Accounting Perspective

Accounting - AC 100 Professor George M Brooker Fundamental Accounting Equation Assets = Liabilities Owners Equity(capital Assets anything a

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AC 100 Professor George M. Brooker
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Fundamental Accounting Equation Assets = Liabilities + Owners Equity (capital) Assets : anything a business owns , even if it is not paid for. Liabilities : anything a business owes . The creditors share of the assets. Owners equity : the owners share.
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Typical Assets 1. Cash : paper money, coin, checks. 2. Accounts Receivable : money owed to the business from sales on account - you want to convert accounts receivable to cash. 3. Supplies : quickly consumed & inexpensive. In the office & stores, ex: pens, plastic bags, etc. 4. Pre-paid assets : insurance, rent - assets that are paid for in advance and short lived. 5. Inventory : merchandise we buy or make to sell. 6. Equipment : long life & expensive, ex: vehicles, furniture, machinery.
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Typical Liabilities (What we owe) 1. Notes Payable : written promise to pay 2. Accounts Payable : the money we owe to suppliers for purchases on account (oral) 3. Taxes payable : to the state or the government 4. Wages Payable : pay for the workers 5. Unearned Revenue : ex - when someone prepays for a ball game or the theater
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Owners Equity 1. Sole Proprietorship : one owner, not a corporation 2. Partnership : two or more owners, not a corporation 3. Corporation : a separate legal entity created by the state (to protect your personal assets)
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The Theory of Debits & Credits 1. Debit is on the left side of an account. 2. Credit is on the right side of an account. 3. When referring to Assets , debit means plus (increase), credit means minus (decrease) Cash $100 cash for supplies 100 1. When referring to liabilities and capital (owners equity), debit means minus (decrease), credit means plus (increase) Acct Payable Bought $2000 worth of equipment on account 2000 1. Three forces that affect capital: RED R Revenue : sales, every business sells something (credit +) E Expenses : heat, light, salaries (debit -) D Drawing : to withdraw for personal use (debit -)
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The Accounting Cycle 1. Journalize 2. Post 3. Trial balance 4. Worksheet 5. Statements: Income, Capital, Balance Sheet 6. Journalize & post worksheet adjustment 7. Journalize & post closing entries 8. Post (after) closing Trial Balance
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Worksheet The worksheet is a tool that helps us make statements. Steps to make a worksheet : 1. Copy the trail balance into columns 1 & 2 on the worksheet. 2. Make necessary adjustments in columns 3 & 4 . (This is a correction to make it right) 3. Sort everything from the first 4 columns and put it into the last 4 columns . A. The likes we add. B. The unlike we subtract. 4. Compute the net income. Place the net income in two spots, into the smaller sides of both statements.
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Depreciation is always an Expense (Contra Asset) Depreciation X Accumulated Depreciation 1950 1950 Contra Assets are always subtracted from assets. Accrued = owed but not paid yet, Ex: wages “Used Up” = expense
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Journalize & Post Worksheet Adjustments 1) Closing to make an account equal to 0.
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This note was uploaded on 10/21/2010 for the course BUSINESS ACC-101 taught by Professor Brooker during the Spring '10 term at Bunker Hill.

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Accounting - AC 100 Professor George M Brooker Fundamental Accounting Equation Assets = Liabilities Owners Equity(capital Assets anything a

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