Fundamentals
known as "The Language of Business"
Accounting
Assets are $10,000 & Liabilities are $3,500.
What is OE?
$6,500
If you have 3 assets, what line is below the 3 assets, when they are added up...
Total Assets
activity that changes assets, liabilities, and equity
Transaction
Owner invests cash in business
Cash and Capital
The planned compiled/summarized Accounting process is called:
Accounting System
Formula for Assets, Liabilities and Owners Equity
Assets = Liabilities + Owner's Equity
This Financial Report includes Sales/Revenue
a. Balance Sheet
b. Statement of Cash Flows
c. Income Statement
d. Net Worth Statement
Income Statement
Buy now, pay at future date
on account
Owner withdraws $150.00 cash for personal use
Cash/Asset decrease, Withdrawal/OE decrease
These documents report on financial condition
Financial Statements
Anything of value owned
asset
Net worth formula:
Total Assets minus ___
Total Liabilities
Asset for money due from customers
A/R
Pays $60.00 cash for comms bill
Cash -60
Expense -60
Entity to whom debt is owed
Creditor
Financial debt or money owed
liability
You own $400 in a checking account, $500 in books; college debt of $800
$100
Liability for goods bought on credit
A/P
Receives cash on account, 2,000
Cash +2,000
A/R +2,000
Total primary operating income
Revenue (or Sales)
This Account summarizes owner's equity
Capital account
What is the Financial Statement called that has Assets minus Liabilities
Net Worth Statement
Min. number of accounts per transaction
Two
Sold Services on account of $4,000. What accounts are affected and what amounts?
Accounts Receivable +4,000
Capital (revenue) +4,000