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Fundamental Accounting Concepts

Introduction

In preparing general-purpose financial statements, there are guidelines and principles that are understood by both the accountants who prepare them and the users of such reports are followed. These are set forth in the GAAP and IFRS.

What's in Here

Generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS) were actually based on fundamental accounting principles and concepts.

This chapter covers the fundamental concepts to help you build a good foundation before moving to more elaborate topics.

Image link to Basic Accounting Principles
Lesson 1

Basic Accounting Principles

The Conceptual Framework of Accounting mentions the underlying assumption of going concern. In addition, the concepts of accrual, accounting entity, monetary unit, and time period are also important in preparing and interpreting financial statements.
Image link to Elements of Accounting
Lesson 2

Accounting Elements: Assets, Liabilities, and Capital

The three major elements of accounting are: assets, liabilities, and capital. These terms are used widely so it is necessary that we take a look at each element. We will also discuss income and expense which are actually included as part of capital.
Image link to Accounting Equation
Lesson 3

The Accounting Equation and How It Stays in Balance

The accounting equation is the unifying concept in accounting that shows the relationships between the accounting elements: assets, liabilities, and capital. In this lesson, you will learn about the basic accounting equation and how it stays in balance.
Image link to Examples of Accounting Equation
Lesson 4

Accounting Equation: More Examples

Here are some more sample transactions and their effect to the accounting equation.
Image link to Expanded Accounting Equation
Lesson 5

Expanded Accounting Equation

The expanded accounting equation is the same as the basic accounting equation except with the capital portion broken down into: owners' contributions, owner's withdrawals, income, and expenses.
Image link to Double Entry Accounting System
Lesson 6

Double Entry Accounting System

The double entry accounting system emerged as a result of the industrial revolution. Merchants in the olden times recorded transactions in simple lists. Business became more and more complex, hence the development of more effective ways to keep track of business transactions.
Image link to Accounting Cycle
Lesson 7

The Accounting Cycle: 9-Step Accounting Process

The accounting cycle, also commonly referred to as accounting process, is a series of procedures in gathering, processing, and communicating financial information. This lesson takes you through the steps in the accounting cycle.
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Summary

Fundamental Accounting Concepts: Summary

This is a summary of the topics discussed in Fundamental Accounting Concepts under the Accounting 101: The Basics tutorial series.
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Test Yourself

Fundamental Accounting Concepts: Quiz

Test your accounting skills with this short quiz in Fundamental Accounting Concepts, under the Accounting 101: The Basics.
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