Basic Accounting for the Successful Administrative Assistant
Accounting is the process of recording, analyzing, and interpreting a company's financial transactions. As an administrative assistant, understanding basic accounting concepts can be a valuable tool for career success. This ebook chapter will focus on three main aspects of basic accounting: fundamental accounting principles, accounting systems, and financial analysis.
1. Fundamental Accounting Principles
Accounting is governed by a set of principles that establish the basis for recording and presenting financial transactions. These principles, known as Generally Accepted Accounting Principles (GAAP), include the entity principle, the going concern principle, the accrual principle, and the consistency principle.
The entity principle states that business transactions and personal transactions should be kept separate. This means that company resources should not be used for personal purposes and vice versa.
The going concern principle assumes that the company will continue its operations indefinitely. This affects how assets and liabilities are recorded and valued.
The accrual principle stipulates that income and expenses should be recognized when they are incurred, not when cash is received or paid. This ensures that the company's financial situation is presented in an accurate and timely manner.
Finally, the principle of consistency requires that accounting methods be applied consistently from one period to the next. This allows financial information to be comparable over time.
2. Accounting Systems
There are two main systems of accounting: the cash system and the accrual system. In the cash system, income and expenses are recorded when cash is received or paid. This system is simple and easy to understand, but it may not provide an accurate representation of the company's financial situation.
In the accrual system, income and expenses are recorded when they are incurred, regardless of when the money is received or paid. This system is more complex, but provides a more accurate view of the company's financial health.
As an administrative assistant, you may be responsible for maintaining the company's accounting records. Therefore, it is important to understand which accounting system the company uses and how to correctly record financial transactions.
3. Financial Analysis
Financial analysis is the process of examining a company's financial statements to understand its financial condition and performance. This involves the use of various techniques and tools, including ratio analysis, cash flow analysis, and budget analysis.
Ratio analysis involves calculating various financial ratios, such as profit margin, liquidity ratio, and debt ratio, to assess a company's profitability, liquidity, and solvency .
A cash flow analysis examines a company's cash flow to determine its ability to generate sufficient cash to meet its financial obligations.
Finally, budget analysis involves comparing the planned budget with actual results to identify any variances and take necessary corrective action.
In summary, basic bookkeeping is an essential skill for any administrative assistant. Understanding fundamental accounting principles, accounting systems, and financial analysis can help you perform your job more effectively and contribute to your company's success.
