Accounting 101

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The process by which financial information about a business is recorded, classified, summarise, interpreted, and communicated to owners, managers, and other interested parties.

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Accounting

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This is designed to accumulate data about affirms financial affairs, classifying the data in a meaningful way, and summarize it in periodic reports.

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Accounting system

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Periodic reports of affirms financial position or operating results. A product of the accounting system.

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Financial reports.

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A designation that assures an individual possesses the level of knowledge and skills needed to carry out all key accounting functions through the adjusted trial balance.

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Certified bookkeeper

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What are the 3 areas of accounting

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Public managerial and governmental.

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The review of financial statements to assess their fairness and adherence to generally accept it accounting principles.

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Audits

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Preparation of tax returns and the audit of those returns.giving advice to clients on how to structure their financial Affairs in order to reduce tax liability

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Tax accounting.

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Helping plants improve their information systems or their business performance.

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Management advisory services.

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Working for a single business in an industry. Private accounting

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Managerial accounting.

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establishes accounting policies

manages the accounting system

prepare financial statements

interprets financial information

provides financial advice to management

prepares tax forms

tax planning services

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Managerial accountant

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Keeping financial records and preparing financial work ports as part of the staff of federal, state, or local governmental units.

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Governmental accounting

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Who are the users at financial information?

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Owners and managers

suppliers

banks

customers

tax authorities

regulatory agencies

investors

unions

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Having its own identity. individual,town,business.

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Entity.

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Refers to a business or organization whose major purpose is to produce a profit for its owners.

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Economic entities.

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Nonprofit organizations

cities, public schools, and public hospitals.

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Social Entities

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Three types of business entities

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Sole proprietorship

partnership

corporation.

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A business entity that is separate from its owners and has the right to own property.

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Corporation.

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Accounting standards developed and applied by professional accountants.

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Generally accepted accounting principles GAAP

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Who developed GAAP and who requires all publicly owned companies to follow GAAP?

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FASB

SEC

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Any financial event that changes the resources of a firm.

purchases, sales, payments, etc

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Business transaction.

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An owners of financial interest in the business

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Equity or capital.

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Property that a business owns

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Assets

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Debts are obligations of the business

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Liabilities

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Owners financial interest.

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Owner's equity.

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This shows the firm's financial position on a given date; reviewing the firm's assets, liabilities, and owners equity.

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The balance sheet

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Shows the amount and types of property the business owns, the amount owed creditors, and the owners interest.

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The balance sheet

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The relationship between assets and liabilities plus owners equity; what the entire accounting process is based on.

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The fundamental accounting equation.

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Increases an owner's equity

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Revenue

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Decreases an owner's equity

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Expenses.

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Funds taken from the business by the owner for personal use; A decrease in owner's equity

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Withdrawals.

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This shows the results of business operations for a specific periodof time; Shows the revenue earned and the expenses of doing business.

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The income statement

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Reports the changes that occurred in the owner's financial interest during the reported.

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Statement of owner's equity.

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When is the statement of owner's equity prepared?

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Before the balance sheet.

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The current worth of an asset or the price the asset would bring if sold on the open market.

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Fair market value

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Written records of the assets, liabilities, and owners equity of a business.

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Accounts

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A means of identifying each account as an asset, liability, or owners equity.

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Classification

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Consists of a vertical line and a horizontal line that resemble the letter t.

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T accounts

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The difference between the amounts recorded on the 2 sides of an account.

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Account balance

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The increase side of an account

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Normal balance

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An outflow of cash, the use of other assets, or the incoring of a liability.

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Expense

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A special type of owner's equity account set up to record the owners withdrawal of cash from the business.

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Drawing account

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An entry on the left side of the account.

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Debit

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On entry on the right side of an account

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Credit

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An accounting assistant that involves recording the effects of each transaction as a debit and a credit.

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Double entry system

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A statement that tests the accuracy of total debits and credits after transactions have been recorded.

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The trial balance.

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An accounting error in balding a misplaced decimal point..

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Slide

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A list of all the accounts used by a Business two record it's financial transactions

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Chart of accounts.

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An account that is kept open from one accounting period to the next.

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Permanent account, real

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An account whose balance is transferred to another account at the end of the accounting period

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Temporary account, Nominal