Income Statement
Gross Profit isn't a critique on Capitalism.
___ - ____ =
Gross Profit
What is
Income - Expenses ?
More specifically, Sales - Cost of Goods Sold
this is anything owned by the business having monetary value
what is an asset?
ex: cash, amts owed by customers, property, vehicles, trademarks, etc
this is the purpose of accounting
What is to 1)identify, 2)record and 3)communicate financial information?
This is the primary factor needed to increase equity resulting from the operation of a business
What is net income?
Primarily driven by increases of Sales/Revenue
This is the focus of our client
these 3 business organization types need accounting services
What are 1)sole proprietorships, 2)partnerships and 3)corporations?
BOTH businesses and individuals need tax services, by contrast.
Income Statement is populated by temporary accounts. Provide examples of temporary accounts on the income statement
These are examples of temporary accounts: What is a Sales, Revenue, or Expense account. NOT on the Income statement but also included is Owner's Draw.
Each of these must be zero'd out each fiscal year
a balance sheet report is created to show this
What is the financial position
of a person or business?
By contrast, the Income Statement shows the performance of the business
The balance sheet is populated by permanent accounts, name some balance sheet accounts
What are cash and other assets as well as liabilities. Permanent account means it transfers year to year. Must be reconciled at 12/31 each fiscal year.
Money is not posted until actually spend or received.
What is the Cash Basis accounting system?
(Default for tax preparation)
ProSeries and QuickBooks are examples of these
What are accounting computer programs?
names as many parties you can think who are interested in a business organizations financial statements
What are 1) Business Owners / Stockholders, 2) Banks (Loans), and 3) Government (Debt)?
A bonus answer is wider stakeholder community (customers, related parties, etc.)
owners equity can go by other names. List 3
What is Capital?
What is Shareholder Contribution/Distribution?
What is Owners Draw?
What is Partner Equity?
What is Opening Bal. Equity?
NOT Retained Earnings/Net Income but most/all of EQUITY-type accounts
In practice, we see a lot of auto loan payments and also SBA Loan payments and these should all go the the LIABILITES section against the appropriate loan
A table of contents listing every authorized bookkeeping account in a business’s accounting system.
What is the Chart of Accounts?
It's searchable, its organized
It can be long but we want it to be more detailed than long. It's best if each account present is used and unused means unneeded.
General Ledger report is just the chart of accounts (but for a period of time)
this accounting principle means that a company should use the same accounting methods and principles from one accounting period to another unless a valid reason exists for changing them.
the consistency principle
SG&A, the acronym for the expenses incurred to promote, sell and deliver a company's product/service, and to manage the overall company.
What is Selling, General and Administrative?
invoices received or sent would be recorded into these non-cash accounts
What are Accounts Payable and Accounts Receivable? When we record invoices directly into QuickBooks, these are the functions employed.
Takeaway: Each invoice either received or sent needs to be LINKED up to a payment (in/out). Otherwise it becomes uncleared junk in the system for years
These are the 5 main activities involved in accounting
What are 1) Gathering financial information, 2) Preparing and collecting records, 3) Summarizing and classifying financial information, 4) Preparing formation reports and summaries and 5) Establishing controls to promote accuracy and honesty among employees?
These are examples of temporary accounts
What is a Sales, Revenue, Owner's Drawing, or Expense account
This GAAP principle states that accounting for a business needs to be kept separate from the personal affairs of the owner.
What is the Business Entity Concept?
AKA commingling
Book as shareholder distribution but monitor that distribution is not greater than YTD Net Income
- It's really bad if the personal draw > business net income
These types of entries prepare the temporary accounts for the new fiscal period.
What are the Closing Journal Entries?
state 'the accounting equation' in two different ways
What is 1) Assets-Liabilities=Owner's Equity and 2) Assets=Owner's Equity+Liabilities? or 3) Liabilites=Assets-Equity (no sense)
Takeaway: Clients would need assets> SBA Loans to have positive equity (considered an expectation)
I have a negative account balance
What is.. Review any 'uncleared' items and verify no unusual transactions threw the balance off?
Every business transaction affects two or more accounts and total debits must equal total credits. Name the accounting system
doluble-entry system
If a business closes, the claims of these individuals are settled first.
Who are Creditors?
In addition to the owner, the creditor holds direct rights against the assets against the company (until they are no longer creditors)