what is Accounting, Definition of Accounting

Monday, September 27, 2010

Definition: The principles or practice of systematically recording, presenting and interpreting financial accounts. A statement of debits and credits. A settling or balancing of accounts.

Accounting is keeping track of how much money comes in and goes out of your business as you sell things and buy things. Accounting helps you determine how your money has been spent and the things you have purchased with your money.

Can you imagine if you had ;

• hundreds of cheques being sent out and received by your business,

• thousands of dollars of cash received at your store each day,

• money borrowed (given with the understanding that you pay it back in the future) from a bank that you had to pay interest on each month and eventually pay the bank back,

• money borrowed from friends (investors) that you had to pay back,

• money owed to you by people that bought goods from you and said that they would pay you later,

• to ask people for money to build a factory to produce your products,

• to pay people who worked for you,

• to figure out how much money you had after you paid all the bills, so you could take some money to pay for you living expenses,

• to save money to buy something you needed for your business,

• to pay bills for expenses to run your business like hydro, telephone, insurance, building costs, office supplies etc.

• to buy furniture and equipment and other assets that you would need to keep track of.

Hopefully, you can appreciate that businesses need to do a lot of things with their money. You know what it is like to try and find things in a really messy closet or room. Imagine if you couldn't find your money you needed to pay for things you needed to buy or if you didn't know how much money you had to pay all the money you owed.