Accounting is often confused with bookkeeping. Bookkeeping is a mechanical process that records the routine economic activities of a business.

Accounting includes bookkeeping

but goes well beyond it in scope. Accountants analyze and interpret financial information, prepare financial statements, conduct audits, design accounting systems, prepare special
business and financial studies, prepare forecasts and budgets, and provide tax services Bookkeeping is responsible for the recording of financial transactions. Accounting is
responsible for interpreting, classifying, analyzing, reporting and summarizing financial data.

American Accounting Association (generally accepted accounting principles) Securities and Exchange Commission (SEC)

functions of accountants include: (1) observing, identifying, and measuring economic events; (2) recording, classifying, and summarizing measurements; and (3) reporting
economic events and interpreting financial statements

A business entity is any business organization, such as a hardware store or grocery store, that exists as an economic unitbusiness entity concept applies to the three forms of
businesses—single proprietorships, partnerships, and corporations.

A single proprietorship is an unincorporated business owned by an individual and often managed by that same person. partnership is an unincorporated business owned by two
or more persons associated as partners. partnership begins with a verbal or written agreement. A written agreement is preferable because it provides a permanent record of the
terms of the partnership corporation is a business incorporated under the laws of a state and owned by a few stockholders or thousands of stockholders.Profitability is the ability
to generate income. Solvency is the ability to pay debts as they become due Revenues are the inflows of assets (such as cash) resulting from the sale of products or the rendering
of services to customers. We measure revenues by the prices agreed on in the exchanges in which a business delivers goods or renders services. Expenses are the costs incurred to
produce revenues. Expenses are measured by the assets surrendered or consumed in serving customers. If the revenues of a period exceed the expenses of the same period, net
income results. Thus, Net income = Revenues – Expenses Assets are things of value owned by the business. Liabilities are the debts owed by a business basic accounting
equation becomes: Assets A = Liabilities L + Stockholders’ Equity SE

There are four main types of financial statements, which are as follows: Income statement. Balance sheet. Statement of cash flows. Statement of changes in equity.

T account is a graphic representation of a general ledger account. The name of the account is placed above the "T" (sometimes along with the accountnumber). Debit entries
are depicted to the left of the "T" and credits are shown to the right

accounting cycle is the name given to the collective process of recording and processing the accounting events of a company.

A journal is a chronological (arranged in order of time) record of business transactions. A journal entry is the recording of a business transaction in the journal

A ledger (general ledger) is the complete collection of all the accounts of a company. The ledger may be in loose-leaf form, in a bound volume, or in computer memory

Cash BasisRecognizes revenues when cash is received and recognizes expenses when cash is paid out. Does not match expenses incurred and revenues earned, it is generally
considered theoretically unacceptable.

Accrual Basis Recognizes revenues when sales are made or services are performed, regardless of when cash is received. Expenses are recognized as incurred, whether or not cash
has been paid out

Matching Principle Expenses incurred in producing revenues be deducted from the revenues they generated during the accounting period. The matchi ng principle is one of the
underlying principles of accounting. This matching of expenses and revenues is necessary for the income statement to present an accurate picture of the profitability of a
business. Adjusting entries reflect unrecorded economic activity that has taken place but has not yet been recorded.

2 Types of Matching EntriesDeferred items consist of adjusting entries involving data previously recorded in accounts. These entries involve the transfer of data already recorded
in asset and liability accounts to expense and revenue accounts, respectively.

Accrued items consist of adjusting entries relating to activity on which no data have been previously recorded in the accounts.

Depreciation expense is the amount of asset cost assigned as an expense to a particular period. The process of recording depreciation expense is called depreciation accounting.
The three factors involved in computing depreciation expense are: Asset cost, estimated residual value, Estimated useful life

Annual deprecation= Asset cost – Estimated residual value divided by Estimated years of useful life

Accrued assets are assets, such as interest receivable or accounts receivable, that have not been recorded by the end of an accounting period. These assets represent rights to receive
future payments that are not due at the balance sheet date.

Accrued liabilities are liabilities not yet recorded at the end of an accounting period. They represent obligations to make payments not legally due at the balance sheet date, such
as employee salaries.

• WORKSHEETA columnar sheet of paper or a computer spreadsheet on which accountants summarize information needed to make the adjusting and closing entries and to
prepare the financial statements.

• Usually, they save these work sheets to document the end-of-period entries.

•A work sheet is only an accounting tool and not part of the formal accounting records

•A columnar sheet of paper or a computer spreadsheet on which accountants summarize information needed to make the adjusting a nd closing entries and to prepare the financial
statements.

• Usually, they save these work sheets to document the end-of-period entries.

•A work sheet is only an accounting tool and not part of the formal accounting records

•Clearing account used only at the end of an accounting period to summarize revenues and expenses for the period.

•After transferring all revenue and expense account balances to Income Summary, the balance in the Income Summary account represents the net income or net loss for the period

•Post-closing trial balance is a trial balance taken after the closing entries have been posted.

•The only accounts that should be open •Assets,•Liabilities,•Capital stock•Retained Earnings accounts. •List all the account balances in the debit and credit columns and total them
to make sure debits and credits are equal.