Basic Accounting Concepts Business Owner Should Know Having skills and understanding basic accounting concepts is very important in running a business. Apart from being able to help in making better predictions about the future of the company regarding past sales and expenses, accounting will also assist you in making smarter financial decisions in the long run.

Accounting may not be your thing, but keeping your books organized is essential for your business. As a businessperson, you need to keep track of the expenses, taxes and profits you get from doing business.

Regardless of the background above, accounting is the most important part of business for every entrepreneur, regardless of how big the business is. 

An explanation of the basics of accounting will introduce you to some basic accounting principles, accounting concepts, and accounting terminology.

Below is an understanding of basic accounting and some of the most important accounting concepts you need to know.


What is Accounting


What is Accounting?

Accounting is the process of recording all financial transactions related to the business/business growth you are running. 

Accounting tells whether you are making a profit or not in doing business. Includes, summarizes, analyzes and reports the amount of business cash flows, the value of the company’s current assets and liabilities.

What are the Principles of Accounting?

Business activities cannot be separated from the existence of basic accounting concepts as the basis for the process of recording, summarizing, classifying, processing, and displaying transaction data. This concept also certainly reflects the basic equations of correct accounting. Namely the existence of assets, debt and capital.

These principles, which serve as the rules for accounting for financial transactions and for preparing financial statements, are known as “Generally Accepted Accounting Principles” or GAAP.

Accounting Concepts that Need to be Known?

1. The concept of a business entity

Under this concept, the entity should record all transactions separately as far as financial transactions, from owners and other businesses are concerned. This means that the transactions that are recorded in an entity’s account are only those that belong to that entity.

2. The concept of measurement in money

Accounting information is presented that has a monetary value. Business transactions which can be stated in the form of money are recorded in accounting, either individually or separately.

3. The concept of materiality

Transactions that must be recorded if not carried out will change the decisions made by readers of the company’s financial statements. This tends to result in relatively small records of transactions, so that the financial statements comprehensively represent the financial results, financial position and cash flows of a business.

4. Going concern concept

The company in conducting its business activities tries to run continuously throughout the ages. This assumes that the business will not be forced to stop functioning and liquidate its assets.

5. Cost concept

The property, plant and equipment of a business is recorded at its initial cost in the first financial year. Furthermore, these assets are recorded less depreciation. No increase or decrease in market price is taken into account. This concept only applies to fixed assets.

6. The concept of consistency

Once a business chooses to use a certain accounting method, it must continue to use it in the future. Thus, financial statements prepared in several periods can be compared reliably.

7. Matching concept

This principle states that for every income entry that is recorded in a specific accounting period. The determination of company expenses and revenues is only recognized in the period concerned so that the incurred expenses and revenues have actually been realized. The reported profit or loss calculation describes the actual situation within a certain period of time or a certain period.

8. The concept of conservatism

Income is recognized only when there is reasonable certainty that it will be realized, whereas expenses are recognized more quickly, if there is a reasonable likelihood that this will occur. This concept tends to result in more conservative financial statements.



Accounting Concepts


Basic accounting is very helpful for business owners, both Small, Medium and Large companies. The things above are some of the parts that need to be understood by business people before running a business. Find the right accounting solution for you. Contact Indoservice now!

Indoservice offers accounting, tax and payroll outsourcing services centered on businesses in Indonesia. At Indoservice, we have a dedicated team of professionals who will work with the needs of a good accounting, tax and payroll system for your business. You can count on us to provide the quality service that best suits your needs. 

Contact us at email:  or Call/Whatsapp +6281818811887 & +6287714498500 to get special prices from us.



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Basic Accounting Concepts Business Owner Should Know
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Basic Accounting Concepts Business Owner Should Know
Having skills and understanding basic accounting concepts is very important in running a business.
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