With accounting, a good way to explain what it means would be this 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 that’s called an income statement. 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.
With GAAP, if GAAP is not the principles used for preparing financial statements, then a business needs to make clear which other form of accounting they’re used and are bound to avoid using titles in its financial statements that could mislead the person examining it.
In what’s called double-entry bookkeeping, the liabilities are summarized. And 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 system for doing this; not every company or individual can devise their own systems for accounting; the result would be chaos!
On personal accounting, you balance your checkbook to note any charges in your checking account that you haven’t recorded in your checkbook. Some of these can include ATM fees, overdraft fees, special transaction fees or low balance fees, if you’re required to keep a minimum balance in your account. You also balance your checkbook to record any credits that you haven’t noted previously. They might include automatic deposits, or refunds or other electronic deposits. Your checking account might be an interest-bearing account and you want to record any interest that it’s earned.
Income – any money you’ve earned from working or owning assets, unless there are specific exemptions from income tax.
Standard deduction – some personal expenditures or business expenses can be deducted from your income to reduce the taxable amount of income. These expenses include items such as interest paid on your home mortgage, charitable contributions and property taxes.
Author: Zindy MasekoThis author has published 8 articles so far.