Chapter16

BASICCONCEPTS

OF

ACCOUNTING

ContentsAccountingandthepeopledoingitBasicaccountingequationorformulaAcloserlookatassetsAcloserlookatliabilitiesAcloserlookatowner‘sequityTheAccountingEquationandFinancialPosition

Anaccountingsystemisalwaysusedtomaintainrecordsfor?all?businesses,whetheramultinationalcorporationorasmallcompany.Itisverynecessaryforcorporatesecretariestohavesomeknowledgeaboutaccounting.Inthischapter,wearegoingtointroducesomebasicconceptsofaccounting.

Accountingandthepeopledoingit

Bydefinition,accountingisasystemofrecordinginformationaboutabusiness.?Theinformationthatiscollectedbytheaccountingpeopleis?primarilynumerical.Thepurposeoftheirworkistopresenttheinformationtotheexecutivesofthecompanytohelpthemmakedecisions.?

To?account?forsomethingmeans?tokeeparecordofsomethinginyourbusinessbyusingtheaccountingsystem.Thereareusuallytwotitlesforthepeoplewhoworkintheaccountingdepartments:Accountantandbookkeeper.

?An?accountant?or?abookkeepercollectsdocumentationandrecordstherelevantinformation,categorizesitandpresentsitinspecificformats.Accountinginformationisfinallypresentedintheformof?financialstatements?–thekeyreportsofabusiness.?

Bookkeepers?areusuallyinvolvedmorein?datacollectionandentry.Accountants?canfulfillthisroletoo;butmoreoftentheyareinvolvedin?preparingandpresentingfinancialstatements,andfulfillingan?advisoryorconsultingrole.Accountantshaveevenbecomebusinessstrategists,intimatelyinvolvedinguidingtheoperationsofabusiness.

BasicaccountingequationorformulaTowriteacontract,beginwiththebasicinformation.?Writethedateatthetopofthepage,thenwritethenamesorcompanynamesofbothpartiesinthisformat:Thiscontractisbetween___and___;orThiscontractisenteredintoby___and___.

Thewholeo