Accounting is an Art of Analyzing, Recording, Classifying, summarizing, and reporting the economic events of business.

Transactions

Accounting

Financial Statements

Transaction is an economic event that causes immediate change in financial position in the business and can be measured in terms of money.

Assets
Assets are the financial Resources owned or controlled by entity and are expected to benefit future operations. To treat an item as assets, accountants have to check
It is an resource Business should have ownership or control over it It can be measure in terms of money

Liabilities
Claims of outsiders over the assets of business are liabilities. Generally speaking these are the providers of the assets of the business. In foreseeable future business has to give back their assets or pay back in cash or any other assets for their claim.

Capital / Owners Equity

Claims of insiders over the assets of the business is called capital

Generally speaking these are also providers of the assets of the business. Unlike liabilities, capital has below mentioned distinct features Their contribution (assets provided by them ) are not paid back rather they receive any profit earned by the business. Their claim is residual. It means that in case of winding up of business, first liabilities will be paid, and any left over assets , that may be more then or less then their contribution, will be given to them. Any Profit earned by the company goes to equity holders Any loss suffered by the business, decreases the claim of equity holders

Financial Statements
Basic responsibility of accountant is the preparation of Financial statement. Financial Statements are the key source to provide information about the business. Financial statements include Balance Sheet Income Statement Statement of changes in Equity Cash flow Statement

 Balance Sheet states the financial position of business at any given date. Positions is stated into three main categories, Assets , Liabilities and Capital Income statement states the financial performance of the business for any given period. Performance is stated in terms of revenue earned by the company and expenses incurred to earn that revenue. Net result is stated as profit of the business for the period.

Cash Flow statement states the cash generated and utilized by the business during the given period. Statement of Changes in Equity states the changes took place in capital. Reason of changes are additional investment, withdraw of investment, profit or loss of the business.

 In Accrual Basis of accounting, transactions are recorded when exchange of goods or services takes places compared to cash basis where transactions are only recorded on exchange of cash.