Accounting
Practice and body of
knowledge concerned primarily with
1. Methods for recording transactions,
2. Keeping financial records,
3. Performing internal audits,
4. Reporting and analyzing financial
information to the management, and
5. Advising on taxation matters.
It is a systematic
process of identifying, recording, measuring, classifying, verifying,
summarizing, interpreting and communicating financial information. It reveals
profit or loss for a given period, and the value and nature of a firm's assets,
liabilities and owners' equity.
Accounting provides
information on the
1. Resources available to a firm,
2. The means employed to finance those
resources, and
3. The results achieved through their use.
Definition
The systematic
recording, reporting, and analysis of financial transactions of a business.
The person in charge of
accounting is known as an accountant, and this individual is typically required
to follow a set of rules and regulations, such as the Generally Accepted
Accounting Principles.
Accounting allows a
company to analyze the financial performance of the business, and look at
statistics such as net profit.
Assets
Things that are
resources owned by a company and which have future economic value that can be
measured and can be expressed in dollars. Examples include cash, investments,
accounts receivable, inventory, supplies, land, buildings, equipment, and
vehicles.
Assets are reported on
the balance sheet usually at cost or lower. Assets are also part of the
accounting equation: Assets = Liabilities + Owner's (Stockholders') Equity.
Some valuable items
that cannot be measured and expressed in dollars include the company's
outstanding reputation, its customer base, the value of successful consumer
brands, and its management team. As a result these items are not reported among
the assets appearing on the balance sheet.
Definition of 'Asset'
1. A resource with
economic value that an individual, corporation or country owns or controls with
the expectation that it will provide future benefit.
2. A balance sheet item
representing what a firm owns.
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Investopedia explains
'Asset'
1. Assets are bought to
increase the value of a firm or benefit the firm's operations. You can think of
an asset as something that can generate cash flow, regardless of whether it's a
company's manufacturing equipment or an individual's rental apartment.
2. In the context of
accounting, assets are either current or fixed (non-current). Current means
that the asset will be consumed within one year. Generally, this includes
things like cash, accounts receivable and inventory. Fixed assets are those
that are expected to keep providing benefit for more than one year, such as
equipment, buildings and real estate.
Capital
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Definition:
The term Capital has
several meanings and it is used in many business contexts. In general, capital
is accumulated assets or ownership. More specifically,
• Capital is the amount of cash and
other assets owned by a business. These business assets include accounts
receivable, equipment, and land/buildings of the business.
• Capital can also represent the
accumulated wealth of a business, represented by its assets less liabilities.
• Capital can also mean stock or
ownership in a company.
Capital Used in Other
Business Terms
Other associated terms
which relate to the term "capital" are:
• Capital gains are increases in the
value of stock and other assets when they are sold.
• Capital assets, which sounds like a
redundancy
• The capital structure of a business
is the mix of debt and equity in the business balance sheet.
• Capital improvements are improvements
made to capital assets.
• Venture capital is private funding
(capital investment) provided by individuals or other businesses to new
business ventures.
• A capital lease is a lease of
business equipment which represents ownership and is reflected on the company's
balance sheet as an asset.
• A capital contribution is a
contribution of capital, in the form of money or property, to a business by an
owner, partner, or shareholder. The contribution increases the owner's equity
interest in the business.
Examples: Common cause
of business failure is not having enough capital.
