Basic Accounting Basic Accounting CourseCourse

YESCO 2009 Office Managers YESCO 2009 Office Managers ConferenceConference

What are Financial Statements?What are Financial Statements?

Documents that show the results of Documents that show the results of business decisions made by managementbusiness decisions made by management

They are used by creditors, investors and They are used by creditors, investors and managers as a basis for making future managers as a basis for making future decisionsdecisions

Types of Financial StatementsTypes of Financial Statements

Balance Sheet: A snapshot of a Balance Sheet: A snapshot of a company’s financial positioncompany’s financial position

Income Statement: Report of a company’s Income Statement: Report of a company’s profitability for a specific period of timeprofitability for a specific period of time

Other Financials: Statement of Cash Other Financials: Statement of Cash Flows, Statement of Retained Earnings or Flows, Statement of Retained Earnings or Stockholder’s EquityStockholder’s Equity

Balance SheetBalance Sheet

Assets = Liabilities + Owner’s EquityAssets = Liabilities + Owner’s Equity Assets: Things of value owned by a businessAssets: Things of value owned by a business Liabilities: Creditor claims against assetsLiabilities: Creditor claims against assets Equity: Owner claims against assetsEquity: Owner claims against assets

Income StatementIncome Statement

Revenue – Expenses = Net IncomeRevenue – Expenses = Net Income Revenue: Inflow of assets that result from the Revenue: Inflow of assets that result from the

sale of products or rendering services to a sale of products or rendering services to a customercustomer

Expenses: Costs incurred to produce revenue Expenses: Costs incurred to produce revenue (cost of goods sold) or maintain the business(cost of goods sold) or maintain the business

Accounting for TransactionsAccounting for Transactions

Double Entry Accounting – A system of Double Entry Accounting – A system of recording each business transaction by recording each business transaction by means of a two-way, self balancing entrymeans of a two-way, self balancing entry There must always be at least 1 debit and 1 There must always be at least 1 debit and 1

creditcredit Debits and Credits are simply terms that Debits and Credits are simply terms that

indicate whether to increase or decrease the indicate whether to increase or decrease the balance in an accountbalance in an account

T Accounts are used to provide a visual T Accounts are used to provide a visual representation of account activityrepresentation of account activity

T AccountT Account                       

DEBIT – Left DEBIT – Left SideSide   

CREDIT – Right CREDIT – Right SideSide

  

  

  

  

  

  

  

  

DebitsDebits

Increase assetsIncrease assets Decrease liabilitiesDecrease liabilities Decrease stockholder’s equityDecrease stockholder’s equity Decrease revenueDecrease revenue Increase expensesIncrease expenses Increase dividendsIncrease dividends

CreditsCredits

Decrease assetsDecrease assets Increase liabilitiesIncrease liabilities Increase stockholder’s equityIncrease stockholder’s equity Increase revenuesIncrease revenues Decrease expensesDecrease expenses Decrease dividendsDecrease dividends

Business TransactionsBusiness Transactions

Measurable events that affect the financial Measurable events that affect the financial condition of a businesscondition of a business

Examples of business transactionsExamples of business transactions Paying a vendor for product/servicePaying a vendor for product/service Creating an invoice to a customerCreating an invoice to a customer Paying salaries to an employeePaying salaries to an employee Issuing petty cash to an employee for Issuing petty cash to an employee for

purchase of permitspurchase of permits

YESCO Processes a Utility Bill for YESCO Processes a Utility Bill for $100$100

Utilities Accounts Payable Cash

100   100  

     

     

     

YESCO Pays the Utility Bill for YESCO Pays the Utility Bill for $100$100

Utilities Accounts Payable Cash

100 100 100   100

     

     

     

YESCO Processes Time Card for YESCO Processes Time Card for $500 Bonus – charge to 8511$500 Bonus – charge to 8511

8511-XXXX - Wage Wages Payable Cash

500   500  

     

     

     

YESCO Issues check for $500 YESCO Issues check for $500 Bonus – charged to 8511Bonus – charged to 8511

8511-XXXX - Wage Wages Payable Cash

500 500 500   500

     

     

     

Yesco Invoices Customer for Cash Yesco Invoices Customer for Cash Sale Job with the below detailSale Job with the below detail

Amount of Invoice - $500Amount of Invoice - $500 Customer has a resale certificateCustomer has a resale certificate Job CostsJob Costs

Labor costs - $150Labor costs - $150 Materials costs - $100Materials costs - $100 PCO costs - $50PCO costs - $50

YESCO Creates Invoice to YESCO Creates Invoice to CustomerCustomer

Accounts ReceivableAccounts Receivable Revenue – Cash SaleRevenue – Cash Sale

500500    500500

     

     

     

YESCO Closes JobYESCO Closes Job

Work in ProcessWork in Process LaborLabor

   300300 150150

     

     

     

MaterialMaterial PCOPCO

100100 5050

     

     

     

Customer Pays YESCO InvoiceCustomer Pays YESCO Invoice

CashCash Accounts ReceivableAccounts Receivable

500500    500500

     

     

     

Group Exercises and Fun!!!!Group Exercises and Fun!!!!