Basic Accounting Principles

Basic Accounting PrinciplesAccounting has been defined as, by Professor ofAccounting at the University of Michigan WilliamA Paton as having one basic function:\"facilitating the administration of economicactivity. This function has two closely relatedphases: 1) measuring and arraying economic data;and 2) communicating the results of this processto interested parties.\"As an example, a company's accountantsperiodically measure the profit and loss for amonth, a quarter or a fiscal year and publishthese results in a statement of profit and loss

that's called an income statement. Thesestatements include elements such as accountsreceivable (what's owed to the company) andaccounts payable (what the company owes). It canalso get pretty complicated with subjects likeretained earnings and accelerated depreciation.This at the higher levels of accounting and in theorganization.Much of accounting though, is also concerned withbasic bookkeeping. This is the process thatrecords every transaction; every bill paid, everydime owed, every dollar and cent spent andaccumulated.But the owners of the company, which can beindividual owners or millions of shareholders aremost concerned with the summaries of thesetransactions, contained in the financialstatement. The financial statement summarizes acompany's assets. A value of an asset is what itcost when it was first acquired. The financial