Accounting I Essentials
By Duane Milano
()
About this ebook
Related to Accounting I Essentials
Related ebooks
What is Financial Accounting and Bookkeeping Rating: 4 out of 5 stars4/5Intermediate Accounting I Essentials Rating: 4 out of 5 stars4/5Accounting: A Simple Guide to Financial and Managerial Accounting for Beginners Rating: 0 out of 5 stars0 ratingsBookkeeping Basics Rating: 5 out of 5 stars5/5Accounting Principles Comprehensive Guide to learn the Simple and Effective Methods of Accounting Principles Rating: 0 out of 5 stars0 ratingsAccounting Fundamentals Rating: 4 out of 5 stars4/5Accounting II Essentials Rating: 4 out of 5 stars4/5Cost & Managerial Accounting II Essentials Rating: 4 out of 5 stars4/5Financial Accounting Handbook Rating: 0 out of 5 stars0 ratingsCost & Managerial Accounting I Essentials Rating: 4 out of 5 stars4/5Basic Accounting Concepts: A Beginner's Guide to Understanding Accounting Rating: 0 out of 5 stars0 ratingsAccounting: Step by Step Guide to Accounting Principles & Basic Accounting for Small business Rating: 4 out of 5 stars4/5Accounting: Accounting made easy, including basic accounting principles, and how to do your own bookkeeping! Rating: 5 out of 5 stars5/5Easy Accounting: Simple Steps, Simple Solutions Rating: 0 out of 5 stars0 ratingsAccounting Rating: 5 out of 5 stars5/5Full Charge Bookkeeping, For the Beginner, Intermediate & Advanced Bookkeeper Rating: 5 out of 5 stars5/5Bookkeeping: Step by Step Guide to Bookkeeping Principles & Basic Bookkeeping for Small Business Rating: 5 out of 5 stars5/5Awaken the Accountant in You | Master the Accounting Basics in One Hour Rating: 1 out of 5 stars1/5Bookkeeping Basics: What Every Nonprofit Bookkeeper Needs to Know Rating: 4 out of 5 stars4/5The Handy Accounting Answer Book Rating: 0 out of 5 stars0 ratingsThe Essentials of Finance and Accounting for Nonfinancial Managers Rating: 5 out of 5 stars5/5How to Learn Quickbooks for Accounting Rating: 0 out of 5 stars0 ratingsAccounting for Non-Accountants: The Fast and Easy Way to Learn the Basics Rating: 4 out of 5 stars4/5Intermediate Accounting 1: a QuickStudy Digital Reference Guide Rating: 0 out of 5 stars0 ratingsFinancial Accounting and Reporting Study Guide Notes Rating: 1 out of 5 stars1/5Accounting: A Comprehensive Guide to Small Business Accounting, Budgeting, and Bookkeeping Rating: 0 out of 5 stars0 ratingsFinancial Statement Basics: From Confusion to Comfort in Under 100 Pages Rating: 4 out of 5 stars4/5Accounting Workbook For Dummies Rating: 3 out of 5 stars3/5Bookkeeping 101 For Business Professionals | Increase Your Accounting Skills And Create More Financial Stability And Wealth Rating: 0 out of 5 stars0 ratings
Accounting & Bookkeeping For You
Accounting For Dummies Rating: 5 out of 5 stars5/5The Intelligent Investor, Rev. Ed: The Definitive Book on Value Investing Rating: 4 out of 5 stars4/5The ZERO Percent: Secrets of the United States, the Power of Trust, Nationality, Banking and ZERO TAXES! Rating: 5 out of 5 stars5/5Bookkeeping For Dummies Rating: 5 out of 5 stars5/5Profit First (Review and Analysis of Michalowicz's Book) Rating: 5 out of 5 stars5/5The Tax and Legal Playbook: Game-Changing Solutions To Your Small Business Questions Rating: 3 out of 5 stars3/5The Book on Advanced Tax Strategies: Cracking the Code for Savvy Real Estate Investors Rating: 4 out of 5 stars4/5How to Start a Nonprofit Organization: The Complete Guide to Start Non Profit Organization (NPO) Rating: 4 out of 5 stars4/5Bookkeeping: An Essential Guide to Bookkeeping for Beginners along with Basic Accounting Principles Rating: 4 out of 5 stars4/5Accounting for Non-Accountants: The Fast and Easy Way to Learn the Basics Rating: 4 out of 5 stars4/5Bookkeeping: Step by Step Guide to Bookkeeping Principles & Basic Bookkeeping for Small Business Rating: 5 out of 5 stars5/5Start, Study and Pass The CPA Exam FAST - Proven 8 Step CPA Exam Study Playbook Rating: 5 out of 5 stars5/5Profit First for Therapists Rating: 0 out of 5 stars0 ratingsOvercoming Underearning(TM): A Simple Guide to a Richer Life Rating: 4 out of 5 stars4/5Taxpayer's Comprehensive Guide to Llcs and S Corps: 2016 Edition Rating: 5 out of 5 stars5/5Bookkeeping Kit For Dummies Rating: 5 out of 5 stars5/5The Nonprofit Fundraising Solution: Powerful Revenue Strategies to Take You to the Next Level Rating: 5 out of 5 stars5/5Accounting Rating: 5 out of 5 stars5/5QuickBooks: A Beginner’s Guide to Bookkeeping and Accounting for Small Businesses Rating: 0 out of 5 stars0 ratingsYour First CFO: The Accounting Cure for Small Business Owners Rating: 4 out of 5 stars4/5Bookkeeping Basics: What Every Nonprofit Bookkeeper Needs to Know Rating: 4 out of 5 stars4/5CPA Review Notes: Audit 2022 Rating: 5 out of 5 stars5/5Tax-Free Wealth: How to Build Massive Wealth by Permanently Lowering Your Taxes Rating: 0 out of 5 stars0 ratings
Related categories
Reviews for Accounting I Essentials
0 ratings0 reviews
Book preview
Accounting I Essentials - Duane Milano
ASSETS
CHAPTER 1
INTRODUCTION
1.1 DEFINITION OF ACCOUNTING
Accounting can be described as an information system that provides essential information about the financial activities of a business entity to various individuals or groups for their use in making informed decisions.
Accounting is primarily concerned with the design of the recordkeeping system, the preparation of summarized reports based on the recorded data, and the interpretation of those reports.
1.2 USERS OF ACCOUNTING INFORMATION
Users of accounting information can be quite varied, depending on the type of decision under consideration. Accounting information might be used for decisions involving investments, to impose income taxes, or for regulatory or managerial decisions. The process of using accounting to provide information to users is illustrated in Chart 1.2.1.
As shown in this diagram, the first step is to identify user needs. A properly designed accounting system can then generate summarized reports (using recorded transaction data) to meet those needs for accounting information. Users can then use those reports to make informed business decisions.
CHART 1.2.1
1.3 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
This broad range of potential users has brought about the evolution of Generally Accepted Accounting Principles (GAAP) used in preparation of financial statements. Many of these principles have been formally established by standard-setting bodies such as the Financial Accounting Standards Board (FASB). Others have simply gained acceptance through widespread use. Adherence to GAAP provides a measure of consistency in preparation of financial statements.
1.4 THE ACCOUNTING EQUATION
Assets are tangible or intangible properties owned by a business. The rights or claims to those assets are equities. Owners and creditors provide resources that enable a business to purchase assets and therefore are said to have equity in that business. For instance, an owner may start a business with $10,000 cash. This cash is used to buy equipment. The owner, who provided the funds for the equipment, has a claim to that equipment.
The relation between assets and equities is shown by the equation:
Assets = Equities
Equities can be subdivided into two categories: (1) Liabilities: rights of creditors represented by debts of the business, and (2) Owner’s Equity: rights of the owner or owners.
1.5 EXPANDING THE ACCOUNTING EQUATION
Expanding the original equation by using the two categories of equities shown in 1.4 yields the accounting equation:
Assets = Liabilities + Owner’s Equity
Creditors have preferential rights to the assets of a corporation. The residual claim of the owner or owners may be better understood by restating the accounting equation as:
Assets — Liabilities = Owner’s Equity
The dollar totals of both sides of the accounting equation are always equal, since they are simply two views of the same business property. The list of assets provides a description of the various business properties, while the list of liabilities and equity indicates the funding source for those assets.
1.6 TRANSACTIONS
A transaction can be defined as an occurrence or an event that must be recorded. Any business transaction can be stated in terms of the resulting change in the three basic elements of the accounting equation. The equality of the two sides of the accounting equation must be maintained upon completion of a transaction.
As an illustration, examine the result of a transaction to purchase land for $10,000 cash.
Assets (+$10,000 land — $10,000 cash) =
Liabilities + Owner’s Equity
In this case, assets would be increased by $10,000 to reflect the land purchase and decreased by $10,000 to reflect cash paid. The net effect on assets is zero, so the accounting equation remains valid.
As another example, modify the transaction above to reflect the purchase of land by borrowing $10,000 purchase price with a bank loan (also known as a note payable).
Assets (+$10,000 land) = Liabilities (+$10,000 note payable) + Owner’s Equity
In this case, assets and liabilities are each increased by $10,000. The accounting equation therefore remains