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ACCOUNTING ACTIVITIES
Identifying Business Activities
Economic activities
Accounting links decision makers Accounting with economic information activities & with the results of their decisions
Decision makers
Actions (decisions)
Lenders Governments
Sales Staff
Shareholders Customers
Officers
Budget Officers
Operating Activities
Generating income via sales and services
Investing Activities
Buying resources (assets)
8
TYPES OF ACCOUNTING
Tax
Financial Managerial
Financial Accounting - Chapter 1 11
ASSETS
Cash
Notes Receivable
Land Buildings
Store Supplies
LIABILITIES
Notes Payable
Accounts Payable
Wages Payable
Other Payable
EQUITY
Owner Investments/ Capital paid- in Owners claims on assets Owner Withdrawals
Retained earnings
Assets
(Economic resources)
Answer
Revenues Expenses = Net income (Net loss) Assets = Liabilities + Owners equity
Operating cash flows Investing cash flows Financing cash flows Increase or decrease in cash during the period
Financial Statement
Income statement
5,000
35,000
16
50,000
Non-current assets
Office equipment Vehicles Total assets Current liabilities Creditors Loan
Non-current liabilities
Loan (due 30/6/07) Owners equity Capital K.Wilson Total liabilities & equity
17
21
Revenue is Recognized
Expense is Recognized
Recognition is the process of recording (incorporating) an item into the financial statements as an asset, liability, revenue, expense, etc.
Accrual principle:
Profit =
THE ACCOUNT
5 types of Accounts are: Assets, Liability, Equity, Revenue and Expense Assets = Liabilities + Stockholders' Equity
T-ACCOUNTS
Account Title Debit LEFT SIDE
Accounting Equation: Rules of Debit and Credit:
Assets
Liabilities
Debit Credit
Debit Credit +
Debit Credit +
T - ACCOUNTS
Assets = Liabilities + Owners Equity
Assets
Increases Decreases Liabilities Decreases Increases
Revenue
Increases Decreases
Decreases Increases
DOUBLE-ENTRY ACCOUNTING
Vehicles
Cash at bank
Mar 1 Vehicles 18,000 Mar 4 Wages 400
18,000
Wages
Mar 4 Cash at bank 400
Revenue
Debit
31