Accounting Analysis On The Financial Position Of A Company Essay
Accounting is the process of work where an accountant or account related personnel keeps the company’s financial accounts. The process of work includes recording, storing, sorting, retrieving, summarizing and presenting in financial reports. The purpose of accounting is to provide information that is needed for making of economic decisions and to help in defining the financial position of a company. Accounting is very important to a company.
2.0 Accounting Equation
The Accounting Equation also called the balance sheet equation is the most basic principle used in accounting. It relates to three categories of accounts, assets, liabilities and owner’s equity. It states that during the period, the value of assets a business owns is equal to the sum of the value of its liabilities and equity. The accounting equation makes it simpler to understand the relation of the three amounts with each other. It is the foundation of the double entry-system. The total debit is equivalent to total credits. The accounting equation is: (Refer to Appendix 1)
Assets are resources that have values and are owned by the business that is used in running the business and business activities. It is also items that can be converted into cash. It increases the value of a business. Compare to others who have fewer assets, the larger the amount of assets a business has, the stronger the business. Assets can be categorized to 2 types, Non-current assets and Current assets.…