A simple Definition of accounting is how your business records, arranges and understand the business financial Details. We can think of accounting as large machine that we keep raw financial details into records of all your business transactions, projections, taxes.
Accounting say us whether or not we are making a gain, what is the medium of cash flow and what is the present value of company liabilities and assets.
Accounting starts the moment you enter a business transaction. Any event and activity that involves our business money into company ledger.The accounting cycle has six main steps: -
Financial statements are the report that conclude how your business is performing financially.
There are three major types of financial statements:
These all above main types of the financial statements tell us where business’s money is and how it got there. Financial statements can be generated fairly easily using accounting software.What are Types of Accounting?
The different types of accounting have been explained below:
As we know that most of the business users and owners uses the accounting software such as Padisco which is familiar with chart of Accounts in Accounting. The chart of Accounting is the list of all the accounts that organization is taking help by which to post its financial transactions.
Each account has account type and account name. Each account may have assigned the Unique account number. The chart of Account is flexible with new accounts and it can be easily added. But efficient Accounting Systems maintain the lean chart of Account to do proper business and posting analysis easily.
Liabilities: -The balance sheet report mainly delivery’s liabilities as one of the dates fixed in the heading of the balance sheets. Liabilities is defined as the obligation that your business require to fulfill. Liability means also we say as credit. The liabilities need three things:
There are various types of liabilities as one of them is current liabilities which is also called as short-term liabilities, which are debts or obligations that requires to be paid within year. Current liabilities should be handled by the management to make sure that company possess enough liquidity from the present assets to guarantee that obligation or debts can be met.Examples of Current Liabilities are:
This is another type of liabilities. The non-current liabilities also called as long-term liabilities which obligations or debts that are due in complete year time. Long term liabilities are a necessary things of organization long-term financing. Long term liabilities are crucial in calculating company’s long-term solvency.Some of the list of non-current liabilities are as follows below:
A contingent liability is a type of liabilities that may or may not happens. This means that if there is uncertainty about recording such liabilities in financial accounts. There are two ways by which Contingent liabilities are defined. The first way associated with past events and other one is associated with future events.Some of the definition of Contingent Liabilities are:
It is the total amount of capital provided to a company by its shareholders in exchange for stocks, plus any retained earning or donated capital. We can also define the Stockholders' Equity as it is total amount of assets that investors will own once liabilities and debts are paid off.
As stakeholder and shareholders are synonymous, hence stockholder’s equity may also be concerned to as shareholders’ equity.
Stockholder’s equity = share capital + retained earnings – treasury shares
Stockholder’s equity = total assets – total liabilitiesComponents of Stockholder’s Equity
It influenced by various components are explained below:
Retained Earnings: - It is amounts earned by income, called as retained earnings.
Share capitals: - The amounts received through the reporting entity from transaction with its owner are called as Share capitals.
Net Income & Dividends: - The Net Income increases retained earnings while dividend payment decrease retained earnings.
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