CHAPTER 1: THE WAY OF VIEWING BUSINESS

CHAPTER 1: THE WAY OF VIEWING BUSINESS

I am studying bachelor of accounting, the first question when I just read in the first second is what actually is ACCOUNTING? the question make me wanna read through all this chapter 1 to get an answer for that.

First key I have learn is Accounting is a business model.The meaning of Accounting is very clear in a title. After that is the meaning of Business, I never learned deeply about definition of the word, I can see "Business" is about creating value, serving people needs. The need of people is different. Therefore, business have to make a different to satisfy people want.That is a big opportunity to expand the business. A firm need to invest more, create more and it also is the challenge in Business too. I have stayed in Australia for more than 2 years, I must say it has a lot of businesses even though just in small area. Each business do own activity and make the diferrent to others

The second thing I need to understand if I wanna go higher and professional in Accounting is know and understand the key "building-blocks" of it:

• Journal: The daily transaction of a firm. transaction entered into a journal each day.

• Ledger: contain these same transactions but arranged not in the order in they occur each day but individual accounts

• Debit( to owe) and Credit(to believe) are also important in Accounting

From the meaning of these words, I know I debit Asset account, credit Equity and Liability account.

The most important in this chapter I need to remember all the time is the Accounting Equation:
 Asset = Equity + Liabilities

Double-entry accounting is a way of looking at The business. According to Charlie Munger, double entry book keeping was a hell of invention. In my opinion, double entry likes we add or subtract something, after we need to give it back to make the accounting equation balance all the time.
Double entry is a system of recording transactions of  a firm in such a way as to ensure the relationship between the different elements of the business model that underpins accounting is kept intact.

It also has some elements to expand the equation are Revenue and Expense.
Revenue are additions to equity as a result of increases to assets or reductions in liabilities of a firm but not those changes to assets and liabilities that relate to transactions between a firm and its equity owners. I am confusing about revenue and Income. Are they different or similar?

The basic of Accounting is very important and I must say this chapter is very useful for me.