Accounting is the nerve of every business. It provides the required financial information to the stakeholders including financiers, investors,suppliers,and the management to help them take financial decisions. Be it a small roadside shop or a multi-national corporation, every business entity involves some sort of business accounting. Here are a few facts to help you understand the nature of accounting:
1. Business accounting usually involves two disciplines: one is financial accounting and the other is managerial accounting. While managerial accounting takes care of your sales and day-to-day expenses, financial accounting provides an overall summary of all your financial activities. Managerial accounting is used to keep a track of the internal expenses while financial accounting is meant for external agencies such as banks and government.
2. The transactions of a business entity is defined by its assets and liabilities. These are two of the most important components of business accounting. Assets are the things that your business owns while Liabilities are everything that your business owes.
3. In business accounting, all transactions are entered in two separate accounts and there must be a balance between these two accounts. Double-entry bookkeeping helps an accountant to keep a track of the transactions and ensure that the assets and liabilities are balanced.
4. The difference between your assets and liabilities is called equity. This represents your total worth. If your liabilities are more than your assets then your equity will run in negative and this means that your business is bankrupt.
5. Another important aspect of business accounting is credit and debit. Credit increases your liabilities or equity account and debit is the accounting entry that increases your overall assets.
6. Your balance sheet gives you a brief snapshot of the position of your business in financial terms. It gives you an overview of your assets in terms of equipment, bank accounts, buildings etc. It also shows you your total liabilities such as loans (both short and long-term) and the total ownership equity (the number of shares that are held and the amount of money received from the owners of those shares).
7. Cash is the king in any business. So, it is essential to keep a track of cash flow for smoothly running your business. The cash flow statement is one important aspect of business accounting. It keeps a track of how your business is gaining cash (through sales) and spending it (by repaying debts, buying machinery etc.)
8. Every business must keep a record of its income and expenses. In accounting, this is known as the income statement. It records the overall sales of your business and sums it up to show the final result or the net income generated by your business.
Hopefully, these points will help you learn the various aspects of business accounting. If you are an entrepreneur, then you can avail accounting services. If you are looking for any accounting services in Thailand, call us at+66 26260277.
