Recording systematic way of keeping track of business transactions that have a monetary or financial impact on the business, whereas financial reporting is providing financial information about a business that is useful to exist and potential investors, so, why would businesses record financial information?
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Well, they’ll use past information to be ready to make informed decisions about what’s getting to happen in the future.
They may use this information to be ready to make better day to day business decisions, they’ll need to provide this information to authorities like SARS (SARS being the South African tax authorities), or they’ll use the knowledge to organize financial reports.
The financial information recorded in the record-keeping system: source documents, journals, ledger, and trial balances, are often employed, by internal users. For instance, managers in making day to day decisions within the business. Now, these decisions could include paying their creditors in time, purchasing the right sort of inventory within the correct quantities and at the right time.
During this Tutorial, however, we are primarily curious about using financial information to report back to external users of monetary information. Remember, these are equity and debt providers.
Recording occurs on a day-to-day basis to make sure that each one of the knowledge about the business is captured.
While we are going to see there is considerable flexibility in how this information is recorded, the business doesn’t to make sure that all transactions are recorded, and are recorded in a systematic way. In other words, similar transactions are recorded in a similar fashion. Reporting,
however, occurs at least once during a financial year, at the financial year-end, and presents information in a way that is useful to external users in making decisions concerning providing resources to a business. to be useful, information must conform to the principles, and practices covered in Generally Accepted Accounting Practice, also referred to as GAAP.
As explained in InternationalFinancial Reporting Standards (IFRS), this guides financial reporting in South Africa and far from the remainder of the planet. And this is often what you’d be studying if you continue to become an accountant.
Prepares of monetary reports got to use equivalent terms, principles, and guidelines as are understood by users. Believe it, it’s during this way that the right financial performance and financial position of business are going to be communicated to the users of the financial reports
So The Book Explains whats the Learn the difference between an asset and a Liability, Accounting 101
The Author goes and makes an explain about Fish he says When we spoke about the Fish and the list, and he made the point that emotions cover everything, it makes us poor judges and can affect our relationships, paralyzes our willingness to act, causes us says Douglas that the spending poorly, out of jealousy, and obscures important information.
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the Author Further Elaborate by saying the value of the list is that it is unemotional meaning that it was not based on emotions l, it is just a clean set of steps to learn and keep us ahead of our peers
sometimes taking the emotion out of a situation and viewing it in writing or even in diagram form m can make things much clearer for us
let us do that now, with a very simple principle, i would like yu to be aware that everything in your life can be divided into one of two categories, everything in your life is either
An asset ( Which is good)
A Liability ( Which is bad)
A difference is simple, an asset is anything whatsoever that causes money to flow into your life,
A liability is anything whatsoever that causes money flow out of your life
Assets make you richer, liabilities make you poor, we want assets, we don’t want liabilities
if you understand this, that assets make you richer and liabilities makes you poorer, you understand that entire governing dynamic of personal wealth, if you don’t, you the makings of the lifelong problem of your hands so please do ay attention
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He aggressively argues that understanding this one thing is the biggest difference between rich and poor people, poor people tend to view things like their houses, or cars as assets
Are they really? lets put it to that simple unemotional test
Do they cause money to go into your account pr out of your account? See they are costing you money meaning that they are expenses, therefore, they are liabilities and they are making you poorer
Now what if you rented your house out to a tenant that would be a great idea wouldn’t it?, The author continues to say let’s apply the simple test here, does doing that cause money to come in or go out? in this case, the one i just explained, it causes money to come in through the rental of the property. therefore in this scenario Your house it is actually an asset and when you earn an income it becomes an asset
There is no emotion in this equation this means that they didn’t use emotions to make the decisions, and that means it makes it wonderful simply and if you understand the difference between an asset and a liability ( an asset causes money to come in and the liability causes money to go out ) You have the basis of so a world view that can show you how to become wealthy is a possible world view and this can be achieved through reading books
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