Accounting is about numbers and since accounts need to balance out, the numbers need to match. How do they much in accounting though?

As you know, accounting is about debits and credits and hence it’s called double entry accounting. You cannot make a debit entry without a credit to support it and vice a versa. As such, both sides, debits and credits need to equal out. Continue reading →

First and foremost, keep it simple and structured. It only gets messy and stressful if you have to do it ad hoc. It may sound like a cliché, but don’t panic! You can do it all if you just keep a cool head and have it all structured.  Continue reading →

When you’ve opted for a change in an accounting policy, there are two ways it can be applied – retrospectively or prospectively.  Continue reading →

According to International Financial Reporting Standards (“IFRS”) an accounting policy should only be change when the change is either required by a standard or interpretation or when it means that the financial statements give more relevant and reliable information about the effects of transactions, other events or conditions on the entity’s financial position, performance or cash flows. The reason I quote IFRS is because it’s the basis for most accounting standards in the world. Obviously one should consult their local legislation, but something as fundamental as changing an accounting policy is most probably treated the same way.  Continue reading →

Now that you’ve chosen an accounting policy, you’re expected to apply it consistently. Consistently in this sense means from period to period the same way.  Continue reading →

Accounting policies are what you use in your accounting to have your financial statements prepared in a certain way. They are specific principles, bases and guidelines, rules and practices used when preparing and presenting financial information for your company.  Continue reading →

Cash basis of accounting is doing exactly as the name refers – you account for transactions as the cash “moves” (cash physically or through bank accounts). Note that when cash didn’t “move” (i.e. you didn’t pay your bills or you did not receive money from clients) you don’t account for the named transactions either. It’s just left there “hanging” sort of say, somewhere on papers or in your memory. They are your unpaid bills and invoices.  Continue reading →