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
What are the accounting policies and accounting estimates?
What is a fiscal year and its differences from the calendar year?
What are the consolidated financial statements and audited financial statements?
Differences of IFRS vs US GAAP and IFRS vs Indian GAAP
Also, we discuss here the top 10 accounting scandals of the world that you must be aware of as a financial analyst.
Accounting Principles are a set of rules and guidelines by maintaining which a company should report its financial data.
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.
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.
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.