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Accounting is the backbone of business world.Accounting is important to business because it is the base that offers great support to management for planning, controlling as well as decision making process. It is with the aid of accounting information that the performance of a unit can be evaluated.Let me try to explain basic accounting principles to be followed by companies:1.The foremost decision of any business undertaking is regarding choosing right accounting methods which are Accrual Method & Cash Methoda)Accrual Method:Income and expenses are recorded as they occur, regardless of whether or not cash has actually changed hands. An excellent example is a sale on credit. The sale is entered into the books when the invoice is generated rather than when the cash is collected.b)Cash Method:The cash method is the most simple in that the books are kept based on the actual flow of cash in and out of the business. Income is recorded when it is received, and expenses are reported when they are actually paid.2. Decision on system of book keeping Single Entry System Vs Double Entry Systema) Single Entry System:Is a system which records only the personal and cash aspects of the business. Under this system of recording ignores impersonal aspects of transactions.b) Double Entry System:This is a dual aspect concept of business transactions that is receiving aspects (debit) and giving aspects (credit) are recorded in the books of accounts. Double entry system is the method of making all transactions in the account in an opposite side for equal value. This system of accounting provides more accurate data.Illustration3. Some General points to be kept in mind which preparing accountsa) Consistency:I can explain it as; "what you have done in past, you continue to do it in future." The same qualifies for accounting policies. The methods of accounting are kept same year on year. This also facilitates better comparison of earnings year on year for an analyst.b) Prudence:Profits are recognized as they are realized but loss if anticipated is provided for earlier.c) Going Concern:A term for a company that has the resources needed in order to continue to operate indefinitely. If a company is not a going concern, it means the company has gone bankrupt.More Information:Pavan Jayaprakash's answer to What is a balance sheetBusiness and Management StudiesBest Business InfoCase Laws Sec. 5 : Accrual of incomeIndian Accounting StandardsAccounting Decisions, Business Startup, Business Accountant

I evaluated entries for the Daughters of the American Revolution Writing Contest.When I first started teaching, there was an eccentric, amazing old woman at my school named Dr. Harvey. She was one of those teachers who could get away with murder—probably by connecting homicide to a relevant standard in her class. She was also an active member of her local Daughters of the American Revolution chapter and, because she was an English teacher with a doctorate, the obvious pick for the member tasked with judging the chapter's entries for the annual DAR writing contest.Her chapter had a lot of entries for this contest each year, and there were categories for multiple genres of writing: short stories, poems, one-act plays, etc. So every year, she received a boatload of pieces to read, but she didn't have the time to evaluate all of them before her deadline, so she enlisted a couple of English teachers at our school to help weed out the less-than-stellar entries and find the pieces that were in contention to win in each category. I had a good working relationship with her, and she respected my ability to evaluate writing, so I was honored when she asked me to be one of her preliminary readers.I read DAR entries for her for a couple of years, and by year three, I had a pretty good system down for getting through them quickly. But I needed a place away from the house to do it. A place where I could think…and maybe have a beer.That’s how I found myself at the bar of a Kuroshio sushi restaurant, with a 16 oz. Kirin Ichiban and an order of spicy tuna maki, poring over a binder full of sappy sentimental missives thanking long-dead patriotic grandmothers for their heirloom quilts, essays extolling American exceptionalism in a time of Millennial-instigated mediocrity, and one-act plays in which every character speaks in a sultry southern drawl.When I had dutifully separated the proverbial wheat from the chaff, Dr. Harvey would thank me for my service and give me a gift card to a local grocery store because she was concerned I wasn’t eating enough.She was a crazy, fascinating, wonderful woman and the person indirectly responsible for the nerdiest thing I ever did in a bar.

Accounting is important to business because it is the base that offers great support to management for planning, controlling as well as decision making process. It is with the aid of accounting information that the performance of a unit can be evaluated.Let me try to explain basic accounting principles to be followed by companies1. The foremost decision of any business undertaking is regarding choosing right accounting methods which are Accrual Method & Cash MethodAccrual Method:Income and expenses are recorded as they occur, regardless of whether or not cash has actually changed hands. An excellent example is a sale on credit. The sale is entered into the books when the invoice is generated rather than when the cash is collected. Likewise, an expense occurs when materials are ordered or when a workday has been logged in by an employee, not when the check is actually written. The downside of this method is that you pay income taxes on revenue before you've actually received it.Cash Method:The cash method is the most simple in that the books are kept based on the actual flow of cash in and out of the business. Income is recorded when it is received, and expenses are reported when they are actually paid. The cash method is used by many sole proprietors and businesses with no inventory.Conclusion: The laws and regulation prescribe companies to maintain books as per accrual system which helps in uniformity of book keeping across companies.Illustration2. Decision on system of book keeping Single Entry System Vs Double Entry SystemSingle Entry System:Is a system which records only the personal and cash aspects of the business. Under this system of recording ignores impersonal aspects of transactions. This is not based on the Dual aspect Concept so it will be incomplete account or inaccurate account.Double Entry System:This is a dual aspect concept of business transactions that is receiving aspects (debit) and giving aspects (credit) are recorded in the books of accounts. This is the most common system of book keeping used for recording every business transactions. Double entry system is the method of making all transactions in the account in an opposite side for equal value. This system of accounting provides more accurate data with scientific system of accounting.IllustrationConclusion : Laws and regulations prescribe double entry system of accounting which helps in preparing, presentation and comparison of Financial Statement.3. Some General points to be kept in mind which preparing accountsA) Consistency:I can explain it as; "what you have done in past, you continue to do it in future." The same qualifies for accounting policies. The methods of accounting are kept same year on year. This also facilitates better comparison of earnings year on year for an analyst.B) Substance over Form:Substance over form is an accounting concept which means that the economic substance of transactions and events must be recorded in the financial statements rather than just their legal form in order to present a true and fair view of the affairs of the entity.C) Prudence:Profits are recognized as they are realized but loss if anticipated is provided for earlier.D) Matching Principle:is a further refinement of the accruals concept. For example, accruals basis of accounting requires the recognition of the estimated tax expense in the current accounting period even though the actual settlement of the provision may occur in the subsequent period. However, matching principle would also necessitate the recognition of deferred tax in the accounting periods in which the temporary differences arise so as to 'match' the accounting profits with the tax charge recognized in the accounting period to the extent of the temporary differences.E) Going ConcernA term for a company that has the resources needed in order to continue to operate indefinitely. If a company is not a going concern, it means the company has gone bankrupt.Lastly, Accounting is the backbone of business world.Financial accounting generates some of the key documents, including profit and loss account showing the method of business traded for a specific period and the Balance Sheet which provides a statement showing mode of trade in business for a specific period.Without these financial documents it would be impossible to run the business or to make decisions regarding the business.The accounting process consists of measuring and summarizing business activities, interpreting financial information, and communicating the results to management and other decision makers.Read more at Business and Management StudiesBest Business InfoCase Laws Sec. 5 : Accrual of incomeIndian Accounting StandardsAccounting Decisions, Business Startup, Business Accountant