Accounting FAQ's

8. What is the accounting process?

The accounting process consists of three steps:

(i) Keeping receipts - each transaction of the business must be tracked by some type of record;

(ii) Posting - the process of classifying and recording receipts; and

(iii) Creating financial statements - statements that report important aspects of the business (the big picture).

9. What is financial reporting?

Financial reporting is summarizing the activity of the business in numeric form. Know and understand the business's finances. Understanding the finances is most important to the success of the business (Success = Knowledge of Numbers).

10. Why are financial statements important?

Financial statements report most of the information needed by external users of financial data, such as banks, investors and private lenders. They report (i) the business's financial position, (ii) the business's ability to finance projected capital needs, (iii) why the business may be experiencing cash shortages, (iv) the business's ability to meet its financial obligations, and (v) differences in net income and associated cash receipts and payments.