Accounting Principles1:54 with Michael Watson
A brief overview of accounting principles.
Links to further reading on double-entry bookkeeping and accounting
The purpose of accounting is to gather and report information 0:00 in order to measure an entity's financial performance and position. 0:04 Accounting, also referred to as bookkeeping, today is by and 0:08 large based on a process known as double entry bookkeeping. 0:13 This means that for every journal entry, or 0:17 recording of a transaction into the books or accounts, 0:20 that there has to be two entries, one in a debit account and one in a credit account. 0:24 We're not going to go into detail on that aspect of accounting in this course, 0:30 but I have included some resources below in the teacher's notes, 0:35 if you'd like to explore this more. 0:38 In fact, 0:41 we're really only going to scratch the surface of accounting in this course. 0:41 It's a massive topic with no shortage of concepts to explore. 0:45 What is important to understand though is how these journal entries are made, and 0:50 what accounts they are put in based on a set of rules or accounting standards. 0:54 In the United States, 1:00 these are known as GAAP or Generally Accepted Accounting Principles. 1:01 These standards set rules around how companies prepare their financial 1:07 statements. 1:11 Outside of the States, what these rules are called would vary by country. 1:12 Most likely, it will be the IFRS or 1:17 International Financial Reporting Standards. 1:21 These rules are in place to make sure that the way companies are preparing and 1:24 presenting financial statements are consistent. 1:29 And accurately reflect the financial position of a company. 1:32 It sounds obvious now, but historically, not all businesses were required, or 1:38 needed to report something like sales or revenue in the same way. 1:42 That's a big reason why GAAP evolved, to help make sure everyone is accounting for 1:47 things consistently. 1:52
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