Accounting Practical - Learn On Your Own
How do I learn accounting practical ? Or Can I learn accounting practical on my own is a question that most of us ask when we get into commerce stream or get an accounting job without an accounting background. At commerce papers, we help you untangle your accounting confusions and help learn accounting practical on your own but for that you need to practice more accounting practical on your own.
Test yourself to check how much did you learn? Every accounting practical problem of different accountancy chapters or topic will bring in some new accounting treatment for you; so the more you practice accounting practical problems, the more you learn accounting.
Basically accounting education consists of two fundamental elements:
- Learning to prepare accounting information by understanding accounting cycle, which helps to develop skills in analysing and recording transactions (use of debits and credits, journals, ledgers), also periodically adjusting and closing the accounting records, and the ability to correctly apply generally accepted accounting principles (GAAP) throughout the process. The culmination of these skills is the ability to prepare financial statements that properly and fairly report financial condition and the results of operations.
- Learning to use accounting information means developing the ability to analyse, interpret and apply financial information, particularly as reflected in financial statements such as balance sheet, income statement, statement of owner’s or stockholders’ equity, and statement of cash flows. Say for instance, using financial ratios to analyze key relationships in the balance sheet and income statement is an important skill.
The ability to properly prepare correct accounting information greatly enhances the ability to use correct accounting information.
The fact of the matters is that, both the skills are mutually and closely related. A complete introduction to financial accounting develops both of these skills.
Debt-To-Equity Ratio:
Debt Equity Ratio is the ratio that indicates the pattern of company's finance between debt- capital and equity capital. Here "Debt Capital" refers to that portion of company's assets that are being financed through "Loan" or 'Debt'
that has some intrinsic interest-bearing financial obligations. For example debentures, loans, redeemable preference shares, bank overdrafts, etc
Consolidation:
In business, the term "Consolidation" refers to the merger and acquisition or combining of assets, liabilities and other financial items of two or more entities into one as a single economic entity.
Budgeting And Financial Forecasting:
Budgeting and financial forecasting are like two sides of a coin. While budgeting helps to prepare the estimates for future, financial forecasting are financial planning techniques that help business personnel in their decision-making
process. Budgeting helps in evaluation of revenues that a business wants to realize in the near future period, whereas financial forecasting is used to calculate approximately the amount of revenues that will be achieved.
Capital Reserve And Revenue Reserve:
The accounting mechanism of "Capital Reserve" is used to conserve profits. The system of "Capital Reserve" provides financial stability to the concern. Capital Reserve crop up either from gain on sale of long-term assets or on settlement
of liabilities. Capital Reserve may also arise due to the sale of equity shares at a premium. Further, due to legal obligations, some amount revenue profits may also be added to capital reserve but Capital Reserve does not include any
free balance that might be used for the distribution of profits.
Inventory Turnover Ratio:
Inventory Turnover Ration refers to the average number of times in an accounting period that a business sells and replenishes its inventory or stock of goods. The time taken or the period is divided by the inventory turnover formula to
calculate the days taken to sell the inventory on hand or "inventory turnover days."
Accounting Equations:
The accounting equation helps us to understand the relationship between financial statements. Before understanding cost accounting, we need to understand the meaning of cost object. Cost objects are those product lines, customers, departments
or any other thing the cost of which needs to estimated by management. It is a key concept used in managing the costs of a business.
