What is accounting?

Accounting is a crucial part of running a successful business. It helps you keep track of your financial information, report on the performance of your business, and make informed decisions about the future.

 The process of accounting involves four main steps: recording, reporting, interpreting, and analyzing financial information.

 Recording is the process of posting all transactions related to running a business. This includes recording both the debit and credit sides of a transaction, such as "DR Cash" and "CR Revenue". 

Reporting involves categorizing all of the transactions that have been recorded into different financial statements, such as revenue, cost of goods sold, general expenses, accounts receivable, inventory, fixed assets, accounts payable, long-term debt and equity.

 Interpreting involves understanding how your current financial performance compares to previous periods, such as the prior month or year. This can help you identify trends and make informed decisions about the future.

 Analyzing financial information involves looking at key ratios, such as liquidity and profitability, to understand the overall financial health of your business. It also involves looking at cash flow management to understand your cash inflows and outflows each month. This can help you make decisions about things like hiring more employees, purchasing assets, or relocating to a better location.

 Accounting is an essential component of running a business. It helps you keep track of your financial information, report on your performance, and make informed decisions about the future.