Finance and Accounting Basics for Administrative ProfessionalsAdministrative Assistant Resource
October 22, 2012 — 2,210 views
Finance and Accounting Basics for Administrative Professionals
Administrative professionals in many businesses have to deal with both finance and accounting. Knowing the basics about each is helpful in doing their jobs. Finance in business involves how a business acquires funds to do business. Accounting is the recording of expenses and income to show a business' financial situation. These two work together in running a successful business.
There are two types of financing that small businesses tend to use: equity and debt. Equity financing means getting financial capital in exchange for a partial ownership in a business. Debt financing means taking out loans from banks and other lending institutions. Either way, the business is getting an inflow of cash to buy merchandise and pay bills. Administrative professionals often see the paperwork associated with both of these types of financing.
For a small business in some situations, obtaining financing is a make or break situation. Without the financial capital, small businesses may find they do not have enough funds to pay bills and to buy necessary merchandise. A company's monies are often tied up in inventory that has not sold or in accounts receivable not yet paid.
The accounting process records every transaction that a business makes. That includes sales made, bills paid, and monies received. In modern Western business, a double entry bookkeeping system is the norm. This involves making two entries for each transaction. For example, let's say you bought a chair for the office with a check from the business' checking account. The first entry is a deduction from the checking account for the amount of the purchase. The second entry is an addition to an account for office furniture. The purchase of the chair is an asset addition that you record with the second entry.
Common terms you need to know in accounting follow:
- Debit - A debit is simply the left side of a double-entry transaction.
- Credit - A credit is simply the right side of a double-entry transaction.
- Financial Period - It is a fixed period which accounts use to summarize financial information. Periods often selected include monthly, quarterly, semi-annually, or annually, depending on the situation.
- Financial Statements - These are the financial documents issued by your accountant after each financial period.
- Financial Reporting - Stockholders and business owners need to know the financial health of a company. That is the purpose of periodic financial reporting./li>
Learning the basics of finance and accounting is essential for the effective administrative professional.
Administrative Assistant Resource
Administrative professionals in many businesses have to deal with both finance & accounting. Knowing the basics about each is helpful in doing their jobs. This article gives the basics on Accounting & Finances geared for Administrative Professionals.