Accounting

Accounting is the task of collecting and sorting an organization’s financial information. It comprises a number of dated transactions, each linked to a Debit and a Credit Account which update two Reports: the Income Statement and the Balance Sheet. These Reports are similar across all standards, with some variation depending on which accounting standard you subscribe to, for example, GAAP (Generally accepted Accounting Principles) or IFRS (International Financial Reporting Standards). 

Income Statement

The Income Statement captures revenues, income and expenses and is also known as Statement of Profit or Loss or Statement of Comprehensive Income. 

Items that make up the Income Statement include:

• Sales - Generated from Customer Invoices

• Cost of Sales - Generated from Goods Issued and Purchases for other materials and outwork

• Gross Profit - Sales less Cost of Sales

• Other Income - For example, Interest or Rent received which are not part of your core business. These need to be manually captured in the Ledger.

• Operating Expenses - Salaries, Rentals, Leases, etc. required to operate the business, but are not directly related to Sales. These need to be manually captured in the Ledger.

• Nett Profit - Gross Profit plus Other Income less Operating Expenses

Balance Sheet

The Balance Sheet captures assets, liabilities and owner's equity and is also known as Statement of Financial Position.

Items that make up the Balance Sheet include:

• Assets - What you own

• Liabilities - What you owe

• Equity - Assets - Liabilities

Trial Balance

The Trial Balance is a summary of the Income Statement and Balance Sheet. It's a useful tool to help you manage your Accounting.