I know you've never studied accounting before and you're starting for the first time...
You've been studying it for a while, but maybe you just don't get it...
Or maybe you feel like you know it pretty well, apart from a few small things...
So first of all, what do we mean by the basic accounting concepts?
The first thing one should do, no matter what subject one is studying, is to define the subject itself.
In other words... What's it about? What's the deal? What is this thing?
Okay, so let's define accounting:
Accounting is the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by the users of information.
Now, you might be wondering who these users of information are. It includes :
(1) Managers : Since they are the day-to-day decision makers they need to know how well the things are progressing financially and about the financial status of the buisness.
(2) Owner (s) of the buisness : They need to be informed of the profitability of the buisness and what the financial resoruces are.
(3) A prospective buyer : If the owner decides to sell the buisness, a prospective buyer would want to review the accounts before reaching a decision.(4) The Bank : If the owner wants to borrow money for buisness use, the bank will require such information.
(5) Tax Inspectors : They need to be able to calculate the taxes payable.
(6) A Prospective Partner : Incase the owner wants to share ownership with someone else, the would-be-partner would want to know these information.
(7) Investors : Either the exsisting ones or potential ones. (Eg: Shareholders, debenture holders). They want to know whether it is it profitable to invest money into the buisness or not.
