Buy More Notebooks - Fundamentals of Accounting 1

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3 TYPES OF BUSINESS
   1. Service Business - a commercial enterprise that provides work performed in an expert manner by an individual or team for the benefits of its customers. It provides intangible products such as accounting, banking, consulting, cleaning, landscaping, education, insurance, treatment, and transportation services. Examples are jobs as doctors, accountants, teachers, event planner and lawyers.
   2. Merchandising Business - people who work here called "merchandiser." It is a business that purchase finished products and resells them to customers. An example is a supermarket. Purchased items, wholesaler from manufacturer or distributor to make it available for us to buy in pieces. Businesses who provide services are not considered as merchandising unless they offers products that come from a distributors or manufacturer.
   3. Manufacturing Business - is any business that uses components parts or raw materials to make a finished good. Finished goods can be sold directly consumers or customers, or to the other manufacturing businesses to be used to make different products. Factories are example of manufacturing business. Factories are composed of robots, computers, machines, and humans to create a product.

ACCOUNTING CONCEPTS AND PRINCIPLE
In preparing financial statements, accountants is guided by different concepts and principles which is formulated by accounting profession.
   1. Entity Concept - this concept states that the personality of the owner and the personality of the business are distinct and separate from each other. This names that the personal asset expenses of the owner CANNOT recorded in the business expenses. One of the principles of accounting is that the owner and the business enterprise have different personalities; thus, they cannot be merged. Each personality must maintain its own records of transaction.
   2. Objectivity Principle - sometimes called the reliability principle. In order to be objective, the transactions should be verifiable by other parties and are properly supported with pieces of evidence. This is the very reason why a transaction should have the proper supportung evidence before it is recorded to be verifiable.
   3. Cost Principle - this principle states that the transactions have to be recorded at the amount that one has actually paid for.
   4. Materiality Principle - the princiole states that the materiality of an account is a matter of professional judgement. Therefore, the skill of an accountant judging an accoount essential. However for academic purpose, we have to consider all accounts, small or big, to be material account.
   5. Matching Principle - this principle states that the reason the business earns an income is that it simple spends. Therefore, for accounting purpose, we will match the expense.
   6.  Accounting Period - a period of 12 months.
    a. Calendar Period - a period of 12 months which will end ON December 31
    b. Fiscal Period - a period of 12 months which will end OTHER than December 31
   7. Revenue Recognition - an accounting principle that determines the specific conditions under which income becomes realized as revenue or income. Generally, income is recognized when a specific event occurs and the income pertaining to it is measurable. Moreover, income is recognized when a company delivers merchandise or services to its customers.
   8. Conservatism - this is a concept of recognizing expenses and liabilities in the least amount of time if there is uncertainty of the outcome and certainty of revenue and assets received.