FAQS

Frequently asked questions.

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1. What Accounting Terms you should know?

Accounting has a wide range of terms and concepts, but here are some fundamental ones:

   – Assets: Anything a company owns or has rights to (e.g., cash, equipment, inventory).

   – Liabilities: Debts or obligations a company owes to others (e.g., loans, accounts payable).

   – Equity: Represents the ownership interest in a company (e.g., common stock, retained earnings).

   – Income Statement: Shows a company’s profitability over a specific period.

   – Balance Sheet: Summarizes a company’s financial position at a given moment.

   – Cash Flow Statement: Details how cash flows in and out of a company.

   – Revenue: Money earned from providing goods or services.

   – Expenses: Costs incurred to generate revenue.

   – Depreciation: The allocation of a long-term asset’s cost over its useful life.

   – Double Entry Accounting: Every financial transaction has equal and opposite effects on at least two accounts.

   -Accrual Basis: Recognizing revenue and expenses when they are incurred, not when cash changes hands.

2. How to maintain accounting accuracy?

Maintaining accounting accuracy is essential for financial integrity. You can do so by:

   – Regularly reconciling accounts.

   – Accurate data entry and documentation.

   – Ensuring compliance with accounting standards and regulations.

   – Conducting internal audits.

   – Utilizing accounting software.

   – Separation of duties to prevent fraud.

   – Regularly reviewing financial statements.

   – Training staff on accounting principles.

3. Are inactive and dormant accounts the same?

   Inactive and dormant accounts are similar but not exactly the same. Inactive accounts are those that have had no recent transactions or activity but are still open and operational. Dormant accounts, on the other hand, are usually accounts that have been inactive for a more extended period, often due to inactivity or customer abandonment. The exact definitions may vary by context and regulations, so it’s essential to follow specific rules and policies.

4. What do you mean by executive accounting?

   There is no standard term called “executive accounting” in traditional accounting terminology. However, in a business context, “executive accounting” might refer to the financial reporting and analysis that executives use to make strategic decisions. It involves summarizing complex financial data into actionable insights for high-level executives and management to steer the company effectively. This can include various financial reports and KPIs that help in decision-making.

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