Kevin Ellis - Accounting: A Simple Guide to Financial and Managerial Accounting for Beginners

Introduction

T hank you for purchasing , "Accounting: A Simple Guide to Financial and Managerial Accounting for Beginners." I hope you find this book informative and useful.

If you are looking for a guide that will help you gain a good understanding of accounting, this is the perfect book for you. It is designed to provide the reader with a basic but adequate understanding of financial and managerial accounting. You have to realize that accounting is a vast subject, and you cannot become an expert just by reading a single book. However, this book will provide you with enough information on accounting to help you understand everything you need as a beginner.

When you think of accounting, the first thing that comes to mind is crunching numbers. But an accountant does a lot more than that. Very few people recognize all that goes into accounting until they have involved in it themselves. This book will help you get familiar with all of this and more.

I am sure you are thinking, why is accounting important? Well, accounting involves a comprehensive and systematic record keeping of financial transactions related to any business. Accounting is important for various reasons. It is not just about keeping books or filing taxes. Even though these are two of the main tasks involved in it, there are many other facets involved in accounting too. In business, accounting will involve setting up accounting systems and preparing reports or statements related to all finances. There is a lot more than these things as well that you will soon learn. The point is, accounting is considered the language of business. It will help you understand how a business works and where it is thriving or declining. It allows you to ascertain what the financial position is for a business. Accounting reports allow management to determine what the business position is and what steps they need to take to improve the current position. Accounting is required for all business transactions. It will help to record, classify, and summarize of all the transactions. This enables proper analysis and creation of balance sheets, trial balance, and other financial documents.

Accounting plays an important role in decision making, controlling processes, and planning. The documents that are factored in all of this are created with the help of accounting. The methodical documenting involved in accounting will also prevent or reduce any incidence of theft or fraud in the business. Proper accounting will allow any business to run efficiently. It will enable effectiveness and accuracy in all activities. This will lead to better productivity and enable the management to make better decisions regarding the business.

In business, accounting will be involved in various functions. It is required for planning a budget. A proper budget will help the business run systematically. It will help to make strategies, save money, and also to prevent expenditure beyond what is specified in a budget. Records of financial statements in the business are required for a budget to be created. These documents will be available through accounting.

When you need a loan from a bank or any lender, you will be required to show your financial statements. These documents are only available if your business has a proper accounting system. This is how you can present any financial books to the bank. It will include records of profits, assets, or liabilities. Loans are only given out after scrutiny of such financial records.

Accounting takes care of the basic but crucial function of keeping records for a business. A business needs records to allow smooth running. Records have to be collected and organized well. They also have to be interpreted so the end-user can understand and make viable decisions based on these records.

The statements obtained through accounting will influence decision-making and provide information to investors in the business. Executives of a business cannot make sound decisions when they don't have access to accurate financial statements. If they don't have these documents, they will fail to achieve the objectives of their business. The lack of financial records will also have a negative impression on any investors in the business. Accounts will help them keep track of the progress or decline of any organization.

You can see that accounting is important in many different ways, and probably more than you previously expected.

Since this book is specifically aimed at providing information on financial and managerial accounting, let us get a basic introduction to them as well.

What is financial accounting? Financial accounting involves summarizing, analyzing, and reporting financial transactions that are related to a particular business. It is focused on providing useful information for the benefit of external users.

What is managerial accounting? Managerial accounting is concerned with accounting information that managers can use to help them in making better decisions so they can improve their management of the company's operations. It is focused on internal decision making, unlike financial accounting.

The book will cover a lot of topics, including:

• The accounting equation
• GAAP and IFRS
• Financial accounting
• Managerial accounting
• Financial statements
• Recording statements

All of these topics will be covered in detail to help you understand better. So, if you are ready, let us get started without further ado!

Chapter One: Introduction to the Accounting Equation

I f you want to be an expert in the field of accounting, you have to familiarize yourself with the accounting equation. The double-entry accounting system uses the accounting equation as its basis. A company's balance sheet will display the accounting equation such that the sum of shareholders equity and the company's liabilities will be equal to the total assets of the company. It will ensure that the balance sheet of a company remains balanced based on this double-entry system. Every entry that is made on the debit side will have a corresponding entry made on the credit side.

The accounting equation formula is as follows for sole proprietorship: