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Accounting and Financial Statements - Coggle Diagram
Accounting and Financial Statements
Accounting
Classification
Management Accounting
Financial Accounting
Tax Accounting
Definition
Accounting is described as a systematic process of identifying, recording, classifying, and summarizing financial transactions of an organization.
The main purpose is to provide reliable and relevant information to different users so that they can make informed economic decisions.
Accounting information reflects:
The financial position of an organization (what it owns and owes),
The results of operations (income and expenses)
The cash flows during a specific period.
Accounting process
The entire accounting process shows how information flows from source documents to the final financial statements.
The sequence consists of five main steps:
Source Documents
Book of Original Entry
Ledger Accounts
Trial Balance
Final Accounts (Financial Statements)
Double entry system
The Double Entry System is a method of accounting that records and reflects both aspects of every financial transaction.
Advantages of the Double Entry System
Shows financial position
Detailed and effective control
Determines business results
Facilitates comparison
Improves accuracy
Financial Statements
Types of FSs
Income Statement
Definition
Includes:
Gross Revenues
Net Revenues
Gross Profit
Operating Expenses
Depreciation
income from operations
Net profit or net losses
Cash Flow Statement
Balance sheet
A balance sheet reflects a company’s financial position at a given moment, not the movement of cash during the period.
It ensures the balance between assets and sources of funds.
ASSETS = LIABILITIES + SHAREHOLDERS’ EQUITY
Three Main Components;
Assets
Liabilities
Shareholders’ Equity
Definition
Is a forrmal record of a company's financial activities and position, summarizing it's performance cash flow and financial health over a specific period.