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What are the basics of Accounting?

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What are the basics of Accounting?

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Step 1

Accounting: Accounting is a system, or a process of collecting and organizing economic transactions, analyzing, and summarizing the transactions into reports, and communicating the relevant information to the users.

Step 2

Record keeping:

Double-entry accounting is a system of accounting where a transaction is recorded in two accounts: debit and credit. The economic events which bring about any changes in the financial items of a business and can be measured in the monetary units is referred to as a transaction. A record which documents or records the changes in assets, liabilities, or equity for a particular period is referred to as an account.

Accounting equation is a concept expressed in the form of equation, which creates a relation between resources or assets of a company and claims of resources to creditors and owners. Fundamental accounting equation is expressed as shown below:

Assets: These are the resources owned and controlled by business and used to produce benefits for the company. Assets are classified on the balance sheet as current assets, non-current assets, property, plant, and equipment, and intangible assets.

Liabilities: The claims creditors have over assets or resources of a company are referred to as liabiliti...

Assets Liabilities+Stockholders' Equity
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Assets Liabilities+Stockholders' Equity

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