Understanding Accounting Practice and Entries

Understanding Accounting 1

Understanding Accounting Practice and Entries

Axia College of University of Phoenix

Understanding Accounting 2

Accounting methods used in business are to record revenues and expenses when acquired, whether it is cash exchange or credit charges. The different accounting methods used in business today are accrual accounting, cash flow accounting, and fund accounting. Accrual is an accounting method that refers to individual entry, and this entry records revenue or expenses when cash in not used in a transaction, such as a credit sale. Cash flow accounting in a business is the monitoring of the amount of cash generated and used in a business, such as merchandise sold in the business or merchandise bought to sell in the business (expenses or investments). Fund accounting is, primarily used by non-profit organizations and government organizations. This type of accounting used is to keep track of money spent, rather than money earned in these organizations. What the accounting records take the form of is the collection of funds, and each fund has a distinct purpose, such as operating expenses and an assortment of activities in the organization.

Accounting entries are entered in a cycle form. First step in the cycle form is the journal entry. The journal entries consist of credit or debit transactions, and the raw data should be entered into the general journal so that accounting can calculate it further. Entries are entered into the general journal daily. The journal entries are then posted into an accounting ledger and this can be done daily or weekly, depending on the business. There are separate accounts to maintain for each major revenue and expense, and accounts for each major class of assets, liability, and equity. When all...