会计 101

The discipline of 会计 is an integral part of modern life that is so tightly woven into the fabric of day-to-day activities that it can be almost difficult to perceive. Many people think of 会计 as something that is only relevant around tax time each spring. 当然, professional accountants and the practice of 会计 in general are given increased public attention during tax season, but when it is understood that the practice of 会计 is the foundation of all business and economic activity, one begins to understand just how important it is to monitor and maintain.

For something that is so pervasive and seemingly complex, the basics of 会计 are relatively simple to grasp in a short amount of time. While just knowing these basics won’t turn a person into a CPA, knowing basic 会计 principles help people understand more about how the economy runs. Applying a working knowledge of 会计 into everyday decision making can also be the first step to improving personal financial outlooks, 也.

Transaction Analysis

会计 at its most basic level involves a transaction analysis. A transaction analysis is a look at a financial decision to determine the impact it will have on a business or individual. A 都柏林 transaction analysis CPA often provides these analyses for local businesses in the 都柏林 area to help them determine the impact a potential transaction may have on their overall financial outlook and strategic plan.

A transaction analysis in its most basic form comes down to what is known as the fundamental 会计 equation, which simply states that a person’s or company’s assets are equal to liabilities plus owner’s equity. 资产, 比如现金, equipment and supplies, are basically what a business has or owns; liabilities are what the business owes — loans, 例如, while owner’s equity is made up of things like profits that the owner technically owns.

Using this equation and common sense, it is easy to see how what a company owns is equal to what it owes and what it generates in the form of owner’s equity. While it seems simple, balancing this equation is often complex and is the foundation of most 会计 practices.

Expanded 会计 Equation

A slightly deeper level of 会计 involves what is known as the expanded 会计 equation. This equation takes a closer look at the owner’s equity portion of the equation above and breaks it down into two parts: revenues and expenses. Revenues are what the business earns and expenses are the costs of what the business needs to generate its revenues. Accountants use this equation to determine a business’s profit or loss. Higher revenues than expenses means a profit, while higher expenses than revenues amounts to a loss.

The Importance Of Fundamentals

会计 is as old as recorded history itself. It started in ancient Mesopotamia and the double-entry bookkeeping system as it is used today was popularized in 16^th century Venice. 会计’s importance, versatility and rich history ensure that it will be necessary and useful to understand well into the future. It is easy for individuals and businesses to become caught up in higher-level, esoteric concepts over the course of their financial dealings. A return to examining a financial situation through the lens of basic 会计 principles can be a wise strategy that is even more effective if implemented on a routine basis.