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Introduction to Accounting

Accounting is a basic component of business, in which the movement of money is recorded and analyzed. There are a lot of parts of accounting, but there are some parts that stand out as universally viable and crucial. These components are going to be discussed in this brief introductory article. More research is always better when it comes to accounting, so start here and continue onward later on. The following terms are only some of the most basic possible, but they are also some of the most often used in the accounting world.

Accounts Receivable

An account receivable is an amount of money that someone owes you. While this is not as good as cash for any purposes, it is the potential for cash. Accounts receivable are used to justify portions of one's balance sheet through billing customers. While it is assumed that no one will ever be able to successfully collect on all of their accounts receivable, these accounts are still useful measures of a company's financial power.

Accounts Payable

An account payable is the exact opposite of an account receivable. While an account receivable is what someone else owes you, an account payable is what you owe to someone else. Accounts payable can be very useful in making your cash work harder for you through acquiring goods and services you need now without putting down all of your cash.

Cost Accounting

Cost accounting is a method of identifying the rate at which money is spent within your organization. If you go by cost accounting, you can improve the efficiency of your management through understanding where your money goes. The main component of cost accounting that separates it from accrual accounting is that in cost accounting, the time of an expenditure is important. This can be very important for weeding out unlikely and unusual transactions that do not have a major impact on long trends.

Accrual Accounting

Accrual accounting is a method of chronicling where money goes in an organization in an effort to improve the efficiency of management. Through the use of accrual accounting, you can tell how much you spend versus how much you take in without regard to a particular time period. The main difference between accrual accounting and its close cousin cost accounting is that in accrual, it is assumed that costs are met and compensated for by income. This way, trends can be accounted for in an even fashion.




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