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Basic accounting in 10 mints

Basic accounting in 10 mints
This powerpoint teaches the basics of bookkeeping and accounting. It includes details about debits and credits, assets, liabilities, sales, and expenses. Examples are provided and a quick description of the chart of accounts, profit and loss statements and the balance sheet is also included.

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Basic accounting in 10 mints

  1. 1. Basic Accounting in 10 minutes Accounting PLus
  2. 2. BY Yousaf Certified Practising Accountant (CPA)
  3. 3. Disclaimer: This is very basic accounting. There are other things. I am not covering here.
  4. 4. is managing Debits and Credits. That is all.
  5. 5. Debits = Credit $5,000 worth of debits means You must have $5,000 worth of credit.
  6. 6. There are only two categories of Debits: 1) Assets 2) Expense
  7. 7. There are only “three categories” of credits: Liabilities, Equity, and Revenues.
  8. 8. Now a critic would say….. Contra-Assets are also Credit. Treasury stock are also Debit.
  9. 9. Blah blah blah I’ll get to that in a minute.
  10. 10. Assets are things you own. Liabilities are things you owe. Equity is your investment in the company.
  11. 11. Revenues are income you earn. Expenses are mostly bills you pay.
  12. 12. An Account is a “Catalogue Number” with a description. For Example: 101 Cash
  13. 13. Every account will fall into one of the “5 Categories”: Assets Expenses Liabilities Equity Revenues
  14. 14. A list of these accounts is called the “chart of Accounts”.
  15. 15. Now picture if things big “chart of accounts” listed all the activity in each account under their descriptions, with an ending balance.
  16. 16. 101 Cash 0.00 Deposit 5,00 Withdraw -1,00 Ending 400
  17. 17. Now when you have all your accounts listed this way you end up with this big book.
  18. 18. Whether electronic or paper, this “book” is called the General Ledger.
  19. 19. Now let us say you want to look at this big General ledger but without all that annoying details.
  20. 20. You want to see the account number, description and ending balance.
  21. 21. This short listing is called the “Trail Balance”.
  22. 22. Your Trial Balance will present the debit in the left column and your credit in the right column.
  23. 23. Each column will have the same total. Why? Because Debit equal Credit. Debit = Credit
  24. 24. Trail Balance
  25. 25. Remember all that annoying activity in the General Ledger? You have to put it in there manually.
  26. 26. And when you do, you are going to keep a separate “Journal” to remember. what you did
  27. 27. Let’s call these little entries in your journal, “Journal Entries”.
  28. 28. Computer systems record Journal entries in the Ledger and Journal at the same time.
  29. 29. Debit entries increase debit balances, and Credits decrease them.
  30. 30. Credit entries increase credit balances, and Debit decrease them.
  31. 31. We’re going to make a journal entry. Lets buy a Equipment for $50,000 cash
  32. 32. Journal Entry 1 Debit Credit 140Equipment $ 50,000 101 Cash $ 50,000
  33. 33. Oh no, we got the internet bill and it’s $50
  34. 34. Journal Entry 2 Debit Credit 405Utilities $ 50 201 Account Payable $ 50
  35. 35. Hey, we better pay that electric bill before they shut it off.
  36. 36. Journal Entry 3 Debit Credit 201Account Payable $ 50 101 Cash $ 50
  37. 37. We just painted a house for John and he’s gonna pay us $400 next month.
  38. 38. Journal Entry 4 Debit Credit 102Account Receivable $ 400 301 Revenue $ 400
  39. 39. Oh, No, John only paid us for half the paint job!
  40. 40. Journal Entry 5 Debit Credit 101Cash $ 200 403 Bad Debt Expense $ 200 102 Accounts Receivable $ 400
  41. 41. Are you starting to see the logic?
  42. 42. Did you notice how I increased and decreased accounts?
  43. 43. Remember the “5 Categories” of accounts? Let’s put them in two groups.
  44. 44. Assets, Liabilities and Equity are “Balance Sheet” accounts.
  45. 45. Revenue and expenses are “Income Statement” accounts.
  46. 46. Okay Lets fast forward to the end of the year.
  47. 47. Lets make an “Income statement” from the income statement account.
  48. 48. Income Statement Revenue $ 15,000 Expenses: Salaries $ 300 Utilities $ 200 Bad Debt $ 200 Total Expenses $ 700 Net Income $ 14,300
  49. 49. Now let’s take the balance sheet accounts and make a “Balance sheet”.
  50. 50. Balance Sheet Assets Cash $ 1,000 Accounts Receivable $ 5,000 Property & Equipment $ 70,000 Total $ 76,000 Liabilities Accounts Payable $ 5,000 Long Term Debt $ 3,000 Equity Retained Earnings $ 7,000 Paid-in-Capital $ 61,000 Total $ 76,000
  51. 51. Notice how it “Balance?” The top equals the bottom. Why?
  52. 52. Say it with me……. Debits equal credits Debits = Credits
  53. 53. Assets = Liabilities + Equity
  54. 54. But wait, If debits equal credits, how can a balance sheet balance with revenues and expenses?
  55. 55. At year end, we flushed the income statement accounts into retained earnings.
  56. 56. On January 1, all your “ Income statement accounts” will have “zero balances”.
  57. 57. All of your balance sheet accounts will remain the same, except for retained earnings.
  58. 58. Congratulations! You have the basic. But there’s more.
  59. 59. Lets talk about Contra-Asset accounts. There are two you should know.
  60. 60. These asset account have credit balances! They are negative.
  61. 61. The first one is called “Allowance for doubtful Accounts”
  62. 62. The balance represents the accounts Receivable that you won’t get.
  63. 63. Remember John and How He stiffed us for $200?
  64. 64. Assets Cash $ 10,000 Accounts Receivable $ 5,000 Allowance for Doubtful Accounts $ (200) $ 4,800 Property & Equipment $ 70,000 Total $ 84,800
  65. 65. Here is the Journal Entry that establishes the Allowance.
  66. 66. Journal Entry 6 Debit Credit 420 Bad Debt Expense $ 200 120 Allowance for Doubtful Accounts $ 200
  67. 67. The second contra- asset account is called “Accumulated Depreciation”
  68. 68. Here is what that looks like amongst the other assets:
  69. 69. Assets Cash $ 10,000 Accounts Receivable $ 5,000 Allowance for Doubtful Accounts $ (200) $ 4,800 Property & Equipment $ 70,000 Accumulated Depreciation $ (10,000) $ 60,000 Total $ 74,800
  70. 70. Ok I’ll Show where I got the $10,000 from.
  71. 71. Remember that Equipment we bought for $50,000? It’s only gonna last five years.
  72. 72. So logic would dictate that it loses $10,000 in value per year.
  73. 73. This is called Straight-line depreciation.
  74. 74. Lets book our depreciation expense for year one.
  75. 75. Journal Entry 7 Debit Credit 450 Depreciation Expense $ 10,000 140 Accumulated Depreciation $ 10,000
  76. 76. Remember I mentioned Treasury stock? It is an equity account with a debit balance.
  77. 77. Just keep that in mind. You may see it someday
  78. 78. Lets talk about Prepaid Assets.
  79. 79. The insurance bill came. $12,000 for the entire year. It’s due all at once.
  80. 80. That is $1000 per month expense, but it’s due now!
  81. 81. Let’s take this month’s expense and pre-pay that bad boy.
  82. 82. Journal Entry 8 Debit Credit 460 Insurance Expense $ 1,000 130 Prepaid Insurance $ 11,000 101 Cash $ 12,000
  83. 83. And finally, lets talk about Accrued Expenses which are liabilities.
  84. 84. I’m gonna throw some craziness at you, lets see if you like this.
  85. 85. Lets say it’s month-end or year-end and you wanna close the books.
  86. 86. Your employees have worked for two weeks but they don’t get paid until next month.
  87. 87. If you had lets say a $5,000 payroll, your journal entry may look like this:
  88. 88. Journal Entry 9 Debit Credit 450 Payroll-Salaries Expense $ 5,000 451 FICA Expense $ 383 452 FUTA/SUTA Expense $ 125 270 Accrued Payroll $ 5,508
  89. 89. You made it.
  90. 90. I hope you enjoyed this presentation.
  91. 91. Debits equal credit!!

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Basic accounting in 10 mints This powerpoint teaches the basics of bookkeeping and accounting. It includes details about debits and credits, assets, liabilities, sales, and expenses. Examples are provided and a quick description of the chart of accounts, profit and loss statements and the balance sheet is also included.

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