Adjusted Accounts: Before a business can close its accounting books for the year, an accountant must analyze all of the transactions for the year and make adjustments where necessary. An adjusted account has no other amounts to debit or credit for the year and the accountant can transfer it from the trial balance to the balance sheet.
Unadjusted accounts are the starting amounts from which accounts begin the adjusting process at the end of the fiscal period. Unadjusted accounts do not reflect earned income, expenses or changes in equity that occurred during the fiscal period. The beginning amounts of unadjusted accounts are typically the ending amounts of adjusted accounts from the end of the previous fiscal period.
In double entry accounting, rather than using a single column for each account and entering some numbers as positive and others as negative, we use two columns for each account and enter only positive numbers. Whether the entry increases or decreases the account is determined by choice of the column in which it is entered. Entries in the left column are referred to as debits, and entries in the right column are referred to as credits.
Two accounts always are affected by each transaction, and one of those entries must be a debit and the other must be a credit of equal amount.
The statement of cash flows is one of the main financial statements. The cash flow statement reports the cash generated and used during the time interval specified in its heading. The period of time that the statement covers is chosen by the company.
The accounting balance sheet is one of the major financial statements used by accountants and business owners. The balance sheet presents a company's financial position at the end of a specified date. Because the balance sheet informs the reader of a company's financial position as of one moment in time, it allows someone—like a creditor—to see what a company owns as well as what it owes to other parties as of the date indicated in the heading.
The Statement of Owner's Equity shows the change in owner's equity during a given time period. It lists the owner equity balance at the beginning of the period, additions and subtractions to the balance, and the ending balance. Additions come from owner investments and income; subtractions from owner withdrawals and losses.
The Income Statement portion of the chart of accounts normally begins by listing Revenue Accounts followed by the Expense Accounts. The revenues are grouped or classified based on whether they are related to the normal operations of the business (primary business activities) called Operating Revenue or result from incidental (secondary business activities) called Non-operating Revenue.
Likewise, the expenses are grouped or classified based on whether they are related to the normal operations of the business (primary business activities) called Cost of Goods Sold and Operating Expenses or result from incidental (secondary business activities) called Non-operating Expenses.
While most revenue and expense accounts that need to be set up are common to all businesses, some depend on the type of business. Cost Of Sales is needed for those businesses that produce and sell goods or "inventoriable" services as well as those that just buy and resell the goods.
The history of accounting is as old as civilization, key to important phases of history, among the most important professions in economics and business, and fascinating. Accountants participated in the development of cities, trade, and the concepts of wealth and numbers. Accountants invented writing, participated in the development of money and banking, invented double entry bookkeeping that fueled the Italian Renaissance, saved many Industrial Revolution inventors and entrepreneurs from bankruptcy, helped develop the confidence in capital markets necessary for western capitalism, and are central to the information revolution that is transforming the global economy.
The study of accounting theory involves a review of both the historical foundations of accounting practices, as well as the way in which accounting practices are verified and added to the regulatory framework that governs financial statements and financial reporting.
The bookkeeping methods involved in making a financial record of business transactions and in the preparation of statements concerning the assets, liabilities, and operating results of a business.