Accounting builds upon bookkeeping

Great! I'm glad to hear that you have a solid understanding of bookkeeping. Accounting builds upon bookkeeping, so you're in a good position to learn the fundamentals of accounting.

First, let's review some key bookkeeping concepts. As you know, bookkeeping involves recording financial transactions, such as sales and expenses, in a systematic and organized manner. These transactions are recorded in journals, which are then summarized in ledgers. The ledger is the main source of information for the financial statements, which provide an overview of a company's financial performance.

Now, let's move on to accounting. Accounting involves analyzing, interpreting, and communicating financial information. In other words, it's the process of using the data recorded through bookkeeping to make informed decisions about a business's financial health. There are three fundamental components of accounting:

  1. Assets, Liabilities, and Equity: These are the three major components of a company's balance sheet, which is one of the financial statements. Assets are resources a company owns that have value, such as cash, inventory, or equipment. Liabilities are obligations a company owes to others, such as loans or accounts payable. Equity represents the residual interest in the assets of the company after liabilities are subtracted.

  2. Revenue and Expenses: These are the two major components of a company's income statement, which is another financial statement. Revenue is the income a company earns from its operations, such as sales. Expenses are the costs a company incurs to generate revenue, such as salaries, rent, and utilities.

  3. Financial Statements: These are the reports that summarize a company's financial performance, including the balance sheet, income statement, and cash flow statement. Financial statements are used by stakeholders, such as investors and creditors, to make decisions about a company.

Overall, accounting is all about understanding a company's financial performance and using that information to make informed decisions. By combining your knowledge of bookkeeping with these fundamental accounting concepts, you'll be well on your way to becoming an expert in financial management.

Where can I learn more about bookkeeping and accounting concepts?

Avrio Kursusse do have courses available specifically for these matters!  Visit this page for more information the Bookkeeping Fundamentals self-study course - Bookkeeping Fundamentals self-study – Avrio Products

Back to blog

Leave a comment

Please note, comments need to be approved before they are published.