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Week2ReviewAcctg - Review of the Accounting Process Anthony...

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Review of the Accounting Process Anthony Meder, Ph.D. Week of Sept. 5, 2011
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2 The accounting equation A ssets = L iability + E quity What are the definitions for Assets, Liability, and Equity? There are two sides to every event. Reflection of the balance sheet. Be careful with equity and the income statement
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3 Accounting equation cont’d. (Equity) Equity Increase Decrease Include in income statement Revenues Expenses Never in income statement Owner Contribution Owner Withdrawal
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4 What are ‘Accounts’? Account” refers to one specific item included in each “element”. Assets: cash; account receivable; inventory; property, plant, and equipment (PPE). Liabilities: account payable; notes payable; long-term debt. Revenue: sales revenue. Expense: interest expense; salary expense; advertisement expense. Gains Losses Equity: owner’s contribution; retained earnings, dividend.
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5 Debits and credits How account types increase and decrease Balance Sheet Income Statement Asset = Liability + Equity Revenue - Expense Debit + - - - + Credit - + + + -
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