Principles of Accounting 1

Topics: Generally Accepted Accounting Principles, Double-entry bookkeeping system, Income statement Pages: 2 (321 words) Published: January 13, 2013
Principles of Accounting 1
Christina Doty
American InterContinental University
January 9, 2013

Dear Dad,
I’m writing this letter in the hopes that I can help you better understand accounting, and use your new software more efficiently, and accurately. I know accounting can seem frustrating, tiresome, and difficult to learn or comprehend. I will explain things so that you will be able to understand them.

Dad you need to understand what accounting is, Accounting is the process of keeping track of financial transactions, and analyzing and processing financial information to make business decisions and communicate the financial position of a company (Board) .You also need to know the accounting equation it is Assets=Liabilities + Owner’s Equity.

Assets: Are the resources owned by a business like their cash or land. Liabilities: Are the rights of the creditors are the business’s debts. Owner’s Equity: Are the rights of the owners.

The income statement is a statement that shows a company’s net income or loss over a specific accounting period after all revenues and expenses are accounted for. The balance Sheet is a list of all the assets, liabilities, and owner’s equity accounts and balances as of a specified date. There are rules to follow with debits and credits regarding the income statement and balance sheet increases in assets are recorded on the left side called a debit, while credits decreases in assets are recorded on the right, but that also changes with whatever transaction is being made. Based on the accounting equation: A=L+E    Debit                  Credit

Assets                              Increase             Decrease Liabilities                        Decrease             Increase Equity                              Decrease            Increase Income                            Decrease            Increase Expense                           Increase             Decrease

Journal entry:

The assumptions are Economic entity,...
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