If the purchase is made with a credit account, the credit entry would be recorded in the accounts payable account and the debit entry would be recorded in the inventory account. Purchases made in cash are recorded as a debit to the inventory account and a credit to cash. Purchases: These are transactions that businesses require in order to obtain materials and services necessary to accomplish their goals.Sales typically involve the creation of an invoice to be sent to the customers, detailing the amount that the customer owes. Sales transactions are recorded in the seller's accounting journal (a document that contains a summary of the transaction) as a credit to the sales account and a debit to cash or accounts receivable. Sales: These are transactions in which products/services are transferred from buyers to sellers for cash or credit.Revenue is the gross income figure from which costs are subtracted to determine net income. It includes deductions and discounts for returned products. Revenue: Revenue refers to the income that a company generates from its normal business operations.Common expenses include employee wages, payments to suppliers, equipment depreciation and factory leases. Expenses: Expenses refer to the costs of operations that businesses incur to generate revenue.Equity is calculated by subtracting a company's total assets to its total liabilities. Equity: Equity, also known as shareholder's equity, refers to the amount of money that a company must return to its shareholders after all of its assets are liquidated and all of its debt is paid off.Recorded on the right side of a company's balance sheet, liabilities include accounts payable, loans, mortgages, earned premiums, deferred revenues and accrued expenses. They are settled over time through the transfer of economic benefits such as money, services or goods. Liabilities: These refer to the legal financial obligations or debts that companies incur during business operations.Examples of a company's assets include investments, cash, inventory, accounts receivable, land, supplies, equipment, buildings and vehicles. Assets have future economic value that can be measured and can be expressed in monetary terms. Assets: These refer to resources or items that the company owns.This is why businesses must be proficient in accounting in order to make good decisions. In other words, accounting is not just about recording financial transactions, it measures a company's success at achieving its goals and helps shareholders understand how efficiently their money is being used. It would also be impossible to determine how much taxes to pay, whether to buy or lease a property or whether to merge with another company. Without accounting, it would be impossible to determine which products were successful, which business decisions were effective and whether the company is generating revenue or making a profit. The reports that various streams of accounting generate, such as managerial accounting and cost accounting, are crucial in helping a company's management make informed business decisions. It is typically performed by an accountant or a bookkeeper at a small company, or by large finance departments with dozens of employees at larger companies. The financial statements used in basic accounting are a brief summary of financial transactions over an accounting period, summarizing a company's cash flows, operations and financial position.Д«asic accounting is one of the key functions in almost all types of business. It involves analyzing, summarizing and reporting these transactions to regulators, oversight agencies and tax collection entities. Basic accounting refers to the process of recording a company's financial transactions.

Learning the basics of accounting