Practical use of basic of accounting - charts of accounts, journal entry,ledger, profit and lost statement, income statement.

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Welcome to basic accounting concepts. Accounting is the language of business that helps track, measure, and communicate financial information. The key components work together in a systematic flow: starting with the Chart of Accounts to organize all financial categories, then Journal Entries to record each transaction, followed by the General Ledger to summarize account balances, and finally the Income Statement to show profit and loss. The Chart of Accounts is the foundation of accounting, organizing all financial accounts into five main categories: Assets like cash and inventory, Liabilities such as accounts payable, Equity including owner's capital, Revenue from sales and services, and Expenses like rent and salaries. Journal entries record each transaction using the double-entry system. For example, when selling a product for one thousand dollars cash, we debit Cash and credit Sales Revenue for the same amount, ensuring debits equal credits. The General Ledger is where all journal entries are posted and summarized by individual account. Each account has a debit side on the left and credit side on the right. The posting process involves taking amounts from journal entries and recording them in the appropriate accounts. For example, the Cash account starts with a beginning balance of five thousand dollars. After posting a sale of one thousand dollars on the debit side and a rent payment of eight hundred dollars on the credit side, the ending balance becomes five thousand two hundred dollars. The Income Statement, also called Profit and Loss Statement, shows a company's profitability over a specific period. It has three main components: Revenue from sales, Expenses from business operations, and Net Income calculated as Revenue minus Expenses. In our example, ABC Company has sales revenue of ten thousand dollars, total expenses of seven thousand five hundred dollars, resulting in a net income of two thousand five hundred dollars. This statement helps stakeholders evaluate the company's financial performance and profitability. To summarize what we've learned about basic accounting: The Chart of Accounts provides the organizational structure for all financial categories. Journal Entries record each transaction using the double-entry system. The General Ledger compiles and summarizes these entries by account. The Income Statement reveals profitability by comparing revenues to expenses. Together, these fundamental tools create a complete system for tracking, measuring, and reporting business financial performance.