morokoff

Smartly Institute

via Smart.ly Platform

02.08.2018

Online Educational Course “Accounting 1: Fundamentals”

Certificate.pdf

Introducing the Balance Sheet

All companies must follow a set of rules that standardizes the reporting and recording of their financial data.
While US companies follow Generally Accepted Accounting Principles (GAAP), companies in most other countries follow the International Financial Reporting Standards (IFRS). The balance sheet gives a glimpse into the health and composition of a business.
Double-entry bookkeeping: A transaction requires at least two entries to keep the balance sheet balanced.
Dual-aspect concept: If there is a change in the total amount of assets, there needs to be a resulting change in liabilities, equity, or both.
Money-measurement concept: Only items expressed as monetary amounts can go on a balance sheet.
Entity: A business, company, or organization.
Entity concept: A business’ finances are separate from its owner’s finances.
Going-concern concept: Accounting assumes that an entity will operate indefinitely.

Assets, Liabilities, and Equity

Assets: Items owned and controlled by an entity, valuable to the entity, and acquired at a measurable cost.
Current assets are assets expected to be converted into cash or used up by the business within one year.
Accounts Receivable: Where a company records credit purchases by its customers. The company expects these customers to pay them in cash in the near future.
Inventory: Goods an entity intends to sell.
Prepaid Expenses: Monies paid in advance for pending expenses—for example, paying rent in advance. Noncurrent assets will not be used up or converted into cash for at least one year.
Property, Plant and Equipment (PP&E): Tangible assets that depreciate, or lose value, over time due to wear and tear.
Creditor: Anyone who lends money or extends credit.
Liabilities: Debts owed to outside entities (creditors) in return for borrowed goods, services, or monies.
Current Liabilities: Obligations that will be paid within one year.
Long-Term Liabilities: Obligations that won’t be paid until at least a year has passed.
Bank Loans (Bank Loan Payable) can be recorded under both current and long-term liabilities.
Accounts Payable: Obligatory monies owed by an entity for goods and services. The opposite of Accounts Receivable.
Estimated Tax Liability: The estimated amount of what will be due in taxes per year.
Equity: Money (capital) either supplied by equity investors or collected in the form of an entity’s retained earnings.
Paid-In Capital: Money supplied by investors.
Retained Earnings: Income generated by an entity’s successful operations that is reinvested in the entity.
Proprietorship: An entity with one sole owner and investor.

Account Types

T-accounts: Charts used to record increases and decreases of individual accounts found on the balance sheet.
Debits: Represent an increase in an asset but a decrease in a liability or equity.
Credits: Represent a decrease in an asset but an increase in a liabilty or equity.
Asset accounts will normally have debit balances. Liability & Equity accounts will normally have credit balances.
Two special equity accounts are Revenues and Expenses. Revenues are increases in equity and usually have a credit balance. Expenses are decreases in equity and usually have a debit balance. Revenues are debited and credited like other equity accounts, but Expenses are debited and credited like asset accounts.

Accounting Transactions

Income Statements are used to calculate net income.
Net Income: The difference between total revenues and total expenses.

Net Income = Total Revenues — Total Expenses

Balance Sheets record one point in history and show a company’s financial position. Income Statements measure a company’s financial performance over a period of time.
General Journal: The chronological record of every transaction. A journal uses the same rules as a T-account.
General Ledger: The collection of all T-accounts.
Revenues and Expenses are temporary accounts. At the end of a period they are closed out and their balances are transferred to the income statement. Other asset, liability, and equity accounts are permanent accounts. They are not closed out, and their balances are transferred to the balance sheet.

Certificate