Real Estate Accounting Made Easy, 2nd Edition

2BASIC REAL ESTATE ACCOUNTING

The term “accounting” refers to the process of identifying, measuring, recording, classifying, summarizing, and communicating financial transactions and events to enable users to make informed decisions. Users of accounting information include business managers, analysts, business owners, creditors, regulators, investors, customers, and suppliers, among others. The wide range of users of accounting information underscores the importance of accounting knowledge in business. No one can run a successful business today without a basic understanding of accounting or the advice of an accountant. Accounting information is not only used by for-profit organizations; it is also very useful in nonprofit organizations.

HISTORY OF DOUBLE-ENTRY BOOKKEEPING

An important aspect of accounting is its double-entry bookkeeping system. This system was first publicized by Italian mathematician Luca Pacioli in his 1494 book, Summa de arithmetic, geometric, proportion et proportionality, and is widely regarded as the first published treatise on bookkeeping as we know it today. However, the earliest known uses of double-entry bookkeeping date back to the Farolfi ledger of the 1290s, used by Italian merchants Giovanno Farolfi & Company, and also the use of double-entry bookkeeping by the Treasurer's accounts of the city of Genoa in Italy in 1340. The principle of this system is that business transactions are best recorded in accounts, and each transaction should be recorded ...