ACCOUNTING 1MR. CROWELL

Accounting basics

Common termsAccounts Payable-

Current amount owed by a business or other businesses for goods or services purchased on credit.

Accounts receivable-

Current asset or the amount still owed to a business by clients

or customers who have purchased services on credit.Accrual Bases-

The accumulation of either expenses or revenue based on value alone rather than actual cash value.

Assets-

Anything a business owns or controls that has a monetary value. If an asset is owned it is also considered Equity.

Common Terms Cont’dEquity-

The equity of a business indicates its net worth or book value. Equity equation is E=A-L or Equity= Assets-Liabilities

Gross Profit-

A business’s gross profit is an indicator of how well the company is doing. It is calculated by subtracting the total cost of goods and services from total sales. Obviously we want a positive gross profit, or to be “ IN THE BLACK” not “IN THE RED”

Your basic Accounting Equations

Assets = Liabilities + Capitol or shareholders equity

In another way

Net income= Income - expenses

Equity= Assets – Liabilities

WRITE THESE DOWN YOU WILL USE THEM!!!!!

Our Basic Accounting Principles

Revenue-

Also known as the realization principal, states that revenue is earned when a sale is made or goods and services are provided

Expense-

This occurs when a business uses goods or receives services. In other words it’s the opposite of Revenue

Matching-

When you see revenue you should match to related expenses

Unit of measure assumption-

States that the business’s domestic currency is the appropriate unit of measure.

Separate entity assumption-

States that a business entity, is separate thing from its owner.

Types of ownershipSole proprietorship-

One individual or married couple own business. This is most common form.

General Partnership-

2 or more persons who agree to contribute money, labor, and skills to a business.

Limited partnership-

Usually has one or more general partners and one or more limited partners. General partners share in profits and losses but limited partners share profits but only suffer losses to the extent of their investment.

Limited liability partnership-

Like a general partnership, only one partner has no liability for the other.

These are the first we will cover! There will be more! Dun dun dun!!!

LIFO AND FIFO

LIFO-

Last in first out- This means that that the most recently produced items are recorded as sold first. Using this method can reduce income taxes during inflation:

FIFO-

First in first out- This simply means that the oldest inventory items are recorded as sold first.

Possible FuturesCPA- Certified public accountant

These people do your taxes!! Usually a 4year degree and you must be certified.

Bookkeeper-

This is a very detailed oriented job. Handling finances for business’s. It does not require a 4 year degree.

Accounting clerk-

Assists the accountants with routine tasks. More narrowly focused than a bookkeeper.

Accountant-

VERY DETAILED ORIENTED!! Problem solver, can communicate complex financial information. You will need more that just an accounting degree. Must take CPA exam and usually is a member of one or more associations.

Why?

Trust me when I say this class will help you in the real world, I am telling the truth! Its not like some classes “???? algebra,” you will actually use this stuff I promise…