Explained: Need for Bank Reconciliation

Reconciliation is the process of comparing transactions that have been recorded internally against monthly statements from external sources like banks to see if there are differences in the records and to correct any discrepancies. Further, reconciliation involves resolving any discrepancies that may have been discovered. Need for the reconciliation: Companies perform bank reconciliation to ensure…

Concept of Debits and Credits

Debits and credits are accounting terms that represent the two sides of a financial transaction. Debit is notated “DR” and credit is notated “CR”. The word debit comes from the Latin word “debitum” meaning “what is due” and the word Credit comes from “creditum”, meaning “something entrusted to another or a loan.” A debit (DR)…

Explained: Recordkeeping in accounting

Recording in accounting refers to keeping a record of monetary business transactions, reflecting the correct picture of assets-liabilities, profits, loss, etc. Recordkeeping helps companies track each business transaction, including new equipment purchases, product sales, service costs, payroll expenses, etc.  Accurate recordkeeping provides important information for legal and tax purposes. In addition, recording Transactions in the…

Understanding Revenue Recognition and Realisation in accounting

Revenue Recognition and Realisation in accounting represent the profits companies and individuals make from selling assets. However, there are certain difference between Revenue Recognition and Realisation. Revenue recognition is an aspect of accrual accounting that stipulates when and how businesses “recognise” or record their revenue. The principle requires that businesses recognise revenue when it’s earned…