Weekg1:gIntroductiongtogrecordinggaccountingginformationg
g
Weekg1.1
Whatgisgangaccountg?
Everygsinglegthinggingagbusinessgwillghavegonegaccountgandghavegangaccountgnumber
Examplesgsuchgasgland,gcar,rentg
Thegpurposegofgangaccountgisgtogkeepgtrackgofganyggimpactgofgthegbusinessgtransactiongofgthatg
gparticulargitemg
AngaccountgcontaingagTgaccount,gthegleftgsidegandgthegrightgsideg
Ingthegaccountinggsystemgeverygsinglegitemgingthegaccountgwillgcontaingangaccountgnumberg
Everygsinglegitemgshouldghavegonegaccountgandgonegaccountgnumberg
Whatgaregthegfourgfinancialgstatements?
Financialgstatementgisgusuallygpreparedgingthegendgofgthegyeargingagbiggdocumentgwhichgisgcall
edgAnnualgreportg
Angannualgreportgwillgincludeg
-
Incomegstatementg(whichgisgalsogcalledgasgFinancialgPositiongorgalsogcalledgProfitgandgLoss
gStatementgorgcalledgasgComprehensivegincome)g
-
Balancegsheetgstatementg(whichgisgalsogcalledgthe:EquitygstatementgorgalsogcalledgthegState
mentgofgfinancialgposition)g
-ChangesgingEquity
-Cashgflowgstatementg
Incomegstatement:ggreportsgthegrevenuesgandgthegexpensesgandgthereforegthegprofitgandgt
heglossgofgthegbusinessg
Ifgthegrevenuegisghighergthangthegexpensesgitgisgagprofitg
Butgifgthegrevenuegorgthegtotalgrevenuegisglessgthangthegtotalgofgexpensesgthangweghavegaglossg
,Revenue-Expenses=ProfitgorgLoss
Thegpurposegofgangincomegstatementgisgtogmeasuregthegfinancialgperformancegofgagfirmgorgagb
usinessgingtermsgofgsellinggthegproductsgorgservicesgtogthegclientsgandgalsogcontrollinggthegexpe
nsesgwithingthegbusinessgoperation.g
Balancegsheetgstatement:
Thegbalancegsheetgstatementgreportsgthegassetsgthegliabilitiesgandgthegequity
Assets=Liabilitiesg+gEquitygg
ItgisgcalledgthegBasicgaccountinggequationg
ChangesgingEquitygstatement:
gThisgstatementgreportgthegchangesgingequityg
WhichgincludegthegRetainedgearningsgandgDividend
Cashflowgstatement:
Itgwillgreportgthegchangesgingcashgactivitiesgfromg
Operatinggsection,InvestinggandgFinancingg
Whatgisgthegbasicgaccountinggequation?
Assets=Liabilitiesg+gEquitygg
Whatgisgagcurrentgasset
gAregcashgandgothergassetsgthatgaregreasonablygexpectedgtogbegrealizedgingcashgwithingonegye
argorgduringgthegnormalgoperatinggcycle,gwhichevergisglonger.g(Itgisgagshortgtermgasset)g
Ex.gShortgtermginvestment,ginventory,g
Cashgandgcashgequivalents
Accountsgreceivable
Prepaidgexpenses
Inventory
Marketablegsecurities
,Whatgisgagnongcurrentgassetg
gAregassetsgandgcashgthatgaregnotgexpectedgtogbegconvertedgintogcashgwithingonegyeargfromgth
egdategofgthegbalancegsheet.
gEx.gplant,gpropertygLand,gandgequipmentg(PP&E)
Trademarks
Long-termginvestmentsgandggoodwill—whengagcompanygacquiresganothergcompany
Assetsgincludeg Liabilitiesgincludeg
Equipment Accountgpayablegagbusg
Expense
Accountgreceivableg
Prepaidgexpenseg
Equipmentg
Landg
Buildingg
Houses
Assetginclude
Equipment
Accountgreceivableggisgwhengtheyghavegreceivedgtheggoodgandgservicesgbutghaven’tgpaidgforgi
tgyetg(Representgmoneygowedgtogyourgbusinessgbygcustomers)
Land
Houses
Building
Prepaidgexpensegpayinggthegfuturegexpensegingadvanceg
Liabilityginclude
Accountgpayablegitgisgwhengagcompanygpaysgforgaggoodgandgservicesgusinggcreditg(Itgreprese
ntgthegmoneygthatgyourgbusinessgowesgtogsuppliers)
g
Unearnedgrevenuegitgisgwhengthegcustomergpaysgforgtheggoodgandgservicesgbutghaven’tgreceiv
edgtheggoodsgandgservicesgyetg
Notegpayablegitgisgaglonggtermgliabilityg
Weekg1.2
DebitsgandgCredits
, g
WhatgisgthegpurposegofgDebitgandgCreditg
Theygaregusedgtogstandardizegtheglanguagegtogusegthegtechnicalgtoolsgtogdogrecordinggingagbusi
nessgtransactiong
Notgnecessarilygincreasegorgdecreaseg
Andgnotgplusgorgminusg
Itgisgalsognotgagdebitgcardgorgcreditgcard.g
NOTE:gCreditgdoesgnotgmeangnecessarilygdecreaseg
Debitgdoesgnotgmeangnecessarilygtogincreaseg
ThegleftgsidegofgthegTgstructuregofgangaccountgisgdebitgorgalsogcalledgasg(DR)
ThegrightgsidegofgthegTgstructuregofgangaccountgisgcalledgthegcreditggorgalsogcalledgasg(CR)
Weekg1.3
WhatgaregthegeffectsgofgBusinessgtransactionsgongaccounts?
g
Realizeghowgmanygaccountsgaregbeinggimpactedgfromgthegtransactionsg
Itgcouldgbegangincreasegorgdecreasegingtheirgbalanceg
NOTE:ggThegaccountinggequationghavegtogalwaysgremaingbalanced
gAnalyzinggbusinessgtransaction
Firstgaskgyourselfghowgmanygaccountsgareginvolvedgingthisgtransactiong
Cashgisgonegofgthemgandgbecausegofgincreasegingthegbusinessgandgcapitalgbecausegheg
hasgnowgagbusinessg
Ex.g1ggLinhgcontributedg$100,000gcashgtogestablishghisgAccountinggservicegbusiness
Assetsg =g Liabilitiesg +g Equity
Cashg+$100,000 gggggggggggCapital+$100,000
Ex.2ggLinh’sgAccountinggservicegBusinessgpurchasedgagcargforg$50,000gandgpaidgcash.g
Assetsg =g Liabilitiesg +g Equity
Carg+$50,000
Cashg-$50,000
Ex.3ggLinh’sgAccountinggServicegBusinessgborrowedg$20,000gasgagbusinessgloangfromgANZgba
nk.g
g
Weekg1.1
Whatgisgangaccountg?
Everygsinglegthinggingagbusinessgwillghavegonegaccountgandghavegangaccountgnumber
Examplesgsuchgasgland,gcar,rentg
Thegpurposegofgangaccountgisgtogkeepgtrackgofganyggimpactgofgthegbusinessgtransactiongofgthatg
gparticulargitemg
AngaccountgcontaingagTgaccount,gthegleftgsidegandgthegrightgsideg
Ingthegaccountinggsystemgeverygsinglegitemgingthegaccountgwillgcontaingangaccountgnumberg
Everygsinglegitemgshouldghavegonegaccountgandgonegaccountgnumberg
Whatgaregthegfourgfinancialgstatements?
Financialgstatementgisgusuallygpreparedgingthegendgofgthegyeargingagbiggdocumentgwhichgisgcall
edgAnnualgreportg
Angannualgreportgwillgincludeg
-
Incomegstatementg(whichgisgalsogcalledgasgFinancialgPositiongorgalsogcalledgProfitgandgLoss
gStatementgorgcalledgasgComprehensivegincome)g
-
Balancegsheetgstatementg(whichgisgalsogcalledgthe:EquitygstatementgorgalsogcalledgthegState
mentgofgfinancialgposition)g
-ChangesgingEquity
-Cashgflowgstatementg
Incomegstatement:ggreportsgthegrevenuesgandgthegexpensesgandgthereforegthegprofitgandgt
heglossgofgthegbusinessg
Ifgthegrevenuegisghighergthangthegexpensesgitgisgagprofitg
Butgifgthegrevenuegorgthegtotalgrevenuegisglessgthangthegtotalgofgexpensesgthangweghavegaglossg
,Revenue-Expenses=ProfitgorgLoss
Thegpurposegofgangincomegstatementgisgtogmeasuregthegfinancialgperformancegofgagfirmgorgagb
usinessgingtermsgofgsellinggthegproductsgorgservicesgtogthegclientsgandgalsogcontrollinggthegexpe
nsesgwithingthegbusinessgoperation.g
Balancegsheetgstatement:
Thegbalancegsheetgstatementgreportsgthegassetsgthegliabilitiesgandgthegequity
Assets=Liabilitiesg+gEquitygg
ItgisgcalledgthegBasicgaccountinggequationg
ChangesgingEquitygstatement:
gThisgstatementgreportgthegchangesgingequityg
WhichgincludegthegRetainedgearningsgandgDividend
Cashflowgstatement:
Itgwillgreportgthegchangesgingcashgactivitiesgfromg
Operatinggsection,InvestinggandgFinancingg
Whatgisgthegbasicgaccountinggequation?
Assets=Liabilitiesg+gEquitygg
Whatgisgagcurrentgasset
gAregcashgandgothergassetsgthatgaregreasonablygexpectedgtogbegrealizedgingcashgwithingonegye
argorgduringgthegnormalgoperatinggcycle,gwhichevergisglonger.g(Itgisgagshortgtermgasset)g
Ex.gShortgtermginvestment,ginventory,g
Cashgandgcashgequivalents
Accountsgreceivable
Prepaidgexpenses
Inventory
Marketablegsecurities
,Whatgisgagnongcurrentgassetg
gAregassetsgandgcashgthatgaregnotgexpectedgtogbegconvertedgintogcashgwithingonegyeargfromgth
egdategofgthegbalancegsheet.
gEx.gplant,gpropertygLand,gandgequipmentg(PP&E)
Trademarks
Long-termginvestmentsgandggoodwill—whengagcompanygacquiresganothergcompany
Assetsgincludeg Liabilitiesgincludeg
Equipment Accountgpayablegagbusg
Expense
Accountgreceivableg
Prepaidgexpenseg
Equipmentg
Landg
Buildingg
Houses
Assetginclude
Equipment
Accountgreceivableggisgwhengtheyghavegreceivedgtheggoodgandgservicesgbutghaven’tgpaidgforgi
tgyetg(Representgmoneygowedgtogyourgbusinessgbygcustomers)
Land
Houses
Building
Prepaidgexpensegpayinggthegfuturegexpensegingadvanceg
Liabilityginclude
Accountgpayablegitgisgwhengagcompanygpaysgforgaggoodgandgservicesgusinggcreditg(Itgreprese
ntgthegmoneygthatgyourgbusinessgowesgtogsuppliers)
g
Unearnedgrevenuegitgisgwhengthegcustomergpaysgforgtheggoodgandgservicesgbutghaven’tgreceiv
edgtheggoodsgandgservicesgyetg
Notegpayablegitgisgaglonggtermgliabilityg
Weekg1.2
DebitsgandgCredits
, g
WhatgisgthegpurposegofgDebitgandgCreditg
Theygaregusedgtogstandardizegtheglanguagegtogusegthegtechnicalgtoolsgtogdogrecordinggingagbusi
nessgtransactiong
Notgnecessarilygincreasegorgdecreaseg
Andgnotgplusgorgminusg
Itgisgalsognotgagdebitgcardgorgcreditgcard.g
NOTE:gCreditgdoesgnotgmeangnecessarilygdecreaseg
Debitgdoesgnotgmeangnecessarilygtogincreaseg
ThegleftgsidegofgthegTgstructuregofgangaccountgisgdebitgorgalsogcalledgasg(DR)
ThegrightgsidegofgthegTgstructuregofgangaccountgisgcalledgthegcreditggorgalsogcalledgasg(CR)
Weekg1.3
WhatgaregthegeffectsgofgBusinessgtransactionsgongaccounts?
g
Realizeghowgmanygaccountsgaregbeinggimpactedgfromgthegtransactionsg
Itgcouldgbegangincreasegorgdecreasegingtheirgbalanceg
NOTE:ggThegaccountinggequationghavegtogalwaysgremaingbalanced
gAnalyzinggbusinessgtransaction
Firstgaskgyourselfghowgmanygaccountsgareginvolvedgingthisgtransactiong
Cashgisgonegofgthemgandgbecausegofgincreasegingthegbusinessgandgcapitalgbecausegheg
hasgnowgagbusinessg
Ex.g1ggLinhgcontributedg$100,000gcashgtogestablishghisgAccountinggservicegbusiness
Assetsg =g Liabilitiesg +g Equity
Cashg+$100,000 gggggggggggCapital+$100,000
Ex.2ggLinh’sgAccountinggservicegBusinessgpurchasedgagcargforg$50,000gandgpaidgcash.g
Assetsg =g Liabilitiesg +g Equity
Carg+$50,000
Cashg-$50,000
Ex.3ggLinh’sgAccountinggServicegBusinessgborrowedg$20,000gasgagbusinessgloangfromgANZgba
nk.g
