Accounting is the process of identifying and recording business events as well as presenting and communicating this financial information to end-users in a meaningfulway. In other words, accounting is more than just recording the debits and credits oftransactions. Accounting s really a system or process of recording information anddisplaying it to people in an understandable way, so that they can make decisionsbased on the financial information.

 

The primary objective of financial accounting is to reflect the fiduciaryresponsibility and provide useful information for decision-making.

 

 

Accounting basic assumption, also known as accounting basic premise, is the premise of enterprise accounting recognition, measurement, record, and report. Itincludes four assumptions: accounting entity, going concern, accounting periodand monetary measurement.

 

 

The requirement of accounting information quality are the basic norms forhigh-quality accounting information provided in corporate financial accounting reports and are the basic characteristics that should make the accounting information provided in financial accounting reports useful for investors and other users to make decisions,including reliability, relevance, comprehensibility, comparability substance is more important than form, importance, prudence and timeliness.

 

 

Accounting reliability refers to whether financial information can be verified andused consistently by investors and creditors with the same results. Basically.reliability refers to the trust worthiness of the financial statements.

 

 

The accounting information provided by the enterprise should be clear andclear, so that users of financial reports can understand and use it.

 

 

Enterprises are required to perform accounting confirmation, measurement and reporting of transactions or events that have occurred in a timely manner. Without advancing or delaying. They should collect accounting information in fime, process accounting information in time, and transmit accounting information in time.

 

 

The relevance principle is that the relevant information must be useful,understandable, timely, and needed for decision making.

 

 

The same or similar transactions or events that occur in the same enterprise indifferent periods shall adopt consistent accounting policies and shall not be changed at will. If it is really necessary to change, it should be stated in the notes(vertically comparable).

 

For the same or similar transactions or events in different enterprises. The prescribed accounting policies should be adopted to ensure that the accounting information is consistent and comparable (horizontally comparable)

 

 

It requires enterprises to perform accounting confirmation, measurement and which can reflect the financial situation of an company and isthe basis for preparing the balance sheet.

 

The second is the dynamic equation. Profit equals income minus expense.which reflects the operating results of the enterprise and is the basis for compiling the profit statement.

 

 

Accounting equation is an equation that indicates the basic relationship between accounting elements. There are two accounting equations: one is the static equation:a company's total assets are equal to the sum of its liabilities and its shareholders' equity, which can reflect the financial situation of an company and is the basis for preparing the balance sheet.

 

The second is the dynamic equation: Profit equals income minus expense.which reflects the operating results of the enterprise and is the basis for compiling the profit statement.

 

 

Financial statements are reports prepared by a company's management to present the financial performance and position. A general set of financial statements usually includes a balance sheet, income statements, statement of owner's equity, and statement of cash flows.Financial statements are the main source of financial information for most decision makers. That is why financial accounting and reporting places such a high emphasis on the accuracy, reliability, and relevance of the information on the sefinancial statements.

 

 

Accounting elements are financial accounting objects and their basic classifications determined according to the economic characteristics of transactions orevents, which include assets, liabilities, owner's equity, income, expenses, and profits.

 

 

Retained earnings is the cumulative profits and losses of a corporation less its dividends paid to shareholders In other words, it's the cumulative amount of moneyleft over after all of the expenses and dividends are paid.

 

 

Inventory refers to the finished products or commodities that an enterpriseholds for sale in daily activities, the products in the production process, and the materials consumed in the production process or the process of providing laborservices.

 

 

It classifies the specific content of accounting elements for further measurement.

 

 

Trade discount refers to the reduction in list price known as discount, allowedby a supplier to the consumer while selling the product generally in bulk quantities.Cash discount is a reduction in the amount of invoice allowed by the seller to the buyer in return for immediate payment.

 

 

Balance sheet refers to the financial statement that reports a company's assets.liabilities, and shareholder equity at a specific point in time. Balance sheets providethe basis for computing rates of return for investors and evaluating a company'scapital structure. In short, the balance sheet is a financial statement that provides an overview of what a company owns and owes, as well as the amount investedby shareholders.

 

Balance sheets can be used with other important financial statements to conduct fundamental analysis or calculating financial ratios. Investors and creditors canuse the balance sheet to analyze how companies are funding capital assets and operations as well as current investor information.

 

 

Income statement refers to a financial statement that summarizes the revenue scosts, and expenses incurred during a specified period, usually a quarter or fiscalyear. These records provide information about a company's ability or inability togenerate profit by increasing revenue, reducing costs, or both. These statements are often presented on a cash or accrual basis. Users can analyze the income statement to see if companies are operating efficiently and producing enough profit to fundtheir current operations and growth

 

 

The cash flow statement is a statement reflecting the inflow and outflow of cashand cash equivalents in a certain accounting period.

 

 

The statement of owner's equity is a financial statement that reports the changesin the equity section of the balance sheet during an accounting period. In other wordsit reports the events that increased or decreased stockholder's equity over thecourse of the accounting period.