What is accounting?

Accounting is the recording, classification, and presentation of financial data and the flow of money and value to, from, and within the business.

Accounting is a fairly general concept.

 

It designates the entire process of receiving accounting items, their classification, their recording, the calculation of the various balances and accounting results, up to the establishment of standard accounting documents.

 

It is a practical discipline that forms the basis of all management tools.

 

Accounting is in fact a tool that makes it possible to identify, analyze, and communicate information relating to the economic activity of an organization as well as to its assets.

 

Accounting data is expressed in the form of figures, sometimes in quantities but more often in the form of monetary value. All records must be dated precisely.

 

The two main types of accounting

 

There are two main categories of accounting for companies:

 

·       General accounting (mainly intended for external actors)

·       Cost accounting (mainly intended for internal analysis)

 

If the keeping of general accounts is compulsory, the keeping of cost accounts is not.

 

It is however very useful to the company to know its costs and to analyze its profitability. These two types of accounting are complementary.

 

In France, the keeping of accounts is framed by law and obeys strict accounting principles.

 

Objectives and Benefits of Accounting:

 

Keeping accounts allows you to:

 

·       Know in real-time the financial situation of the company

·       Identify the amount and origin of the company's economic results

·       Decision-making aid allows justifying the decisions taken

·       Track the cash in the cash register, inflows, outflows, available amounts

·       Identify the assets of the company, its various assets, and financing

 

The main documents resulting from the keeping of accounts are:

 

·       The balance sheet (statement of what the company owns and owes)

·       The income statement (profits and losses over a given period)

·       The table of uses and resources

·       Annexes

 

Accounting features

 

The accounting must be honest, precise, and reliable. That is, the records must be complete and error-free.

 

When recording transactions as well as when presenting accounting documents, it is essential to comply with the rules and procedures in force.

 

Accounting must allow objective comparisons of economic and financial data between organizations, in space and time.

 

For small structures, it is possible, or even advisable, to use accounting software or to outsource your accounting to a professional.

 

Chartered accountants are subject to specific ethics and standards.

 

The information resulting from the keeping of accounts can be used by different actors: State, banks, investors, customers, etc.

 

In order to guarantee the accuracy and veracity of the accounts, an audit can be carried out by an auditor.

 

Single-entry and double-entry accounting

There are two systems for recording accounting entries.

 

·       Double-entry accounting: any transaction is recorded on two accounts at the same time

·       Single-entry accounting: a transaction is recorded on a single account

In single part accounting, less used, the balance between expenditure and income is calculated, and it is this balance that is entered.

 

There are therefore two columns, one to describe the transaction and one to indicate the quantified amount, positive or negative where applicable.

 

In double-entry accounting, the system generally used, the recording of a transaction is made both to the credit of one account and to the debit of another account, for the same amount.

 

The entry is made in a credited account AND in a debited account.

 

Establishment of accounting books

Accounting books are compulsory, EXCEPT for micro-enterprises and self-entrepreneurs.

 

·       The book-journal: lists day by day all the operations affecting the company's assets

·       The general ledger: lists all the transactions but classifying them account by account

·       The inventory book: lists all the assets and liabilities