Basic Accounting Principles

Accounts, Bookkeeping and Payroll can be a burden to small business. This new series of blogs from Nottingham Accounting Solutions aims at making Accounts, Bookkeeping and Payroll a little clearer.

Basic Accounting Principles

Accounting has been defined as, by Professor of Accounting at the University of Michigan William A Paton as having one basic function: "facilitating the administration of economic activity. This function has two closely related phases: 1) measuring and arraying economic data; and 2) communicating the results of this process to interested parties."

As an example, a company's accountants periodically measure the profit and loss for a month, a quarter or a fiscal year and publish these results in a statement of Profit and Loss. These statements include elements such as accounts receivable (what's owed to the company) and accounts payable (what the company owes). It can also get pretty complicated with subjects like retained earnings and accelerated depreciation. This at the higher levels of accounting in an organization so lets not bother with them here.

Much of accounting though, is also concerned with basic bookkeeping. This is the process that records every transaction, every bill paid, every penny owed and every pound and penny spent and accumulated.

But the owners of the company, which can be individual owners or millions of shareholders are most concerned with the summaries of these transactions, contained in financial statements. The Balance Sheet summarizes a company's assets. A value of an asset is what it cost when it was first acquired. The fBalance Sheet also records what the sources of the assets were. Some assets are in the form of loans that have to be paid back. Profits are also an asset of the business.
In what's called double-entry bookkeeping, the liabilities are also summarized. Obviously, a company wants to show a higher amount of assets to offset the liabilities and show a profit. The management of these two elements is the essence of accounting.

There is a standardised system for doing this; not every company or individual can devise their own systems for accounting; the result would be chaos!

Nottingham Accounting Solutions Ltd offer accounts, bookkeeping and payroll services in the Nottingham and Mansfield area as well as Sage sales, set-up and 1 - to - 1 training on Sage accounts and Sage payroll. So why not take a look at www.nottingham-accounting-solutions.co.uk

What Is Accounting Anyway?

Accounts, Bookkeeping and Payroll can be a burden to small business. This new series of blogs from Nottingham Accounting Solutions aims at making Accounts, Bookkeeping and Payroll a little clearer.

What Is Accounting Anyway?

Anyone who's worked in an office at some point or another has had to be involved with accounting. “The Accounts” … they're the people who pay and send out the bills that keep the business running. They do a lot more than that, though. Sometimes referred to as "bean counters" they also keep their eye on profits, costs and losses. Unless you're running your own business and acting as your own accountant, you'd have no way of knowing just how profitable - or not - your business is without some form of accounting.

No matter what business you're in, even if all you do is balance a cheque book, that's still accounting. It's part of even a kid's life. Saving a pocket money, spending it all at once - these are still accounting principles.

What are some other businesses where accounting is critical? Well, farmers need to follow careful accounting procedures. Many of them run their farms year to year by taking loans to plant the crops. If it's a good year, a profitable one, then they can pay off their loan; if not, they might have to carry the loan over, and accrue more interest charges next year.

Every business and every individual needs to have some kind of accounting system in their lives, otherwise, the finances can get away from them, they don't know what they've spent, or whether they can expect a profit or a loss from their business. Staying on top of accounting, whether it's for a multi-million pound business or for a personal bank account is a necessary activity on a daily basis if you're clever. Not doing so can mean anything from a bounced cheque or posting a loss to a company's shareholders. Both scenarios can be equally devastating.

Accounting is basically information, and this information is published periodically in business as a profit and loss statement, or as part of a set of management accounts.

Nottingham Accounting Solutions Ltd offer accounts, bookkeeping and payroll services in the Nottingham and Mansfield area as well as Sage sales, set-up and 1 - to - 1 training on Sage accounts and Sage payroll. So why not take a look at www.nottingham-accounting-solutions.co.uk