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What are some basic accounting concepts?

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Quick Answer

Accounting basics include the concepts of transactions, assets, revenues, expenses and liabilities, according to AccountingCoach. An income statement is another fundamental concept, as it reports the revenues and expenses of a company during a certain time period to show the company's profitability.

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Even a new, relatively simple business such as a parcel delivery service has thousands of transactions a year, explains AccountingCoach. Transactions include the money a business owner invests in the business, the equipment the business buys, its expenses and the fees it collects from clients.

Revenues and expenses are important parts of income statements, notes AccountingCoach. Revenues are the money a business earns, and when a business uses accrual accounting, it records revenues when the business earns them. Under the less common cash method, a business records revenues when it receives the money. Businesses tend to record expenses when they occur regardless of when the business actually pays for the expense.

Assets go on a balance sheet, which reports a company's assets, liabilities and stockholder or owner equity at a certain time, states AccountingCoach. An asset is something a company owns and includes its cash, supplies and equipment. A liability is an obligation the business has, such as a loan or items bought on credit.

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