What Are Accounting Earnings? Accounting earnings, another name for a company’s stated earnings, or net income (NI), are calculated by subtracting business expenditures, including cost of goods sold (COGS), general and administrative expenses (G&As), depreciation, interest, and taxes, from revenue. In effect, it shows the amount of money a company has left over after deducting the explicit
What Is the Accounting Equation? The accounting equation states that a company’s total assets are equal to the sum of its liabilities and its shareholders’ equity. This straightforward relationship between assets, liabilities, and equity is considered to be the foundation of the double-entry accounting system. The accounting equation ensures that the balance sheet remains balanced.
What Is an Accounting Error? An accounting error is an error in an accounting entry that was not intentional. When spotted, the error or mistake is often immediately fixed. If there is no immediate resolution, an investigation into the error is conducted. An accounting error should not be confused with fraud, which is an intentional
What Is an Accounting Event? An accounting event is a transaction that is recognized in the financial statements of an accounting entity. A company must record in its accounting records any economic event that impacts the company’s finances. Examples of accounting events include such things as recording the depreciation of an asset, the payment of dividends
What Is an Accounting Manual? An accounting manual contains pertinent accounting rules and other information for a business or organization. It is a manual that is internally developed and contains information specific to the organization for which it was developed. Key Takeaways An accounting manual contains the accounting policies and procedures of a company.Developed internally
What Is an Accounting Method? An accounting method refers to the rules a company follows in reporting revenues and expenses. The two primary methods of accounting are accrual accounting (generally used by companies) and cash accounting (generally used by individuals). Cash accounting reports revenues and expenses as they are received and paid through cash inflows
What Is an Accounting Period? An accounting period is an established range of time during which accounting functions are performed, aggregated, and analyzed. An accounting period may consist of weeks, months, quarters, calendar years, or fiscal years. The accounting period is useful in investing because potential shareholders analyze a company’s performance through its financial statements
What Are Accounting Policies? Accounting policies are the specific procedures implemented by a company’s management team that are used to prepare its financial statements. These include any accounting methods, measurement systems, and procedures for presenting disclosures. Accounting policies differ from accounting principles in that the principles are the accounting rules, and the policies are a
What Is an Accounting Postulate? An accounting postulate is an assumption in the field of accounting based on historical practice. Accounting postulates form the basis of the accounting standards that govern how transactions are treated and recorded. Key Takeaways An accounting postulate is an assumption in the field of accounting based on historical practice.Accounting postulates
What Is Accounting Practice? Accounting practice is the process and activity of recording the day-to-day financial operations of a business entity. Accounting practice is necessary to produce the legally required annual financial statements of a company. There are different accounting methods that companies can choose to use, and there are principles that companies must abide
