What is Accounting?

Accounting can be described as a way to communicate the financial health of a business or an organization to any and all interested parties. It is a way of assessing the assets, liabilities and cash flow, or the future of an entity for all current and future investors. It is the lifeblood of a business and all types of business have basic information that is recorded to get that job done.

Recommended Online Accounting Degree Programs

All accounting or book keeping has a standard set of accounting principles. It stands for every type of business. In this way there is unity in all business accounting procedures to ensure that there is unity and a clear understanding no matter what business is being monitored.

This system is called GAAP or Generally Accepted Accounting Principles and are general rules that all businesses follow when recording their financial information. There is no law enforcing this, but it is to the advantage of a business to use this when reporting to the different loan agencies and the Government when reporting earnings and getting an audit.

The Many Layers Of Accounting

There are many layers or types of accounting in a business. Every facet of the business has its own unique type of accounting. There is accounting for the day to day transactions and all are important to the survival of a business. The accounting areas include:

. Credit
. Payroll
. Taxes
. Assets
. Receivables
. Payables
. Public

When the day to day transactions are recorded this is called basic book keeping. These transactions are recorded as debits and credits and must always balance in what is called the accounting equation. This is the way an overall look at a company can be made to determine the success of the company.

The use of computers is making these transactions easier to post and work for the company. Reports of any kind can be produced with the push of a button and a quick snap-shop of the transactions and cash flow are revealed. All kinds of reports are needed to gauge the company’s success:

. Statement of Profit and Loss
. Balance Sheets
. Assets and Liabilities Report
. Retained Equity

All of these reports give a picture of what the company is doing and where it is headed. They can help to decide if the company is financially stable and if there are any adjustments to be made in the strategies for operation. These reports are good for the investors also. They are able to see if a company is worth investing in.

Credit Accounting

Of all the areas of accounting in a business, Credit Managing is a very important area. In Credit Accounting the business can secede or fail if the cash flow is tied up in unpaid bills or bad credit. There needs to be a strong person in charge of this area to manage and take action to keep the company’s cash flow free and make sure that bad debt is recovered.

With all of the areas of accounting working together in a business, it can be determined if a company is financial stable. The health of a business is depending on it!

Recommended Online Accounting Degree Programs