Accounting basics

ACCOUNTING
Accounting is the science that teaches the norms and procedures to organize, register and analyze the operations made by physical or legal persons.
Today, accounting is called "thelanguage of business" because it is the vehicle for reporting financial information about a business entity to many different groups of people
Why is accounting important?
Allow the company to havecontrol on its assets and liabilities.
Foresee future needs of the company.
Be a source of information for people outside of the company
Basic accounting concepts
Assets: Are the company’s economicresources, for example, cash (also called banks), inventories, temporary investments, buildings, lands, vehicles, brands, key rights. All what is prepaid.
Liabilities: Are all the debts that thecompany has with people outside of it, for example mortgage, payable taxes. Everything that has been received in advance, also known as deferred.
Equity: It’s also known as stockholders’. It is the moneyor assets that the stockholders or shareholders contributed when the company began.
Financial Statements: Also known as sheets. Are the finished products of the accounting process, they give thecorresponding information to the stockholders or to the manager to create a concrete vision about the position and profitability of the company.
Day Book: It’s the book where all the company’stransactions are registered on the debits and credits column.
Ledger Book: It’s also known as T accounts. Shows the final balance of each account used.
Entries: the money or other assets that the companyearns.
Expenses: Charges that the company has to pay for working properly.
Accounting equation: Assets = liabilities + stockholders
Double entry system: Every transaction has to affect the credit anddebit in the same way.

Financial Statements
• Financial Position Statement: Shows how the company is positioned. It consists basically on the Accounting equation.
• Cash flow statement: Shows...