Mechanics of accounting

An asset is an item on the balance sheet, acquired with the expectation that it will yield financial benefit.

Money moves through a company (“cash flow”) via three main channels: operations, financing and investing.

Two principal accounting methods exist to record business transactions: cash accounting and accrual accounting.

At the end of the fiscal period, accountants close certain accounts in order to prepare the financial statements.

At the end of the fiscal period, accountants close the temporary accounts. This overview describes the closing process.

This sample financial statement highlights the relationship between the different parts of the financial statements.

Financial statements describe the profitability and value of a business, and have four main components.

The following consolidated financial statements demonstrate how the accounts from one statement affect another.

Journal entries have two sides: they record both an equal debit and credit for every business transaction.

Two main types of liabilities exist: current liabilities and long-term liabilities. Both are financial obligations.