By Pooja Borkar
By Jyoti Singh
If you are new to accounting, this is the section you may want to go through this accounting basics first. Here we discuss what is accounting and its accounting principles like matching principle of accounting and conservatism principle of accounting. Also, we look at why the accrual basis of accounting is used to report the financials as compared to the cash basis of accounting.
Other topics discussed here include in accounting basics are
Accounting Principles are a set of rules and guidelines by maintaining which a company should report its financial data.
Accounting cycle is a combination of collecting data for creating post-closing trial balance.
Accrual accounting basis is one of the most accepted methods in accounting.
CBA is a way of recording the accounting transactions for revenue and expenses which are made in cash.
Matching Principle is the most important accounting basic concept and it means that you should record the expense in the income statement in the same period by matching it with the corresponding revenue.
Conservatism Principle is a process in accounting under the GAAP which allow and records expenses and liabilities in nature.
Cash accounting is a type of accounting which focuses on cash inflow and cash outflow.
Accounting Policies are a set of rules or procedures by following which a company prepares its financial statements.
The measurement through which few items in accounting are quantified is called accounting estimates.
Mark to Market Accounting means recording the value of the balance sheet assets or liabilities at current market value with the aim to provide a fair appraisal of the company’s financials.
In cash accounting, the business will only record the transaction when cash inflow or cash outflow occurs. Whereas accrual accounting, on the other hand, income and expenses are recorded whenever they occur.
Operating cycle of a company is an activity ratio that measures the average period of time required for turning the firm’s inventories into cash.
Fiscal year is referred to as period used for accounting purposes by the industry at large. It is period lasting for 12 months and is used for budgeting, account keeping and all the other reporting for industries.
Fiscal year defines the period over which financial statements need to be prepared. Whereas, Calendar Year begins the New Year’s Day of a given calendar system and ends on the day before the following New Year’s Day.
Financial reporting is the communication of important financial information & other activities of the organization to various stakeholders for helping them get the idea about the actual financial position of the organization at any point in time.
Consolidated Financial Statement is the financial statements of the overall group which represents the sum total of its parents and all of its subsidiaries.
Audited Financial Statements are referred to by investors, stakeholders as well as financial institutions for forming a reliable opinion of the company.
In this article, we will talk about top 10 accounting scandals of all time and how these companies manipulated their financial statements.
US GAAP and IFRS are technically classified as generally accepted accounting principles.
IFRS was prepared and updated by IASB (International Accounting Standards Board). Indian GAAP is a set of accounting standards that are specifically designed for the Indian context.