Computerized Accounting

To understand what computerized accounting is, it’s essential to know how accounting systems can be represented. So, let’s examine the figure below. The purpose of accounting is to provide financial information that is useful for decision-making. Accounting can be viewed as a system (or a process) that converts data into useful information. The information processes … Read more

Accounting Conventions

What Are Accounting Conventions? Accounting conventions are general rules of practice arising from customs, usages, and traditions. These conventions serve as the guiding principles for accounting. Accountants follow these rules based on the widely accepted idea that accounting practices should be consistent, that financial statements should be prepared on a conservative basis to mitigate the … Read more

Accrual Concept of Accounting

What Does the Accrual Concept of Accounting Mean? – Definition The accrual concept of accounting is based on the economic premise that profits are best measured by changes in owner’s equity between the beginning and the end of any accounting period. Explanation As we know in relation to the accounting equivalence concept, when sales of … Read more

Closing Entries

What Are the Closing Entries? Closing entries are the journal entries made at the end of the period, used to update retained earnings to reflect the results of operations and to eliminate the balances in the revenue and expense accounts, so that they may be used again in a subsequent period. When Are Closing Entries … Read more

Cash vs Accrual Basis of Accounting

Cash Basis vs Accrual Basis of Accounting – Definition The cash basis and the accrual basis are the two basic methods of accounting. Each method identifies a different set of rules for recognizing revenues and expenses. The accrual basis of accounting means that revenues, expenses, and other changes in assets, liabilities, and owners’ equity are … Read more

Responsibility Accounting

What Is Responsibility Accounting? – Definition Responsibility Accounting is a basic part of good budgeting; budgets should be prepared by the people who will be responsible for achieving them. Explanation Budgets should be prepared by the individuals who will be responsible for achieving them. This ensures that full use is made of the knowledge of … Read more

Advantages of Adhering to Accounting Concepts and Principles

The following advantages are associated with proper use of accounting concepts and principles: Accounts prepared in accordance with generally accepted accounting principles and concepts are more accurate and reliable. The users of financial statements attach greater credibility to the statements that have been prepared in accordance with generally accepted accounting principles. Hence, if a business … Read more