Accounting Components

After previously we discussed the Definition of Financial Accounting and its Functions, Stages and Standardization, this time we will discuss the components that exist in financial accounting. Happy reading …

 

Table of contents :

Accounting Components

  1. Assets (Assets or Property)

Harta lancar (current assets)

Harta tetap (fixed assets)

Investment assets

Intangible assets

Other assets

  1. Liabilities (Liabilities or Obligations)

Short-term liabilities

Long-term liabilities

Other obligations

  1. Income
  2. Equity (Equity)
  3. Expenses (Costs or Expenses)

Financial statements

Balance sheet

Profit and loss

Capital Change

Arus Kas

Differences in Financial Accounting and Management Accounting

Aim

Scope

Time span

Information Focus

Information Type

Nature of Information

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Accounting Components

To avoid confusion, all financial transactions that have been carried out are not only recorded, but also grouped according to certain categories.

 

There are five categories that are commonly referred to as the main components in accounting records. The five main components are as follows:

 

  1. Assets (Assets or Property)

Assets are all things that are valued and owned by the company that can be used to get benefits in the future.

 

The types of assets in the company include, among others

 

Harta lancar (current assets)

Current assets are assets owned by a company that can be used as a transaction tool and can be used up.

 

Items included in current assets include cash or money, accounts receivable, short-term investments, marketable securities, accrued income or prepaid expenses, and inventories.

 

financial accounting components

financial accounting components

Harta tetap (fixed assets)

The characteristics of permanent assets are that they have a form, can be used by companies both for operational activities and for sale,

 

has a useful value that can be used for a long period (more than one year) as long as the company wants to empower it, and has a high selling price when traded.

 

Property can still be obtained by buying cash, in installments, exchanging, using securities, and making your own. During using this fixed asset, there are costs that must be incurred by the company.

 

These costs include repair and maintenance costs, replacement costs, repair costs, additional costs, and fixed assets reconstruction costs.

 

Also Read:   Definition of Non-Bank Financial Institutions (LKBB)

Treasure investment ( investment assets )

There is only one asset that is included in investment assets, which is long-term investment. In long-term investing, the money that has been invested can be recovered within as little as one year.

 

Types of long-term investments include stocks, mutual funds, pension plan investments, gold or jewelry investments, and bonds.

 

Intangible property ( intangible assets )

Intangible assets are types of assets owned by a company but cannot be stated in a specific form.

 

Examples are patents, copyrights, trademarks, franchises, leasing rights, and goodwill or the advantages that exist in a business, such as reputation, good name, and others.

 

Another treasure ( of assets )

Other assets are assets that are not included in current assets, fixed assets, investment assets, or intangible assets. An example is a rental guarantee,

 

assets that are no longer used, pre-operation or operational costs, collateral, investment advances, receivables, advances for purchase of fixed assets, and deferred expenses.

 

  1. Liabilities (Liabilities or Obligations)

Liabilities are a must for companies to pay certain funds to external and internal parties.

 

The characteristics of a liability are that they arise as a result of past transactions that have not been completed, cannot be avoided, and must be settled by paying cash. Liabilities are divided into two, namely:

 

Short-term liabilities

This obligation is a debt that must be paid in full immediately. Short-term liabilities include trade payables, notes payable, expenses payable, long-term debts that are nearing maturity, income received in advance, tax payable, and dividend payable.

 

Long-term liabilities

Included in long-term liabilities include bonds payable, mortgage debt and bank loans.

 

Other obligations

Other liabilities are liabilities or liabilities that cannot be categorized into short-term or long-term liabilities. It is in the form of collateral or employee personal debt to the company.

 

  1. Income

Income is the amount of money that the company gets for the work it does, from selling goods or services, for example.

 

Also Read:   Definition of Revaluation

Income is divided into two types, namely operating income that is obtained directly from production activities and non-operating income that is not obtained from production activities.

 

The sources of company income are through investment by investors, sales of goods or services, gifts, revaluation of assets, and delivery of company products.

 

  1. Equity (Equity)

Equity is a form of company obligation to capital owners.

 

  1. Expenses (Costs or Expenses)

Expenses are funds that companies spend to finance business operations.

 

Financial statements

The financial report is a product of the accounting system which will then be provided to external parties to the company as previously explained. There are four financial reports in question, among which are as follows.

 

Balance sheet

Balance sheet is a financial report that provides information about the company’s financial position within a certain period of time. The assets, liabilities and equity of a business are presented in these financial statements.

 

Profit and loss

Profit / loss statement is a report that presents the calculation of the net profit or loss of a business within a certain time. These financial statements present the income earned and expenses incurred during that time.

 

Capital Change

Reports on changes in capital are financial statements that include adjustments or changes in equity within the same time frame as the Profit / Loss Statement. There are changes in capital and retained earnings which are presented in this report of changes in capital.

 

Arus Kas

The cash flow statement is a report that provides information about the amount of money that both entered the company and left the company within the same time frame as the Profit / Loss Statement and the Change in Capital Report. Operating, investing and financial activities are presented in this cash flow statement.

 

Aru Khas

Aru Khas

Differences in Financial Accounting and Management Accounting

There are two types of accounting processes known to people, namely financial accounting and management accounting. While financial accounting is used for parties external to a company, management accounting is used for internal parties to the company.

 

However, they are not only different in their use, the two types of accounting processes also have different objectives, scope, time span, focus of information, types of information, and different characteristics of information. The following is a more complete explanation.

 

Also Read:   Definition of the Financial Services Authority (OJK)

differences in financial and management accounting

differences in financial and management accounting

Aim

Financial accounting aims to present financial reports in the form of balance sheets, profit / loss, changes in capital, and cash flow, all of which provide information on the company’s financial condition and performance.

 

Meanwhile, management accounting aims to produce detailed and specific reports, identify problems that arise, and resolve them.

 

Scope

Financial accounting reports the company’s overall financial condition. Meanwhile, management accounting reports the condition of one part of the company, for example, the production department, the marketing department, and others.

 

Time span

Reports produced by financial accounting only focus on a certain time frame and are not flexible, such as a period of one month, six months, one year, or others.

 

Meanwhile, reports produced by management accounting do not have a specific time span, so they are much more flexible than financial accounting, for example daily or weekly reports.

 

Information Focus

Financial accounting focuses information on the past by presenting company accountability reports for fund management. Meanwhile, management accounting is more likely to lead to the future.

 

Information Type

While financial accounting only presents information about company finances, management accounting provides not only financial information

 

but also the day-to-day operations of the company as well as measuring the physical processes, technology, suppliers, customers, and even the company’s business competitors.

 

Nature of Information

The nature of the information provided by financial accounting requires a high level of accuracy, can be verifiable, accurate, and objective. Generally, company management employs an independent third party.

 

Meanwhile, the nature of the information provided by management accounting must include the ability to assist company management in making decisions, for example deciding something related to organization, planning, control, or direction.

 

Therefore, management accounting relies on more than one discipline, namely accounting disciplines, management disciplines, and others.

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