do not generally follow standards established for individuals or businesses.[11][dead link][12][13][dead link][14][15]
If applicable to the business, summary values for the following items should be included on the balance sheet:[16]
US Small business balance sheet
A small business balance sheet lists current assets such as cash, accounts receivable, and inventory, fixed assets such as land, buildings, and equipment, intangible assets such as patents, and liabilities such as accounts payable, accrued expenses, and long-term debt. Contingent liabilities such as warranties are noted in the footnotes to the balance sheet. The small business's equity is the difference between total assets and total liabilities
US Small business balance sheet
A small business balance sheet lists current assets such as cash, accounts receivable, and inventory, fixed assets such as land, buildings, and equipment, intangible assets such as patents, and liabilities such as accounts payable, accrued expenses, and long-term debt. Contingent liabilities such as warranties are noted in the footnotes to the balance sheet. The small business's equity is the difference between total assets and total liabilities
Personal balance sheet
A personal balance sheet lists current assets such as cash in checking accounts and savings accounts, long-term assets such as common stock and real estate, current liabilities such as loan debt and mortgage debt due, or overdue, long-term liabilities such as mortgage and other loan debt. Securities and real estate values are listed at market value rather than at historical cost or cost basis. Personal net worth is the difference between an individual's total assets and total liabilities
Personal balance sheet
A personal balance sheet lists current assets such as cash in checking accounts and savings accounts, long-term assets such as common stock and real estate, current liabilities such as loan debt and mortgage debt due, or overdue, long-term liabilities such as mortgage and other loan debt. Securities and real estate values are listed at market value rather than at historical cost or cost basis. Personal net worth is the difference between an individual's total assets and total liabilities
Types of balance sheets
A balance sheet summarizes an organization or individual's assets, equity and liabilities at a specific point in time. Individuals and small businesses tend to have simple balance sheets.[3][dead link] Larger businesses tend to have more complex balance sheets, and these are presented in the organization's annual report.[4] Large businesses also may prepare balance sheets for segments of their businesses.[5] A balance sheet is often presented alongside one for a different point in time (typically the previous year) for comparison.[6][7][dead link]
Types of balance sheets
A balance sheet summarizes an organization or individual's assets, equity and liabilities at a specific point in time. Individuals and small businesses tend to have simple balance sheets.[3][dead link] Larger businesses tend to have more complex balance sheets, and these are presented in the organization's annual report.[4] Large businesses also may prepare balance sheets for segments of their businesses.[5] A balance sheet is often presented alongside one for a different point in time (typically the previous year) for comparison.[6][7][dead link]
Balance sheet
In financial accounting, a balance sheet or statement of financial position is a summary of a person's or organization's balances. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a snapshot of a company's financial condition.[1] Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time.
A company balance sheet has three parts: assets, liabilities and ownership equity. The main categories of assets are usually listed first and are followed by the liabilities. The difference between the assets and the liabilities is known as equity or the net assets or the net worth of the company and according to the accounting equation, net worth must equal assets minus liabilities.[2]
Another way to look at the same equation is that assets equals liabilities plus owner's equity. Looking at the equation in this way shows how assets were financed: either by borrowing money (liability) or by using the owner's money (owner's equity). Balance sheets are usually presented with assets in one section and liabilities and net worth in the other section with the two sections "balancing."
Records of the values of each account or line in the balance sheet are usually maintained using a system of accounting known as the double-entry bookkeeping system.
A business operating entirely in cash can measure its profits by withdrawing the entire bank balance at the end of the period, plus any cash in hand. However, many businesses are not paid immediately; they build up inventories of goods and they acquire buildings and equipment. In other words: businesses have assets and so they can not, even if they want to, immediately turn these into cash at the end of each period. Often, these businesses owe money to suppliers and to tax authorities, and the proprietors do not withdraw all their original capital and profits at the end of each period. In other words businesses also have liabilities.
Contents[hide]
1 Types of balance sheets
1.1 Personal balance sheet
1.2 US Small business balance sheet
2 Corporate balance sheet structure
2.1 Assets
2.2 Liabilities
2.3 Equity
3 Sample balance sheet structure
4 See also
5 References
6 External links
A company balance sheet has three parts: assets, liabilities and ownership equity. The main categories of assets are usually listed first and are followed by the liabilities. The difference between the assets and the liabilities is known as equity or the net assets or the net worth of the company and according to the accounting equation, net worth must equal assets minus liabilities.[2]
Another way to look at the same equation is that assets equals liabilities plus owner's equity. Looking at the equation in this way shows how assets were financed: either by borrowing money (liability) or by using the owner's money (owner's equity). Balance sheets are usually presented with assets in one section and liabilities and net worth in the other section with the two sections "balancing."
Records of the values of each account or line in the balance sheet are usually maintained using a system of accounting known as the double-entry bookkeeping system.
A business operating entirely in cash can measure its profits by withdrawing the entire bank balance at the end of the period, plus any cash in hand. However, many businesses are not paid immediately; they build up inventories of goods and they acquire buildings and equipment. In other words: businesses have assets and so they can not, even if they want to, immediately turn these into cash at the end of each period. Often, these businesses owe money to suppliers and to tax authorities, and the proprietors do not withdraw all their original capital and profits at the end of each period. In other words businesses also have liabilities.
Contents[hide]
1 Types of balance sheets
1.1 Personal balance sheet
1.2 US Small business balance sheet
2 Corporate balance sheet structure
2.1 Assets
2.2 Liabilities
2.3 Equity
3 Sample balance sheet structure
4 See also
5 References
6 External links
Balance sheet
In financial accounting, a balance sheet or statement of financial position is a summary of a person's or organization's balances. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a snapshot of a company's financial condition.[1] Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time.
A company balance sheet has three parts: assets, liabilities and ownership equity. The main categories of assets are usually listed first and are followed by the liabilities. The difference between the assets and the liabilities is known as equity or the net assets or the net worth of the company and according to the accounting equation, net worth must equal assets minus liabilities.[2]
Another way to look at the same equation is that assets equals liabilities plus owner's equity. Looking at the equation in this way shows how assets were financed: either by borrowing money (liability) or by using the owner's money (owner's equity). Balance sheets are usually presented with assets in one section and liabilities and net worth in the other section with the two sections "balancing."
Records of the values of each account or line in the balance sheet are usually maintained using a system of accounting known as the double-entry bookkeeping system.
A business operating entirely in cash can measure its profits by withdrawing the entire bank balance at the end of the period, plus any cash in hand. However, many businesses are not paid immediately; they build up inventories of goods and they acquire buildings and equipment. In other words: businesses have assets and so they can not, even if they want to, immediately turn these into cash at the end of each period. Often, these businesses owe money to suppliers and to tax authorities, and the proprietors do not withdraw all their original capital and profits at the end of each period. In other words businesses also have liabilities.
Contents[hide]
1 Types of balance sheets
1.1 Personal balance sheet
1.2 US Small business balance sheet
2 Corporate balance sheet structure
2.1 Assets
2.2 Liabilities
2.3 Equity
3 Sample balance sheet structure
4 See also
5 References
6 External links
A company balance sheet has three parts: assets, liabilities and ownership equity. The main categories of assets are usually listed first and are followed by the liabilities. The difference between the assets and the liabilities is known as equity or the net assets or the net worth of the company and according to the accounting equation, net worth must equal assets minus liabilities.[2]
Another way to look at the same equation is that assets equals liabilities plus owner's equity. Looking at the equation in this way shows how assets were financed: either by borrowing money (liability) or by using the owner's money (owner's equity). Balance sheets are usually presented with assets in one section and liabilities and net worth in the other section with the two sections "balancing."
Records of the values of each account or line in the balance sheet are usually maintained using a system of accounting known as the double-entry bookkeeping system.
A business operating entirely in cash can measure its profits by withdrawing the entire bank balance at the end of the period, plus any cash in hand. However, many businesses are not paid immediately; they build up inventories of goods and they acquire buildings and equipment. In other words: businesses have assets and so they can not, even if they want to, immediately turn these into cash at the end of each period. Often, these businesses owe money to suppliers and to tax authorities, and the proprietors do not withdraw all their original capital and profits at the end of each period. In other words businesses also have liabilities.
Contents[hide]
1 Types of balance sheets
1.1 Personal balance sheet
1.2 US Small business balance sheet
2 Corporate balance sheet structure
2.1 Assets
2.2 Liabilities
2.3 Equity
3 Sample balance sheet structure
4 See also
5 References
6 External links
Sunday, February 8, 2009
Intangible assets
Main article: Intangible asset
Intangible assets lack physical substance and usually are very hard to evaluate. They include patents, copyrights, franchises, goodwill, trademarks, trade names, etc. These assets are (according to US GAAP) amortized to expense over 5 to 40 years with the exception of goodwill.
Websites are treated differently in different countries and may fall under either tangible or intangible assets.
Intangible assets lack physical substance and usually are very hard to evaluate. They include patents, copyrights, franchises, goodwill, trademarks, trade names, etc. These assets are (according to US GAAP) amortized to expense over 5 to 40 years with the exception of goodwill.
Websites are treated differently in different countries and may fall under either tangible or intangible assets.
Intangible assets
Main article: Intangible asset
Intangible assets lack physical substance and usually are very hard to evaluate. They include patents, copyrights, franchises, goodwill, trademarks, trade names, etc. These assets are (according to US GAAP) amortized to expense over 5 to 40 years with the exception of goodwill.
Websites are treated differently in different countries and may fall under either tangible or intangible assets.
Fixed assets
Main article: Fixed asset
Also referred to as PPE (property, plant, and equipment), these are purchased for continued and long-term use in earning profit in a business. This group includes land, buildings, machinery, furniture, tools, and certain wasting resources e.g., timberland and minerals. They are written off against profits over their anticipated life by charging depreciation expenses (with exception of land). Accumulated depreciation is shown in the face of the balance sheet or in the notes.
These are also called capital assets in management accounting
Also referred to as PPE (property, plant, and equipment), these are purchased for continued and long-term use in earning profit in a business. This group includes land, buildings, machinery, furniture, tools, and certain wasting resources e.g., timberland and minerals. They are written off against profits over their anticipated life by charging depreciation expenses (with exception of land). Accumulated depreciation is shown in the face of the balance sheet or in the notes.
These are also called capital assets in management accounting
Fixed assets
Main article: Fixed asset
Also referred to as PPE (property, plant, and equipment), these are purchased for continued and long-term use in earning profit in a business. This group includes land, buildings, machinery, furniture, tools, and certain wasting resources e.g., timberland and minerals. They are written off against profits over their anticipated life by charging depreciation expenses (with exception of land). Accumulated depreciation is shown in the face of the balance sheet or in the notes.
These are also called capital assets in management accounting
Long-term investments
Often referred to simply as "investments". Long-term investments are to be held for many years and are not intended to be disposed in the near future. This group usually consists of four types of investments:
Investments in securities, such as bonds, common stock, or long-term notes.
Investments in fixed assets not used in operations (e.g., land held for sale).
Investments in special funds (e.g., sinking funds or pension funds).
Investments in subsidiaries or affiliated companies.
Different forms of insurance may also be treated as long term investments
Investments in securities, such as bonds, common stock, or long-term notes.
Investments in fixed assets not used in operations (e.g., land held for sale).
Investments in special funds (e.g., sinking funds or pension funds).
Investments in subsidiaries or affiliated companies.
Different forms of insurance may also be treated as long term investments
Long-term investments
Often referred to simply as "investments". Long-term investments are to be held for many years and are not intended to be disposed in the near future. This group usually consists of four types of investments:
Investments in securities, such as bonds, common stock, or long-term notes.
Investments in fixed assets not used in operations (e.g., land held for sale).
Investments in special funds (e.g., sinking funds or pension funds).
Investments in subsidiaries or affiliated companies.
Different forms of insurance may also be treated as long term investments
Investments in securities, such as bonds, common stock, or long-term notes.
Investments in fixed assets not used in operations (e.g., land held for sale).
Investments in special funds (e.g., sinking funds or pension funds).
Investments in subsidiaries or affiliated companies.
Different forms of insurance may also be treated as long term investments
Current assets
Main article: Current asset
Current assets are cash and other assets expected to be converted to cash, sold, or consumed either in a year or in the operating cycle. These assets are continually turned over in the course of a business during normal business activity. There are 5 major items included into current assets:
Cash and cash equivalents — it is the most liquid asset, which includes currency, deposit accounts, and negotiable instruments (e.g., money orders, cheque, bank drafts).
Short-term investments — include securities bought and held for sale in the near future to generate income on short-term price differences (trading securities).
Receivables — usually reported as net of allowance for uncollectable accounts.
Inventory — trading these assets is a normal business of a company. The inventory value reported on the balance sheet is usually the historical cost or fair market value, whichever is lower. This is known as the "lower of cost or market" rule.
Prepaid expenses — these are expenses paid in cash and recorded as assets before they are used or consumed (a common example is insurance). See also adjusting entries.
The phrase net current assets (also called working capital) is often used and refers to the total of current assets less the total of current liabilities.
Current assets are cash and other assets expected to be converted to cash, sold, or consumed either in a year or in the operating cycle. These assets are continually turned over in the course of a business during normal business activity. There are 5 major items included into current assets:
Cash and cash equivalents — it is the most liquid asset, which includes currency, deposit accounts, and negotiable instruments (e.g., money orders, cheque, bank drafts).
Short-term investments — include securities bought and held for sale in the near future to generate income on short-term price differences (trading securities).
Receivables — usually reported as net of allowance for uncollectable accounts.
Inventory — trading these assets is a normal business of a company. The inventory value reported on the balance sheet is usually the historical cost or fair market value, whichever is lower. This is known as the "lower of cost or market" rule.
Prepaid expenses — these are expenses paid in cash and recorded as assets before they are used or consumed (a common example is insurance). See also adjusting entries.
The phrase net current assets (also called working capital) is often used and refers to the total of current assets less the total of current liabilities.
Asset characteristics
Assets have three essential characteristics:
The probable future benefit involves a capacity, singly or in combination with other assets, in the case of profit oriented enterprises, to contribute directly or indirectly to future net cash flows, and, in the case of not-for-profit organizations, to provide services;
The entity can control access to the benefit;
The transaction or event giving rise to the entity's right to, or control of, the benefit has already occurred.
It is not necessary, in the financial accounting sense of the term, for control of assets to the benefit to be legally enforceable for a resource to be an asset, provided the entity can control its use by other means.
It is important to understand that in an accounting sense an asset is not the same as ownership. In accounting, ownership is described by the term "equity," (see the related term shareholders' equity). Assets are equal to "equity" plus "liabilities."
The accounting equation relates assets, liabilities, and owner's equity:
Assets = Liabilities + Owners' Equity
The accounting equations are the mathematical structure of the balance sheet.
Assets are usually listed on the balance sheet. It has a normal balance, or usual balance, of debit (i.e., asset account amounts appear on the left side of a ledger).
Similarly, in economics an asset is any form in which wealth can be held.
Probably the most accepted accounting definition of asset is the one used by the International Accounting Standards Board [5]. The following is a quotation from the IFRS Framework: "An asset is a resource controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise." [6]
Assets are formally controlled and managed within larger organizations via the use of asset tracking tools. These monitor the purchasing, upgrading, servicing, licensing, disposal etc., of both physical and non-physical assets.[clarification needed] In a company's balance sheet certain divisions are required by generally accepted accounting principles (GAAP), which vary from country to country
The probable future benefit involves a capacity, singly or in combination with other assets, in the case of profit oriented enterprises, to contribute directly or indirectly to future net cash flows, and, in the case of not-for-profit organizations, to provide services;
The entity can control access to the benefit;
The transaction or event giving rise to the entity's right to, or control of, the benefit has already occurred.
It is not necessary, in the financial accounting sense of the term, for control of assets to the benefit to be legally enforceable for a resource to be an asset, provided the entity can control its use by other means.
It is important to understand that in an accounting sense an asset is not the same as ownership. In accounting, ownership is described by the term "equity," (see the related term shareholders' equity). Assets are equal to "equity" plus "liabilities."
The accounting equation relates assets, liabilities, and owner's equity:
Assets = Liabilities + Owners' Equity
The accounting equations are the mathematical structure of the balance sheet.
Assets are usually listed on the balance sheet. It has a normal balance, or usual balance, of debit (i.e., asset account amounts appear on the left side of a ledger).
Similarly, in economics an asset is any form in which wealth can be held.
Probably the most accepted accounting definition of asset is the one used by the International Accounting Standards Board [5]. The following is a quotation from the IFRS Framework: "An asset is a resource controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise." [6]
Assets are formally controlled and managed within larger organizations via the use of asset tracking tools. These monitor the purchasing, upgrading, servicing, licensing, disposal etc., of both physical and non-physical assets.[clarification needed] In a company's balance sheet certain divisions are required by generally accepted accounting principles (GAAP), which vary from country to country
Asset
This article is about the business definition. For other uses, see Asset (disambiguation).
In business and accounting, assets are everything of value that is owned by a person or company. The balance sheet of a firm records the monetary[1] value of the assets owned by the firm. It is money and other valuables belonging to an individual or business. [2]The two major asset classes are tangible assets and intangible assets. Tangible assets contain various subclasses, including financial assets and fixed assets.[3] Financial assets include such items as accounts receivable, bonds, stocks and cash; while fixed assets include such items as buildings and equipment.[4] Intangible assets are nonphysical resources and rights that have a value to the firm because they give the firm some kind of advantage in the market place. Examples of intangible assets are goodwill, copyrights, trademarks, patents and computer programs.[4]
In business and accounting, assets are everything of value that is owned by a person or company. The balance sheet of a firm records the monetary[1] value of the assets owned by the firm. It is money and other valuables belonging to an individual or business. [2]The two major asset classes are tangible assets and intangible assets. Tangible assets contain various subclasses, including financial assets and fixed assets.[3] Financial assets include such items as accounts receivable, bonds, stocks and cash; while fixed assets include such items as buildings and equipment.[4] Intangible assets are nonphysical resources and rights that have a value to the firm because they give the firm some kind of advantage in the market place. Examples of intangible assets are goodwill, copyrights, trademarks, patents and computer programs.[4]
The bookkeeping and accounting process
In the normal course of business, a document is produced each time a transaction occurs. Sales and purchases usually have invoices or receipts. Deposit slips are produced when lodgements (deposits) are made to a bank account. Cheques are written to pay money out of the account. Bookkeeping involves recording the details of all of these source documents into multi-column journals (also known as a books of first entry or daybooks). For example, all credit sales are recorded in the Sales Journal, all Cash Payments are recorded in the Cash Payments Journal. Columns in the journal normally correspond to an account. In the single entry system, each transaction is recorded only once. Most individuals who balance their cheque-book each month are using such a system, and most personal finance software follows this approach.
After a certain period, typically a month, the columns in each journal are each totalled to give a summary for the period. Using the rules of double entry, these journal summaries are then transferred to their respective accounts in the ledger, or book of accounts. The process of transferring summaries or individual transactions to the ledger is called Posting. Once the posting process is complete, accounts kept using the "T" format undergo balancing which is simply a process to arrive at the balance of the account.
To quickly check that the posting process was done correctly, a working document called an unadjusted trial balance is created. In its simplest form, this is a three column list. The first column contains the names of those accounts in the ledger which have a non-zero balance. If an account has a debit balance, the balance amount is copied into column two (the debit column). If an account has a credit balance, the amount is copied into column three (the credit column). The debit column is then totaled and then the credit column is totaled. The two totals must agree - this agreement is not by chance - it happens because under the double-entry rules, whenever there is a posting, the debits of the posting equal the credits of the posting. If the two totals do not agree therefore, an error has been made in either the journals or made during the posting process. The error(s) must be located and rectified and the totals of debit column and credit column re-calculated to check for agreement before any further processing can take place.
Once there are no errors, the accountant produces a number of adjustments and changes the balance amounts of some of the accounts. For example, the "Inventory" account and "Office Supplies" asset accounts are changed to bring them into line with the actual numbers counted during a stock take. At the same time, the expense accounts associated with usage of inventory and with the usage of office supplies are adjusted. Other refinements necessary to ensure that accounting principles are complied with are also done at this time. This results in a listing called, not surprisingly, the adjusted trial balance. It is the accounts in this list and their corresponding debit or credit balances that are used to prepare the financial statements.
Finally financial statements are drawn from the trial balance, which may include:
the income statement, also known as a statement of financial results, profit and loss statement, or simply P&L
the balance sheet
the cash flow statement
the statement of retained earnings
After a certain period, typically a month, the columns in each journal are each totalled to give a summary for the period. Using the rules of double entry, these journal summaries are then transferred to their respective accounts in the ledger, or book of accounts. The process of transferring summaries or individual transactions to the ledger is called Posting. Once the posting process is complete, accounts kept using the "T" format undergo balancing which is simply a process to arrive at the balance of the account.
To quickly check that the posting process was done correctly, a working document called an unadjusted trial balance is created. In its simplest form, this is a three column list. The first column contains the names of those accounts in the ledger which have a non-zero balance. If an account has a debit balance, the balance amount is copied into column two (the debit column). If an account has a credit balance, the amount is copied into column three (the credit column). The debit column is then totaled and then the credit column is totaled. The two totals must agree - this agreement is not by chance - it happens because under the double-entry rules, whenever there is a posting, the debits of the posting equal the credits of the posting. If the two totals do not agree therefore, an error has been made in either the journals or made during the posting process. The error(s) must be located and rectified and the totals of debit column and credit column re-calculated to check for agreement before any further processing can take place.
Once there are no errors, the accountant produces a number of adjustments and changes the balance amounts of some of the accounts. For example, the "Inventory" account and "Office Supplies" asset accounts are changed to bring them into line with the actual numbers counted during a stock take. At the same time, the expense accounts associated with usage of inventory and with the usage of office supplies are adjusted. Other refinements necessary to ensure that accounting principles are complied with are also done at this time. This results in a listing called, not surprisingly, the adjusted trial balance. It is the accounts in this list and their corresponding debit or credit balances that are used to prepare the financial statements.
Finally financial statements are drawn from the trial balance, which may include:
the income statement, also known as a statement of financial results, profit and loss statement, or simply P&L
the balance sheet
the cash flow statement
the statement of retained earnings
The bookkeeping and accounting process
In the normal course of business, a document is produced each time a transaction occurs. Sales and purchases usually have invoices or receipts. Deposit slips are produced when lodgements (deposits) are made to a bank account. Cheques are written to pay money out of the account. Bookkeeping involves recording the details of all of these source documents into multi-column journals (also known as a books of first entry or daybooks). For example, all credit sales are recorded in the Sales Journal, all Cash Payments are recorded in the Cash Payments Journal. Columns in the journal normally correspond to an account. In the single entry system, each transaction is recorded only once. Most individuals who balance their cheque-book each month are using such a system, and most personal finance software follows this approach.
After a certain period, typically a month, the columns in each journal are each totalled to give a summary for the period. Using the rules of double entry, these journal summaries are then transferred to their respective accounts in the ledger, or book of accounts. The process of transferring summaries or individual transactions to the ledger is called Posting. Once the posting process is complete, accounts kept using the "T" format undergo balancing which is simply a process to arrive at the balance of the account.
To quickly check that the posting process was done correctly, a working document called an unadjusted trial balance is created. In its simplest form, this is a three column list. The first column contains the names of those accounts in the ledger which have a non-zero balance. If an account has a debit balance, the balance amount is copied into column two (the debit column). If an account has a credit balance, the amount is copied into column three (the credit column). The debit column is then totaled and then the credit column is totaled. The two totals must agree - this agreement is not by chance - it happens because under the double-entry rules, whenever there is a posting, the debits of the posting equal the credits of the posting. If the two totals do not agree therefore, an error has been made in either the journals or made during the posting process. The error(s) must be located and rectified and the totals of debit column and credit column re-calculated to check for agreement before any further processing can take place.
Once there are no errors, the accountant produces a number of adjustments and changes the balance amounts of some of the accounts. For example, the "Inventory" account and "Office Supplies" asset accounts are changed to bring them into line with the actual numbers counted during a stock take. At the same time, the expense accounts associated with usage of inventory and with the usage of office supplies are adjusted. Other refinements necessary to ensure that accounting principles are complied with are also done at this time. This results in a listing called, not surprisingly, the adjusted trial balance. It is the accounts in this list and their corresponding debit or credit balances that are used to prepare the financial statements.
Finally financial statements are drawn from the trial balance, which may include:
the income statement, also known as a statement of financial results, profit and loss statement, or simply P&L
the balance sheet
the cash flow statement
the statement of retained earnings
After a certain period, typically a month, the columns in each journal are each totalled to give a summary for the period. Using the rules of double entry, these journal summaries are then transferred to their respective accounts in the ledger, or book of accounts. The process of transferring summaries or individual transactions to the ledger is called Posting. Once the posting process is complete, accounts kept using the "T" format undergo balancing which is simply a process to arrive at the balance of the account.
To quickly check that the posting process was done correctly, a working document called an unadjusted trial balance is created. In its simplest form, this is a three column list. The first column contains the names of those accounts in the ledger which have a non-zero balance. If an account has a debit balance, the balance amount is copied into column two (the debit column). If an account has a credit balance, the amount is copied into column three (the credit column). The debit column is then totaled and then the credit column is totaled. The two totals must agree - this agreement is not by chance - it happens because under the double-entry rules, whenever there is a posting, the debits of the posting equal the credits of the posting. If the two totals do not agree therefore, an error has been made in either the journals or made during the posting process. The error(s) must be located and rectified and the totals of debit column and credit column re-calculated to check for agreement before any further processing can take place.
Once there are no errors, the accountant produces a number of adjustments and changes the balance amounts of some of the accounts. For example, the "Inventory" account and "Office Supplies" asset accounts are changed to bring them into line with the actual numbers counted during a stock take. At the same time, the expense accounts associated with usage of inventory and with the usage of office supplies are adjusted. Other refinements necessary to ensure that accounting principles are complied with are also done at this time. This results in a listing called, not surprisingly, the adjusted trial balance. It is the accounts in this list and their corresponding debit or credit balances that are used to prepare the financial statements.
Finally financial statements are drawn from the trial balance, which may include:
the income statement, also known as a statement of financial results, profit and loss statement, or simply P&L
the balance sheet
the cash flow statement
the statement of retained earnings
Double-entry bookkeeping system
The system is called 'double-entry' because each transaction is recorded in at least two accounts. Each transaction results in at least one account being debited and at least one account being credited with the total debits of the transaction equal to the total credits.
For example: if Company A sells an item to Company B and Company B pays Company A by cheque then the bookkeeper of Company A credits the account "Sales" and debits the account "Bank". Conversely the bookkeeper of Company B debits the account "Purchases" and credits the account "Bank".
For example: if Company A sells an item to Company B and Company B pays Company A by cheque then the bookkeeper of Company A credits the account "Sales" and debits the account "Bank". Conversely the bookkeeper of Company B debits the account "Purchases" and credits the account "Bank".
Double-entry bookkeeping system
The system is called 'double-entry' because each transaction is recorded in at least two accounts. Each transaction results in at least one account being debited and at least one account being credited with the total debits of the transaction equal to the total credits.
For example: if Company A sells an item to Company B and Company B pays Company A by cheque then the bookkeeper of Company A credits the account "Sales" and debits the account "Bank". Conversely the bookkeeper of Company B debits the account "Purchases" and credits the account "Bank".
For example: if Company A sells an item to Company B and Company B pays Company A by cheque then the bookkeeper of Company A credits the account "Sales" and debits the account "Bank". Conversely the bookkeeper of Company B debits the account "Purchases" and credits the account "Bank".
Computerized bookkeeping
Computerized bookkeeping removes many of the paper "books" that are used to record transactions and usually enforces double entry bookkeeping. Computer software increases the speed at which bookkeeping can be performed.
Computerized bookkeeping
Computerized bookkeeping removes many of the paper "books" that are used to record transactions and usually enforces double entry bookkeeping. Computer software increases the speed at which bookkeeping can be performed.
Chart of accounts
Chart of accounts is a list of the accounts codes that can be identified with numeric, alphabetical or alphanumeric codes allowing the account to be located in the general ledger.
Chart of accounts
Chart of accounts is a list of the accounts codes that can be identified with numeric, alphabetical or alphanumeric codes allowing the account to be located in the general ledger.
Interchangeable Terms
Debtors Ledger/Customers Ledger/Sales Ledger/Accounts Receivable Ledger
Creditors Ledger/Suppliers Ledger/Purchases Ledger/Accounts Payable Ledger
General Ledger/Nominal Ledger
Creditors Ledger/Suppliers Ledger/Purchases Ledger/Accounts Payable Ledger
General Ledger/Nominal Ledger
Ledgers
Ledger (or book of final entry) is a record of accounts, each recorded individually (on a separate page) with its balance. (Ledger is also a book holding such records.) Unlike the journal listing chronologically all financial transactions without balances, the ledger summarizes values of one type of financial transactions per account, which constitute the basis for the balance sheet and income statement. Ledgers include:
Customer ledger of financial transactions with a customer.
Supplier ledger of financial transactions with a supplier.
General (nominal) ledger representing assets, liabilities, income and expenses.
Customer ledger of financial transactions with a customer.
Supplier ledger of financial transactions with a supplier.
General (nominal) ledger representing assets, liabilities, income and expenses.
Ledgers
Ledger (or book of final entry) is a record of accounts, each recorded individually (on a separate page) with its balance. (Ledger is also a book holding such records.) Unlike the journal listing chronologically all financial transactions without balances, the ledger summarizes values of one type of financial transactions per account, which constitute the basis for the balance sheet and income statement. Ledgers include:
Customer ledger of financial transactions with a customer.
Supplier ledger of financial transactions with a supplier.
General (nominal) ledger representing assets, liabilities, income and expenses.
Customer ledger of financial transactions with a customer.
Supplier ledger of financial transactions with a supplier.
General (nominal) ledger representing assets, liabilities, income and expenses.
Journals
Journal is a formal and chronological record of financial transactions before their values are accounted in general ledger as debits and credits. If daybooks are not kept, the journals are books of original entry, where the transactions are first recorded, hence often considered synonymous with daybooks. Special journals include: sales, purchases, cash receipts, cash disbursements, and payroll. General journal is a record of the entries not included in other journals.
Journals
Journal is a formal and chronological record of financial transactions before their values are accounted in general ledger as debits and credits. If daybooks are not kept, the journals are books of original entry, where the transactions are first recorded, hence often considered synonymous with daybooks. Special journals include: sales, purchases, cash receipts, cash disbursements, and payroll. General journal is a record of the entries not included in other journals.
Petty Cash Book
Petty cash book is a record of small value purchases usually controlled by imprest system
Daybooks
Daybook is a descriptive and chronological (diary-like) record of day-to-day financial transactions or a book of original entry rarely kept for the entries are now contained in original documents such as invoices and supporting documents. Daybook's details must be entered formally into journals to enable posting to ledgers. Daybooks include:
Sales daybook of the sales invoices.
Sales credits daybook of the sales credit notes.
Purchases daybook of the purchase invoices.
Purchases credits daybook of the purchase credit notes.
Cash daybook, usually known as cash book, of cash received and paid out. It may comprise two daybooks: receipts daybook of cash received, and payments daybook of cash paid out
Sales daybook of the sales invoices.
Sales credits daybook of the sales credit notes.
Purchases daybook of the purchase invoices.
Purchases credits daybook of the purchase credit notes.
Cash daybook, usually known as cash book, of cash received and paid out. It may comprise two daybooks: receipts daybook of cash received, and payments daybook of cash paid out
Single account bookkeeping
Simple bookkeeping for individuals and families involves recording income, expenses and current balance in a cash record book or a checking account register.
Sample checking account register (United States, 2003)[5]
AD=Automatic Deposit, AP=Automatic Payment, ATM=Teller Machine, DC=Debit Card
NUMBEROR CODE
DATE
TRANSACTION DESCRIPTION
PAYMENT AMOUNT
/
FEE
DEPOSIT AMOUNT
BALANCE
balance forward
1331
85
AD
3/15
paycheck
1823
56
3155
41
AP
3/26
electricity
104
31
3051
10
704
3/26
car registration
58
50
2992
60
ATM
3/30
cash withdrawal
100
00
1.00
2891
60
DC
4/2
groceries
127
35
2764
25
Sample checking account register (United States, 2003)[5]
AD=Automatic Deposit, AP=Automatic Payment, ATM=Teller Machine, DC=Debit Card
NUMBEROR CODE
DATE
TRANSACTION DESCRIPTION
PAYMENT AMOUNT
/
FEE
DEPOSIT AMOUNT
BALANCE
balance forward
1331
85
AD
3/15
paycheck
1823
56
3155
41
AP
3/26
electricity
104
31
3051
10
704
3/26
car registration
58
50
2992
60
ATM
3/30
cash withdrawal
100
00
1.00
2891
60
DC
4/2
groceries
127
35
2764
25
Single account bookkeeping
Simple bookkeeping for individuals and families involves recording income, expenses and current balance in a cash record book or a checking account register.
Sample checking account register (United States, 2003)[5]
AD=Automatic Deposit, AP=Automatic Payment, ATM=Teller Machine, DC=Debit Card
NUMBEROR CODE
DATE
TRANSACTION DESCRIPTION
PAYMENT AMOUNT
/
FEE
DEPOSIT AMOUNT
BALANCE
balance forward
1331
85
AD
3/15
paycheck
1823
56
3155
41
AP
3/26
electricity
104
31
3051
10
704
3/26
car registration
58
50
2992
60
ATM
3/30
cash withdrawal
100
00
1.00
2891
60
DC
4/2
groceries
127
35
2764
25
Sample checking account register (United States, 2003)[5]
AD=Automatic Deposit, AP=Automatic Payment, ATM=Teller Machine, DC=Debit Card
NUMBEROR CODE
DATE
TRANSACTION DESCRIPTION
PAYMENT AMOUNT
/
FEE
DEPOSIT AMOUNT
BALANCE
balance forward
1331
85
AD
3/15
paycheck
1823
56
3155
41
AP
3/26
electricity
104
31
3051
10
704
3/26
car registration
58
50
2992
60
ATM
3/30
cash withdrawal
100
00
1.00
2891
60
DC
4/2
groceries
127
35
2764
25
Single-entry system
The primary bookkeeping record in single-entry bookkeeping is the cash book, which is similar to a checking (chequing) account register but allocates the income and expenses to various income and expense accounts. Separate account records are maintained for petty cash, accounts payable and receivable, and other relevant transactions such as inventory and travel expenses.
Sample revenue and expense journal for single-entry bookkeeping[4]
No.
Date
Description
Revenue
Expense
Sales
Sales Tax
Services
Inventory
Advert.
Freight
Office Suppl
Misc
7/13
Balance forward
1,826.00
835.00
1,218.00
98.00
510.00
295.00
245.00
150.00
83.50
61.50
1041
7/13
Printer- Advert flyers
450.00
450.00
1042
7/13
Wholesaler - inventory
380.00
380.00
1043
7/16
office supplies
92.50
92.50
--
7/17
bank deposit
1,232.00
- Taxable sales
400.00
32.00
- Out-of-state sales
165.00
- Resales
370.00
- Service sales
265.00
bank
7/19
bank charge
23.40
23.40
1044
7/19
petty cash
100.00
100.00
TOTALS
3058.00
1,880.90
2,153.00
130.00
775.00
675.00
695.00
150.00
Sample revenue and expense journal for single-entry bookkeeping[4]
No.
Date
Description
Revenue
Expense
Sales
Sales Tax
Services
Inventory
Advert.
Freight
Office Suppl
Misc
7/13
Balance forward
1,826.00
835.00
1,218.00
98.00
510.00
295.00
245.00
150.00
83.50
61.50
1041
7/13
Printer- Advert flyers
450.00
450.00
1042
7/13
Wholesaler - inventory
380.00
380.00
1043
7/16
office supplies
92.50
92.50
--
7/17
bank deposit
1,232.00
- Taxable sales
400.00
32.00
- Out-of-state sales
165.00
- Resales
370.00
- Service sales
265.00
bank
7/19
bank charge
23.40
23.40
1044
7/19
petty cash
100.00
100.00
TOTALS
3058.00
1,880.90
2,153.00
130.00
775.00
675.00
695.00
150.00
Bookkeeping systems
Two common bookkeeping systems used by businesses and other organizations are the single-entry bookkeeping system and the double-entry bookkeeping system. Single-entry bookkeeping uses only income and expense accounts, recorded primarily in a revenue and expense journal. Single-entry bookkeeping is adequate for many small businesses. Double-entry bookkeeping requires posting (recording) each transaction twice, using debits and credits.
Bookkeeper
A bookkeeper (or book-keeper), sometimes called an accounting clerk in the United States, is a person who records the day-to-day financial transactions of an organization.[2] A bookkeeper is usually responsible for writing up the "daybooks." The daybooks consist of purchase, sales, receipts and payments. The bookkeeper is responsible for ensuring all transactions are recorded in the correct daybook, suppliers ledger, customer ledger and general ledger. The bookkeeper brings the books to the trial balance stage. An accountant may prepare the income statement and balance sheet using the trial balance and ledgers prepared by the bookkeeper.
Bookkeeping
Bookkeeping (book-keeping or book keeping) is the recording of the value of assets, liabilities, income, and expenses in the daybooks, journals, and ledgers, in which debit and credit entries are chronologically posted to record changes in value. Bookkeeping is often mistaken for accounting, which is the system of recording, verifying, and reporting such information. Practitioners of accounting are called accountants.
Bookkeeping is undertaken by individuals and organizations including companies and legal persons. It refers to "keeping records of what is bought, sold, owed, and owned; what money comes in, what goes out, and what is left." [1] Bookkeeping is parted into accounting periods, and bookkeepers' work is closely related to that of accountants.
Individual and family bookkeeping involves keeping track of income and expenses in a cash account record, checking account register, or savings account passbook. Individuals who borrow or lend money track how much they owe to others or are owed from others.
Bookkeeping may be performed using paper and a pen or pencil or using computer software.
Contents[hide]
1 Bookkeeper
2 Bookkeeping systems
2.1 Single-entry system
2.1.1 Single account bookkeeping
2.2 Double-entry system
3 Daybooks
4 Petty Cash Book
5 Journals
6 Ledgers
6.1 Interchangeable Terms
7 Chart of accounts
8 Computerized bookkeeping
8.1 Online bookkeeping
9 Terminology
9.1 US/International English spelling
9.2 Jargon
10 Notes and references
Bookkeeping is undertaken by individuals and organizations including companies and legal persons. It refers to "keeping records of what is bought, sold, owed, and owned; what money comes in, what goes out, and what is left." [1] Bookkeeping is parted into accounting periods, and bookkeepers' work is closely related to that of accountants.
Individual and family bookkeeping involves keeping track of income and expenses in a cash account record, checking account register, or savings account passbook. Individuals who borrow or lend money track how much they owe to others or are owed from others.
Bookkeeping may be performed using paper and a pen or pencil or using computer software.
Contents[hide]
1 Bookkeeper
2 Bookkeeping systems
2.1 Single-entry system
2.1.1 Single account bookkeeping
2.2 Double-entry system
3 Daybooks
4 Petty Cash Book
5 Journals
6 Ledgers
6.1 Interchangeable Terms
7 Chart of accounts
8 Computerized bookkeeping
8.1 Online bookkeeping
9 Terminology
9.1 US/International English spelling
9.2 Jargon
10 Notes and references
Bookkeeping
Bookkeeping (book-keeping or book keeping) is the recording of the value of assets, liabilities, income, and expenses in the daybooks, journals, and ledgers, in which debit and credit entries are chronologically posted to record changes in value. Bookkeeping is often mistaken for accounting, which is the system of recording, verifying, and reporting such information. Practitioners of accounting are called accountants.
Bookkeeping is undertaken by individuals and organizations including companies and legal persons. It refers to "keeping records of what is bought, sold, owed, and owned; what money comes in, what goes out, and what is left." [1] Bookkeeping is parted into accounting periods, and bookkeepers' work is closely related to that of accountants.
Individual and family bookkeeping involves keeping track of income and expenses in a cash account record, checking account register, or savings account passbook. Individuals who borrow or lend money track how much they owe to others or are owed from others.
Bookkeeping may be performed using paper and a pen or pencil or using computer software.
Contents[hide]
1 Bookkeeper
2 Bookkeeping systems
2.1 Single-entry system
2.1.1 Single account bookkeeping
2.2 Double-entry system
3 Daybooks
4 Petty Cash Book
5 Journals
6 Ledgers
6.1 Interchangeable Terms
7 Chart of accounts
8 Computerized bookkeeping
8.1 Online bookkeeping
9 Terminology
9.1 US/International English spelling
9.2 Jargon
10 Notes and references
Bookkeeping is undertaken by individuals and organizations including companies and legal persons. It refers to "keeping records of what is bought, sold, owed, and owned; what money comes in, what goes out, and what is left." [1] Bookkeeping is parted into accounting periods, and bookkeepers' work is closely related to that of accountants.
Individual and family bookkeeping involves keeping track of income and expenses in a cash account record, checking account register, or savings account passbook. Individuals who borrow or lend money track how much they owe to others or are owed from others.
Bookkeeping may be performed using paper and a pen or pencil or using computer software.
Contents[hide]
1 Bookkeeper
2 Bookkeeping systems
2.1 Single-entry system
2.1.1 Single account bookkeeping
2.2 Double-entry system
3 Daybooks
4 Petty Cash Book
5 Journals
6 Ledgers
6.1 Interchangeable Terms
7 Chart of accounts
8 Computerized bookkeeping
8.1 Online bookkeeping
9 Terminology
9.1 US/International English spelling
9.2 Jargon
10 Notes and references
Financial transaction
Financial transaction is an event or condition under the contract between a buyer and a seller to exchange an asset for payment. In accounting, it is recognized by an entry in the books of account. It involves a change in the status of the finances of two or more businesses or individuals.
Contents[hide]
1 Purchase
2 Loan
3 Mortgage
4 Bank account
5 Credit-card purchase
6 Debit-card purchase
//
Contents[hide]
1 Purchase
2 Loan
3 Mortgage
4 Bank account
5 Credit-card purchase
6 Debit-card purchase
//
Ledger
A ledger or lieger (from the English dialect forms liggen or leggen, to lie or lay; in sense adapted from the Dutch substantive logger), is the principal book for recording transactions. Originally, the term referred to a large volume of Scripture/service book kept in one place in church and accessible.
According to Charles Wriothesley's Chronicle (1538):
the curates should provide a booke of the bible in Englishe, of the largest volume, to be a lidger in the same church for the parishioners to read on.
It is an application of this original meaning that is found in the commercial usage of the term for the principal book of account in a business house, the general ledger or nominal ledger (see also bookkeeping) and also in the terms purchase ledger and sales ledger.
According to Charles Wriothesley's Chronicle (1538):
the curates should provide a booke of the bible in Englishe, of the largest volume, to be a lidger in the same church for the parishioners to read on.
It is an application of this original meaning that is found in the commercial usage of the term for the principal book of account in a business house, the general ledger or nominal ledger (see also bookkeeping) and also in the terms purchase ledger and sales ledger.
Ledger
A ledger or lieger (from the English dialect forms liggen or leggen, to lie or lay; in sense adapted from the Dutch substantive logger), is the principal book for recording transactions. Originally, the term referred to a large volume of Scripture/service book kept in one place in church and accessible.
According to Charles Wriothesley's Chronicle (1538):
the curates should provide a booke of the bible in Englishe, of the largest volume, to be a lidger in the same church for the parishioners to read on.
It is an application of this original meaning that is found in the commercial usage of the term for the principal book of account in a business house, the general ledger or nominal ledger (see also bookkeeping) and also in the terms purchase ledger and sales ledger.
According to Charles Wriothesley's Chronicle (1538):
the curates should provide a booke of the bible in Englishe, of the largest volume, to be a lidger in the same church for the parishioners to read on.
It is an application of this original meaning that is found in the commercial usage of the term for the principal book of account in a business house, the general ledger or nominal ledger (see also bookkeeping) and also in the terms purchase ledger and sales ledger.
Saturday, February 7, 2009
Modern accounting
Accounting is the process of identifying, measuring and communicating economic information so a user of the information may make informed economic judgments and decisions based on it.
Accounting generally involves 5 major activities, these are:[3]
To collect financial information
To record and store financial information
To aggregate and organise financial information
To present and report financial information to the public or anyone else in a way that is relatively easy to understand
To keep companies and their managers/owners honest and truthful
Accounting is the degree of measurement of financial transactions which are transfers of legal property rights made under contractual relationships. Non-financial transactions are specifically excluded due to conservatism and materiality principles.
At the heart of modern financial accounting is the double-entry bookkeeping system. This system involves making at least two entries for every transaction: a debit in one account, and a corresponding credit in another account. The sum of all debits should always equal the sum of all credits, providing a simple way to check for errors. This system was first used in medieval Europe, although claims have been made that the system dates back to Ancient Rome or Greece.
According to critics of standard accounting practices, it has changed little since. Accounting reform measures of some kind have been taken in each generation to attempt to keep bookkeeping relevant to capital assets or production capacity. However, these have not changed the basic principles, which are supposed to be independent of economics as such. In recent times, the divergence of accounting from economic principles has resulted in controversial reforms to make financial reports more indicative of economic reality.
Critical approaches such as Social accounting challenge conventional accounting, in particular financial accounting, for giving a narrow image of the interaction between society and organisations, and thus artificially constraining the subject of accounting. Social accounting in particular argues that organisations ought to account for the social and environmental effects of their economic actions. Accounting should thus not only embrace descriptions of purely economic events, not be exclusively expressed in financial terms, aim at a broader group of stakeholders and broaden its purpose beyond reporting financial success.[4]
Accounting generally involves 5 major activities, these are:[3]
To collect financial information
To record and store financial information
To aggregate and organise financial information
To present and report financial information to the public or anyone else in a way that is relatively easy to understand
To keep companies and their managers/owners honest and truthful
Accounting is the degree of measurement of financial transactions which are transfers of legal property rights made under contractual relationships. Non-financial transactions are specifically excluded due to conservatism and materiality principles.
At the heart of modern financial accounting is the double-entry bookkeeping system. This system involves making at least two entries for every transaction: a debit in one account, and a corresponding credit in another account. The sum of all debits should always equal the sum of all credits, providing a simple way to check for errors. This system was first used in medieval Europe, although claims have been made that the system dates back to Ancient Rome or Greece.
According to critics of standard accounting practices, it has changed little since. Accounting reform measures of some kind have been taken in each generation to attempt to keep bookkeeping relevant to capital assets or production capacity. However, these have not changed the basic principles, which are supposed to be independent of economics as such. In recent times, the divergence of accounting from economic principles has resulted in controversial reforms to make financial reports more indicative of economic reality.
Critical approaches such as Social accounting challenge conventional accounting, in particular financial accounting, for giving a narrow image of the interaction between society and organisations, and thus artificially constraining the subject of accounting. Social accounting in particular argues that organisations ought to account for the social and environmental effects of their economic actions. Accounting should thus not only embrace descriptions of purely economic events, not be exclusively expressed in financial terms, aim at a broader group of stakeholders and broaden its purpose beyond reporting financial success.[4]
Modern accounting
Accounting is the process of identifying, measuring and communicating economic information so a user of the information may make informed economic judgments and decisions based on it.
Accounting generally involves 5 major activities, these are:[3]
To collect financial information
To record and store financial information
To aggregate and organise financial information
To present and report financial information to the public or anyone else in a way that is relatively easy to understand
To keep companies and their managers/owners honest and truthful
Accounting is the degree of measurement of financial transactions which are transfers of legal property rights made under contractual relationships. Non-financial transactions are specifically excluded due to conservatism and materiality principles.
At the heart of modern financial accounting is the double-entry bookkeeping system. This system involves making at least two entries for every transaction: a debit in one account, and a corresponding credit in another account. The sum of all debits should always equal the sum of all credits, providing a simple way to check for errors. This system was first used in medieval Europe, although claims have been made that the system dates back to Ancient Rome or Greece.
According to critics of standard accounting practices, it has changed little since. Accounting reform measures of some kind have been taken in each generation to attempt to keep bookkeeping relevant to capital assets or production capacity. However, these have not changed the basic principles, which are supposed to be independent of economics as such. In recent times, the divergence of accounting from economic principles has resulted in controversial reforms to make financial reports more indicative of economic reality.
Critical approaches such as Social accounting challenge conventional accounting, in particular financial accounting, for giving a narrow image of the interaction between society and organisations, and thus artificially constraining the subject of accounting. Social accounting in particular argues that organisations ought to account for the social and environmental effects of their economic actions. Accounting should thus not only embrace descriptions of purely economic events, not be exclusively expressed in financial terms, aim at a broader group of stakeholders and broaden its purpose beyond reporting financial success.[4]
Accounting generally involves 5 major activities, these are:[3]
To collect financial information
To record and store financial information
To aggregate and organise financial information
To present and report financial information to the public or anyone else in a way that is relatively easy to understand
To keep companies and their managers/owners honest and truthful
Accounting is the degree of measurement of financial transactions which are transfers of legal property rights made under contractual relationships. Non-financial transactions are specifically excluded due to conservatism and materiality principles.
At the heart of modern financial accounting is the double-entry bookkeeping system. This system involves making at least two entries for every transaction: a debit in one account, and a corresponding credit in another account. The sum of all debits should always equal the sum of all credits, providing a simple way to check for errors. This system was first used in medieval Europe, although claims have been made that the system dates back to Ancient Rome or Greece.
According to critics of standard accounting practices, it has changed little since. Accounting reform measures of some kind have been taken in each generation to attempt to keep bookkeeping relevant to capital assets or production capacity. However, these have not changed the basic principles, which are supposed to be independent of economics as such. In recent times, the divergence of accounting from economic principles has resulted in controversial reforms to make financial reports more indicative of economic reality.
Critical approaches such as Social accounting challenge conventional accounting, in particular financial accounting, for giving a narrow image of the interaction between society and organisations, and thus artificially constraining the subject of accounting. Social accounting in particular argues that organisations ought to account for the social and environmental effects of their economic actions. Accounting should thus not only embrace descriptions of purely economic events, not be exclusively expressed in financial terms, aim at a broader group of stakeholders and broaden its purpose beyond reporting financial success.[4]
Accountancy
or accounting is the system of recording, verifying, and reporting of the value of assets, liabilities, income, and expenses in the books of account (ledger) to which debit and credit entries (recognizing transactions) are chronologically posted to record changes in value (see bookkeeping). Such financial information is primarily used by lenders, managers, investors, tax authorities and other decision makers to make resource allocation decisions between and within companies, organizations, and public agencies. Accounting has been defined by the AICPA as " The art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof." [2]
Financial accounting is one branch of accounting and historically has involved processes by which financial information about a business is recorded, classified, summarized, interpreted, and communicated; for public companies, this information is generally publicly-accessible. By contrast management accounting information is used within an organization and is usually confidential and accessible only to a small group, mostly decision-makers. Open-book Accounting aims to improve accounting transparency. Tax Accounting is the accounting needed to comply with jurisdictional tax regulations. Accounting scholarship is the academic discipline which studies the theory of accountancy.
Practitioners of accountancy are known as accountants. Professional bodies for accountants allow their members to use titles indicating their membership or qualification level: Chartered Certified Accountant (ACCA or FCCA), Chartered Accountant (FCA, CA or ACA), International Accountant (FAIA or AAIA), Management Accountant (ACMA, FCMA or AICWA), Certified Public Accountant (CPA) and Certified General Accountant (CGA or FCGA).
The related, but separate financial audit comprises internal and external audit. External audit - carried out by independent auditors - examines the financial statements and accounting records in order to express an opinion as to the truth and fairness and adherence to Generally Accepted Accounting Principles (GAAP), or International Financial Reporting Standards (IFRS). Internal audit aims at providing information for management usage, and is typically carried out by employees.
Financial accounting is one branch of accounting and historically has involved processes by which financial information about a business is recorded, classified, summarized, interpreted, and communicated; for public companies, this information is generally publicly-accessible. By contrast management accounting information is used within an organization and is usually confidential and accessible only to a small group, mostly decision-makers. Open-book Accounting aims to improve accounting transparency. Tax Accounting is the accounting needed to comply with jurisdictional tax regulations. Accounting scholarship is the academic discipline which studies the theory of accountancy.
Practitioners of accountancy are known as accountants. Professional bodies for accountants allow their members to use titles indicating their membership or qualification level: Chartered Certified Accountant (ACCA or FCCA), Chartered Accountant (FCA, CA or ACA), International Accountant (FAIA or AAIA), Management Accountant (ACMA, FCMA or AICWA), Certified Public Accountant (CPA) and Certified General Accountant (CGA or FCGA).
The related, but separate financial audit comprises internal and external audit. External audit - carried out by independent auditors - examines the financial statements and accounting records in order to express an opinion as to the truth and fairness and adherence to Generally Accepted Accounting Principles (GAAP), or International Financial Reporting Standards (IFRS). Internal audit aims at providing information for management usage, and is typically carried out by employees.
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