Accounting systems have been used for thousands of years. As businesses grew, people to keep track of costs, profits, and losses invented accounting systems. Modern accounting measures and communicates financial information about an economic entity. This information is used to plan, control, evaluate, and make decisions about a business. The process begins with bookkeeping, which records transactions, such as checks and invoices, and summarizes these transactions in financial statements. Financial managers use the financial statements to raise and spend cash and make intelligent financial decisions. This section defines accounting and contrasts it with bookkeeping and finance functions.
             • Accounting is an information system that measures, processes, and communicates financial information about an identifiable economic entity.
             • Bookkeeping, primarily a mechanical and repetitive record keeping function, is a subset of accounting.
             • Finance is concerned with raising and using cash.
             • Accounting supplies information about the company to financial managers so they can make intelligent financial decisions.
             • Accounting enables managers to intelligently plan and control the business and make decisions based on objective information.
             There are two basic accounting methods available to most small businesses: cash or accrual.
             Cash method. If you use the cash method of accounting, you record income only when you receive cash from your customers. You record an expense only when you write the check to the vendor. Most individuals use the cash method for their personal finances because it's simpler and less time-consuming. However, this method can distort your income and expenses, especially if you extend credit to your customers, if you buy on credit from your suppliers, or you keep an inventory of the products you sell.
             Accrual method. With the accrual method, you record income when the sale occurs, whet...

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Accounts. (1969, December 31). In Retrieved 01:04, November 28, 2022, from