managing-budgets

So for example perhaps all utilities for the

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Unformatted text preview: he Marketing department utility expenses add a sub-identifier of 001, followed by another sub-identifier to denote the actual expense. So, let’s imagine you’re looking at all the charges for waste disposal across multiple locations. It could look like this: Marketing: 501004-001 IT: 501004-002 Training: 501004-003 Another way of dividing the chart of accounts is to have the first part of the account number identify the source of the fund that is used to pay for the expense or the destination fund of where the revenue will be going. You see this when an organization has regulations that limit or define how revenue needs to be used. For example, if your organization has received a government grant, you may have to use that grant only for specific activities. You can use your chart of accounts to help you track the expenses you use that grant money for, which will make your life easier if you have to demonstrate your use of the grant funds. When you examine your budget, you will also see that the Chart of Accounts is used to differentiate between the different funds listed on the document. When referring to the budget, you will hear each account number called a ‘line item.’ 3.4 The General Journal (Original Book of Entry) The General Journal is used to record daily transactions that occur. Today, this is usually done electronically with financial software, but of course it used to be done in a large written journal. In order to record transactions correctly, you need to know the rules accountants use called “transaction analysis.” The two rules are: Asset and Expense accounts increase with a debit and decrease with a credit. Liability, Equity, and Revenue accounts increase with a credit and decrease with a debit. The first rule will sound counter-intuitive, but it’s because there is a corresponding entry made that will ‘balance out’ the accounts. You may have heard this process referred to as ‘double-entry’ bookkeeping. To understand the process, imagine that you purchase a computer with...
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This note was uploaded on 06/07/2013 for the course BA 201 taught by Professor Cuongvu during the Fall '13 term at RMIT Vietnam.

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