Discussion Question 2 Week 1 Accounting Assignment

Discussion Question 2 Week 1 Accounting - Assignment Example Bookkeeping was explicitly defined as â€Å"the process of recording, in chronological order, the daily transactions of a business entity. It forms part of the accounting information system† (Miss CPA, 2011, par. 6). The accounting equation is actually defined as â€Å"An equation that reflects the two-sided nature of a business entity, assets on the one side and the sources of assets on the other side (assets = liabilities + owners’ equity)†¦ The accounting equation is the foundation for double-entry bookkeeping, which uses a scheme for recording changes in these basic types of accounts as either debits or credits such that the total of accounts with debit balances equals the total of accounts with credit balances. The accounting equation also serves as the framework for the statement of financial condition, or balance sheet, which is one of the three fundamental financial statements reported by a business† (Financial Terms, 2012). As such, the basic theoretical framework significantly impacts business decision making since it clearly pinpoints and accurately identifies the sources of changes in the different accounts of the organization. As such, understanding the concept of the accounting equation would facilitate determination of any evident deviation that significantly impacts current operation, and which were not according to the organization’s plans, thus, should be appropriately and immediately