The Accounting Cycle

The Accounting Cycle - THE ACCOUNTING CYCLE Understanding...

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THE ACCOUNTING CYCLE Understanding the Relationships Between Accounts
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LESSON ONE
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THE ACCOUNTING EQUATION Assets = Liabilities + Stockholders’ Equity
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ASSETS Things of value that are owned or controlled by the company.
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EXAMPLES OF ASSETS Cash Land Building Equipment Investments Prepayments
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MORE EXAMPLES OF ASSETS Inventory Supplies
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INVENTORY VS. SUPPLIES Inventory is composed of the assets that we buy to resell. Supplies are the assets that we buy to use over less than a year’s time.
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MORE EXAMPLES OF ASSETS Accounts Receivable Notes Receivable
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ACCOUNTS RECEIVABLE Accounts Receivable are composed of the bills that we have sent to our customers for the work that we have done or the products that we have sold. They are normally due within 30 days.
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NOTES RECEIVABLE Notes Receivable are loans that we have made to others either for cash or as part of a sale. They can cover any length of time.
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THE ACCOUNTING EQUATION Assets = Liabilities + Stockholders’ Equity
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LIABILITIES Obligations to pay cash, transfer other assets, or provide services.
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EXAMPLES OF LIABILITIES Accounts Payable Notes Payable Unearned Revenue Mortgage Payable
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THE ACCOUNTING EQUATION Assets = Liabilities + Stockholders’ Equity
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STOCKHOLDERS’ EQUITY The ownership interest in the net assets.
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CAPITAL STOCK Capital Stock is a component of Stockholders’ Equity. It is the ownership of the company divided into units and purchased by others.
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DIVIDENDS Dividends are one of the ways that shareholders are rewarded for owning stock in the company. A dividend is a distribution to the shareholders of cash, other assets, or more stock.
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Revenues are the earnings from selling a product or providing a service We do not have to receive cash to have a revenue. We must simply do the work. Why is Unearned Revenue a liability account
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The Accounting Cycle - THE ACCOUNTING CYCLE Understanding...

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