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
What Is Accounting Profit? Accounting profit is a company’s total earnings, calculated according to generally accepted accounting principles (GAAP). It includes the explicit costs of doing business, such as operating expenses, depreciation, interest, and taxes. Key Takeaways Accounting profit shows the amount of money left over after deducting the explicit costs of running the business.Explicit costs include labor, inventory
What Is an Accounting Ratio? Accounting ratios, an important sub-set of financial ratios, are a group of metrics used to measure the efficiency and profitability of a company based on its financial reports. They provide a way of expressing the relationship between one accounting data point to another and are the basis of ratio analysis.
What Are Accounting Records? Accounting records are all of the documentation and books involved in the preparation of financial statements or records relevant to audits and financial reviews. Accounting records include records of assets and liabilities, monetary transactions, ledgers, journals, and any supporting documents such as checks and invoices. Key Takeaways Accounting records are all
What Is Accounting Software? Accounting software is a computer program that assists bookkeepers and accountants in recording and reporting a firm’s financial transactions. The functionality of accounting software differs from product to product. Larger firms may choose to implement a customized solution that integrates a vast amount of data from many different departments. Small firms
What Is Accounting Valuation? Accounting valuation is the process of valuing a company’s assets and liabilities in accordance with Generally Accepted Accounting Principles (GAAP) for the purposes of financial reporting. Key Takeaways Accounting valuation assesses a company’s assets versus its liabilities for financial-reporting purposes.Accounting valuation is critical to the creation of accurate financial statements.Accounting valuation
