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A brief overview of accounting principles.
Links to further reading on double-entry bookkeeping and accounting
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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
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large based on a process known
as double entry bookkeeping.
0:13
This means that for
every journal entry, or
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recording of a transaction
into the books or accounts,
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that there has to be two entries, one in a
debit account and one in a credit account.
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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,
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if you'd like to explore this more.
0:38
In fact,
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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
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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
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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.
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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
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things consistently.
1:52
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