There are many online accounting services that offer different features for different needs. Remote Books Online offers the best online accounting, bookkeeping, payroll, and tax services.
What is Accounting?
Accounting is the backbone of any business. It is the process of recording, categorizing, and summarizing financial transactions. This process helps to provide an accurate record of a company’s financial condition and enables decision-making.
Accounting Equation
The accounting equation is a fundamental equation that can be used to determine the relationship between assets, liabilities, and owners’ equity.
Assets are resources owned by an entity and available for use in its operations. Liabilities are obligations of an entity arising from past transactions or events. Equity is the residual interest in an entity after deducting all liabilities from all assets.
Accounting Definition
Accounting refers to the process of documenting and summarizing all business transactions. It is a process that helps in understanding a company’s financial health. Accounting also helps in decision-making by providing information about past performance and also projects future performance.
There are four basic functions of accounting:
1) Financial Accounting: Provides information about a company’s financial health to its managers and investors.
2) Management Accounting: Provides information about a company’s operations to its managers to help them make decisions on the day-to-day activities.
3) Tax Accounting: Calculates tax obligations for the company, or individual, based on financial data provided by the taxpayer or tax return filed.
Best Accounting Software for Small Businesses
Accounting software is a type of business management software that is designed to help with accounting, bookkeeping, and other financial tasks.
The most popular accounting software is QuickBooks. QuickBooks supplies a cloud-based solution for small business owners.
Accounting Principles
Accounting principles are the fundamental rules and conventions that govern financial accounting. The following are some of the basic accounting principles:
The matching principle: Assets and liabilities should be recorded in the period in which they were acquired or incurred. This principle is also known as the “traditional approach to accounting”.
The going concern principle: Meaning the business will remain operational for the foreseeable future. A business should be considered to be a going concern unless it is formally declared bankrupt or insolvent.
The cost principle: Assets should be recorded at their purchase price.
The prudence principle: It is prudent for a business to never over- or under- estimate its assets, liabilities, income, or expenses.
Double Entry Accounting
Double-entry accounting is a type of accounting that records each financial transaction twice.
Double-entry accounting is a system for keeping track of the money flowing in and out of a business. It was invented by Italian mathematician and businessman Luca Pacioli in 1494 and has been used ever since.
Double-entry accounting is also known as “Italian” or “Classical” bookkeeping, as it was developed by Italian accountants during the Renaissance period.
Financial Accounting
Financial accounting is the process of summarizing the financial data of a business or other organization. It often involves identifying and describing the types of transactions that have taken place, calculating the values of assets, liabilities, income, and expenses involved in these transactions, and then summarizing these values in one or more financial statements.
Financial accounting is a key responsibility for many people in business. It can be done by hand or with an accounting software package.
The four primary financial statements are:
- The balance sheet
- The profit & loss statement
- The cash flow statement
- The statement of changes in equity
Managerial Accounting
Managerial accounting is the branch of accounting that deals with the managerial decision-making process. It is typically concerned with how to measure, analyze, and interpret information about a company’s financial performance to provide information that will be useful in decision-making.
Managerial accounting can be divided into two main parts: cost accounting and management control systems. Cost accounting includes identification, measurement, accumulation, analysis, and interpretation of costs for a specific purpose. Management control systems include budgeting, cost control, performance evaluation, and compensation evaluation.
Cost Accounting
Cost accounting is a process of tracking and reporting the total cost of production, as well as the costs of all the individual parts that make up those costs.
Cost accounting is a process that records and analyzes financial information to provide knowledge for decision-making. It can be used in a variety of ways, such as determining the profitability of a product or service, or to forecast future expenditures.
In order to account for costs, it is important to understand how they are categorized. There are two main categories: direct and indirect costs. Direct costs are those that can be traced back easily to a specific product or service, such as materials used in manufacturing or wages paid out for certain work hours. Indirect costs are those that cannot be traced back easily, such as rent or utilities.
The Accounting Cycle
The accounting cycle is the process of recording and summarizing transactions in order to produce financial statements. The accounting cycle encompasses many different stages, such as:
- Recording transactions (e.g., sales)
- Compiling and summarizing the transactions (e.g., preparing a balance sheet)
- Preparing financial statements (e.g., income statement, balance sheet)
- Making adjustments (e.g., correcting errors or omissions)
- Closing the books (i.e., preparing an income statement and balance sheet for the year just completed).
Cash vs Accrual accounting
Cash accounting is a system of accounting in which transactions are recorded when cash exchanges hands. Accrual accounting is a system of accounting in which transactions are recorded at the time they occur, even if payment does not take place until a later date.
The main difference between cash and accrual accounting is the timing. Cash accounting records income only when it has been received and expenses only when they have been paid. Accrual accounting records income when it has been earned and expenses when they have been incurred, regardless of whether or not the money has actually changed hands.
Cash vs accrual – cash accountants track cash flow while accrual accountants track net worth.
Cash Basis Accounting: Cash basis accounting is a form of accounting that records the transactions in the cash account. The cash account is an asset account and is usually called “cash” or “bank.”
A business records all cash transactions as income and expenses when it receives or pays out money. It does not recognize any other type of transaction such as those involving accounts receivable, inventory, or fixed assets.
Accrual Basis Accounting: Accrual basis accounting is a method of accounting in which revenue is recognized when it is earned, rather than when it is received. It recognizes revenue when items are delivered or provided to the customer.
Debit and Credit in Accounting
Debits and credits are accounting entries that represent a change in a financial account. The debit entry increases the balance of an asset or expense account, while the credit entry increases the balance of a liability or equity account.
- Debit and credit entries are widely used in all types of accounting practices, such as cash-based and accrual accounting.
- Debit and credit entries are also referred to as “double-entry” or “balanced-entry” bookkeeping methods.
Accounting Formulas
Accounting formulas are used in accounting to calculate the value of a company’s assets and liabilities.
Examples:
- Assets = Liabilities + Shareholders’ Equity
- Net Income = Income – Expenses
- Operating profit = Gross profit – Operating expenses
- Gross profit margin = Gross profit / Sales
Equity in Accounting
Equity refers to the ownership interest in a company. It is usually represented as a percentage of ownership but can also be represented as the number of shares.
There are two types of equity – preferred and common. Common equity is the type that all shareholders have. Preferred equity is an option that investors can choose to purchase, which gives them certain benefits over common shareholders, such as higher dividend payments or priority in receiving dividends.
Online Accounting Services vs Traditional Ones
Online accounting services are now a viable option for small businesses. They provide all the features that a traditional accounting firm would provide, but at a fraction of the cost.
Some of these online accounting services offer additional features, such as free consultations and tax filing, which saves time and money for their customers.
How Online Accountants Can Help Your Business
Online accountants are increasingly becoming necessary for many people. They can help with business taxes, personal taxes, and more. Here are five things online accountants can do for you:
- Tax filing
- Tracking the performance of your investments
- Create a budget
- Help pay your bills on time
- Help with saving for retirement
Purpose of Online Accountant and The Benefits and How It Works
Accountants are professionals who handle finances for individuals, small businesses, and large corporations. They are responsible for calculating taxes, advising on financial decisions, and preparing financial statements.
An online accountant is a professional who provides accounting services to clients over the internet. They offer the same services as traditional accountants but in a digital format.
Online accountants can help you stay in control of your finances with their easy-to-use software and reporting tools. They can also help you save money by providing affordable rates and eliminating travel expenses.