Accounting I

A record of what happened, what was sold, etc.

Generally accepted accounting principles

Recording what you got and where it came from. Recording increases and decreases in accounts so that debits equal credits.

• 1. Income statement
• 2. Statement of owner's equity
• 3. Balance sheet
• 4. Cash flow statement

Everything about the company. What it owes and what it owns.

income (revenue) and expenses

First in first out

Your part - what is owed

Something owned by the business

US, UK, Australia, and Canada

Debits on top.

Credits on bottom.

Credit

Debit

Difference between amounts recieved from customers for goods/services and amounts paid for the inputs used to provide those goods/servies.

Amounts are initially recorded in accounting records at their cost or purchase price.

How much an item was bought at.

Creditors

Liability account created by purchasing on account (credit)

Items that will be used in the business's future.

Also assets

Asset used in process of earning revenue

Go in column next to fees earned.

Revenue and expenses for a period of time.

Excess revenue over expenses

When your expenses exceed your revenue.

Supplies- what business still has; goes on balance sheet.

Supplies expense- supplies business has used up; goes on owner's equity

With a debit

put in,putting money in

Take out; taking money away

With credit.

Credit

Ids accounts

One journal for the entire store, not one for each dept.

It's always the lowest number

Provides information for mangers to use in operating the business

To provide financial savings

An information system that provides reports to users about the economic activites and condition of a business

In US FASB- Financial Accounting Standards Board

Outside US IASB- International Accounting Standards Board

No- in US SEC (security and exchange commision) is

Owned by one individual.

• 70% of US businesses
• Easy and cheap to organize
• Resources limited to those of owner
• used by small business

owned by 2 or more individuals

• 10% of US businesses
• combines skills and resources of more than one person

organized under stat or federal statutes as a separate legal taxable entity.

• generates 90% of business revenue
• 20% of businesses in US
• ownership is divided into hsares called stock
• an obtain large amounts of resoures by issuing stock
• Used by large businesses

combines the attributes of a partnership and a corp.

• 10% of US businesses
• often used as an alternative to partnership
• has tax and legal liability advantages for owners

Yes, because if you have 2 parts of the equation you can use them to find the missing part.

designed to be used for recording a single type of transaction.

i.e. journals seperated by depts.

Concept of accounting that limits the economic data in the acounting system to data related diretly to the ativites of the business

Summary of the revenue and expenses for a specific period of time.

Revenue, expenses, and net income/loss

in order of size beginning with larger items. Misc expense always shown last regardless of amount.

• business name
• (income statement)
• period it is for

• revenue (fees earned)................................................... goes on far right
• (expenses:)
• list seperate expenses here (misc goes last).......left of revenue
• (total expenses).................................................. goes on far right
• (net income/loss)......................................................... goes on far right

summary of the changes in the owner's equity that have occurred during a specific period of time.

• business name
• (statement of owner's equity)
• period of time it's for

• any initial capital made and date they were made.................................................. goes far right
• any additional investments made and date made............................. goes inside left
• Net income taken from income statement....................................... goes inside left
• add all these up
• less withdrawls............................................................................goes inside left
• increase/decrease in owner's equity computation of all these................................... goes far right
• owner's capital both far right items added/minus together....................................... goes far right

List of the assets, liabilities, and owner's equity as of a specific date. usually at the close of the last day of the month.

present assets in order they will be converted into cash or used in operations

• business name
• (balance sheet)
• date

• (Assets) left side (Liabilities) right side
• cash always goes first....... $$$ (accounts payable)..................... $$$
• other assets will vary by business but examples are: other liabilities vary by business but ex are:
• accounts recievable.......... $$$ wages payable.......................... $$$
• supplies......................... $$$
• land.............................. $$$ (owner's equity) right side
• (total assets)................. $$$ (owner's capital) pulled from state of eo........ $$$
• (total liabilities and owner's equity).............. $$$

Summary of cash receipts and cash payments for a specifi period of time.

• consists of 3 sections:
• operating activities
• investing activities
• financing activities

must use summary of transactions to classify transactions

reports summary of cash receipts and cash payments from operations.

normally differs from from amount of net income for the period.

reports cash transactions for the aquisition and sale of relatively permanent assets.

reports cash transactions related to cash investments by the owner, borrowings, and withdrawls by the owner.

• business name
• (statement of cash flows)
• period of time

• (cash flows from operating costs:)
• total of cash revenue............................goes inside left
• total of cash used to pay for expenses.... goes inside left (this will be deducted)
• (net ash flows from operating ativities......................................goes far right
• (cash flows from investing activities:)
• total of cash used for investments i.e. land............................... goes far right
• (cash flows from financing ativities:)
• total of cash from owner's investments... goes inside left
• deduct total of cash withdrawals from owner.. goes inside left
• (net cash flows from finaning activities)................................... goes far right
• your total is cash as of next day of time period......................... goes far right

• 1. title which is name of accounting equation element recorded in the account
• 2. spae for the recording increases in the amount of the element
• 3. spae for recording drecreases in amount of the element

• left side is debit side, increases in assets are recorded on this side
• right side is credit side, decreases in assets are recorded on this side

the excess of debits of an asset account over its credits

a group of accounts for a business entity

a list of accounts in the ledger

accounts are listed in the order they appear in the financial statements

1st number in chart of acounts indiates the major account group of the ledger in which the account is located. i.e. assets, liabilities, owner's equity, revenue, and expenses

2nd number indicates it\s location of account within the group. where it falls within the assets, liability, etc. group

where, using rules of debit and redit, transactions are initially entered.

either a debit or credit depending on whether increases in the acount are recorded as debits or credits.

debit

credit

credit

debit

credit

debit

• 1. the date of the transation is entered in the date column (far left)
• 2. the title of the acount to be debited is recorded at the left-hand margin under the Description column, and the amount to be debited is entered in the Debit column. (middle and to the right, respectively)
• 3. title of the account to be credited is listed below and to the right of the debited acount tile, and the amount to be credited is entered in the credit column. (middle indented and to the far right, respectively)
• 4. brief description may be entered below the crtedited account
• 5. the post. ref. (posting reference) column is left blank when the jhournal entry is initially recorded.

Process of transferring debits/credits from jouinal entries to accounts in the ledger

the debits/credits for each journal entry are posted to the accounts in the order in which they occur in the journal.

• 1. the date of the journal entry is entered in the DAte column of...(the ledger you are using)
• 2. the amount is entered into the Debit column of... (the ledger you are using)
• 3. the journal page number is entered in the Posting Reference column of... (ledger you are using)
• 4. account number is entered in the posting reference column in the journal

assets

liability created by receiving cash in advance of providing a service.

used to detect errors in posting debits/credits from journal to ledger.

verifies equality of double-entry accounting

• 1. list the name of the company, the title of the trial balance, and the date the trial balane is prepared.
• 2. list the acounts from the ledger and enter thier debit or credit balance in the Debit or Credit column of the trial balance
• 3. Total the Debit and Credit columns of the trial balance
• 4. Verify that the total of the Debit column equals the total of the Credit column

assets = liabilities + owner's equity