Accounting is a continuous and continuous recording of its activities of the organization on the basis of primary documents and registration of business processes in cash. All accounting objects are conditionally divided into two parts: assets (funds that belong to the enterprise) and liabilities (sources of these funds). Knowledge of the chart of accounts is the basis of accounting. All operations are reflected in accounting entries. So the acquisition of fixed assets, the receipt of money in the current account is reflected in the debit, that is, there is an increase in assets. The decrease in assets is shown on credit accounts. An increase in liability is recorded on credit, and a decrease on debit.
All postings are compiled on the basis of instructions from the Ministry of Finance and the Tax Service and only if there are primary documents (invoices, contracts, invoices). Understanding the basics of accounting is essential for the daily work of all financiers. When making postings, it is important to logically take into account that an increase in an organization's assets (assets) must be debited, and a decrease in it should be put on a loan. An increase in the sources of funds of the enterprise (liabilities) is put on credit, and a decrease in sources - on debit.
The fundamentals of accounting are two principles:
- Balance principle
The principle of accounting balance is based on the formula:
ASSETS = LIABILITIES + OWNERSHIP
ASSETS are all that the enterprise has and uses for profit.
COMMITMENTS are all that the company owes to external investors, suppliers, government organizations and the budget.
OWNER'S CAPITAL - this is the part that remains when deducting liabilities from assets. It is thus shown that LIABILITIES are repaid in the first place upon liquidation or closure of the enterprise, and each owner can dispose of OWNED CAPITAL last.
- Double entry principle
All financial transactions have offsetting sides, but the principle of balance should always be respected. For example, you have 100,000 rubles, and you need to buy equipment for 300,000, then you take a loan from the bank for the missing amount.
A (100000) = O + CK (100000)
In accounting, this operation is executed on a debit to the cashier of 200,000 rubles and on a loan in a liability to the bank - 200,000 rubles.
A (100000 + 200000) = O (200000) + SK (100000) Thus, the principle of balance is preserved.
Any financial statements are provided for the information of external users of the enterprise. Banks and suppliers will find out how creditworthy the company is, investors want to know how profitable the company is, and the government uses reporting to collect taxes to the budget. Preparation of financial statements by the accountant in standard forms helps the manager to manage the enterprise and also represents the basis of accounting. The most important forms of financial reporting are the balance sheet, balance sheet, statement of cash flows, statement of profit and loss.
Of particular note are the costs of accounting. Costs - this is primarily a decrease in economic benefits in a certain period, as a result of an outflow of assets or an increase in liabilities, which leads to a decrease in capital.
The accountant should not confuse the costs and expenses in accounting and always understand their differences during work and be able to competently defend the point of view before the audit bodies. Costs never reduce OWNERSHIP unlike costs. The company incurs costs for a certain period, then these costs are converted into ASSETS or expenses. Costs depend on costs and always affect the profit of the enterprise. But the costs themselves do not affect profit.
I will show you the following examples: Repayment of accounts payable leads to a decrease in ASSETS (money paid), but at the same time LIABILITIES (debt paid off) also decrease, which means that OWN CAPITAL has not changed. Therefore, to consider this an expense is not true.
Writing off accounts receivable after the expiration of the limitation period of three years is an expense, since there is a decrease in ASSETS without changing the LIABILITIES, which means that OWNERSHIP is reduced. Similarly, you can recognize a negative exchange rate difference or the recognition of fines, penalties, state duties as an expense.
The cost of renting property is an expense at the end of the period, the cost of production, which closed and did not give a profit, can also be considered an expense.
That's actually all the fundamentals of accounting, based on logic, and not on special instructions, teaching aids, regulations and other regulatory documents. In accounting, you need to think logically, and not just blindly follow the requirements.