Accounting : The Accounting System

Satisfactory Essays
Kyana Campbell
Debora Constable
Accounting 2101
April 6, 2015
The Accounting System
Dear Mr. Smith,
Accounting is a subject that it is very hard to grasp, if I say so myself. In order to run a successful and confident business, accounting is very necessary. Fortunately im here to help make your business and understanding of the accounting system as easy as possible. There are a number of benefits for companies that create and maintain an accounting system. All businesses are involved in three different types of activity. These three activities are financing, investing, and operating. The accounting information system keeps track of the results of each of these business activities.
Maintaining these accounting systems are very helpful to
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Having an accounting system it plays such a big role in the decision being made in your business. The accounting system helps you form a financial analysis, which is what helps to show your business growth, profit and cash flow. Having these thing helps you to gage where your current financial condition stands and also to guide you towards the next step you need to take in your business.
The accounting system has a basic structure that consist of three things: assets, liabilities, and stockholder’s equity. The basic equation of accounting is that assets equal liabilities plus stockholder’s equity. An asset is what you own such as cash which is an economic resource. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset. A liability is what you owe. Obligations of the company and amounts owed to creditors for a past transaction are liabilities. On a list of accounts titles ending in “payable” are usually liabilities. Stockholder’s equity is what something is worth. It represents the interest of a company 's shareholders in the net assets of the company.
There are four basic financial statements in accounting. The balance sheet, the income statement, retained earnings statement, and the statement of cash flows. The balance sheet is what reports assets and claims to assets at a specific point in time. It identifies the basic equation of accounting,
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