Ten day MBA Chapter 3 (1)

I think accounting is the core of the business, sales make the company grow, and good accounting makes the company stay healthy. That is how important accounting is. All of your business activities are recorded, summarized and analyzed through accounting. We do business is for profit, and how much money does your company make? what does company own? and how much does your company owe others? how well did your company's operations perform? how does the company get the cash to fund itself? everything must eventually measured in dollars, and that is accounting coming from.
Accounting has many rules. Accounting's governing rules are called Generally accepted accodunting principles, GAAP. Before we enter into rules, we need familiar with concepts first.
1.The Entity. The whole business, or seperate individul unit.
2.Cash basis versus accrual accounting. Very small business can get all the accounting informaiton they need from registered checking account. Cah accounting tells you when and how much cash changed hands, but it doesn't try to match the costs of conducting business with their related sales. However, most big size companies use the accsdrual accounting method. accrual accounting recongnizes the financial effect of an activity when the activity takes place without regard to the movement of cash. Allocation and matching.
3.Transaction definition and objecgtivity. Accounting records only completed sales and have quantifiable"monetary value. Accountants have an objecitivity rule to guide them. There must be reasonable andverifiable evidence to support the transaction, such as contract.
4.Accounting conservation and historical costs. When companies incur losses that are probable and that can reasonaly be estimated, accountants record them, even if the losses have not actually been realized. when gains are expected, accsountants postpone recording them until they are actually realized. Accounting conservatism governs the preparation of financial statements. when in doubt, be conservative. Accounting records contain only measurable and verifiable properties, debts, sales and costs.
5.Going concern, Consistency concept, materiality.