Accounting

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.