I will be posting step by step about the financial
accounting and the Management Accounting so stay tune for more post. Meanwhile
Share the Post and have a read.
First thing anyone should be aware is
About the Accounting, So what’s is Accounting?
Accounting is Recording of the
Transactions and Summering those information’s.
Now Transaction normally will be recorded
in daily weekly or month basis where as Summarising information will be
normally at the end of the year as a financial statement which Usually People referred
as Balansheet (Statement of Financial position) and statement of Profit and
loss.
Now You Know what is Accounting is about
in business, so let me give a intro about the some important type of business.
Sole trader
This is one person in a business alone. So
he is the owner of the sole business. Whatever sell or buy he or she is the one
responsible.
This is why it’s not a limited company.
Here The Owner is personally is liable for the liability of the business.
Now even though owner is the managing and
running the business, For Accounting Purpose We treat the business as separate
from the business.
Partnership
This is also quite same as sole trader
except few ways of being trade.
Here Two or People are in the business
together and there will be sharing profit or loss between them.
Here also same like Sole trader the
Owners/partners are personally liable for the liabilities.
Limited Liability Company
The important of here being limited
company is that here the business and the owners (shareholders) are Separate in
law.
The Owners have the limited liabilities. And
this would mean If the Business is in loss or collapse, the owner which is also
referred here as Shareholders the most they can lose is their investment in the
business.
However whatever type of the business, Sole
trader/partner/Limited Company for the Accounting Purpose we treat business as
a separate from owners which in accounting term called as Separate entity
Concept.
Now I hope this post has given the basic
idea of about the accounting and type of business, I will be posting lot of
other basic concepts before I post advance staff which will be really easy once
you know all the basic concepts.
Remember Accounting is not just about
recording and summering even though that what it does in the financial accounting.
We will need to understand all this when
we have make some financial decision and if you know the basic easily you know what’s
the decision you could take.
Don’t just read but understand how the
accounting concept work. It’s Easy and I will try and explain in most basic and
easiest way possible whatever post or the examples which I will provide.
Thank you for reading the post, now Share
the post and help other by just sharing this post.
