fundamentals of accounting

• The purpose of accounting is to record, classify, summarize, interpret, and communicate economic events that have occurred during an organization's operations.
• Account title describes the specific item of assets, liability, equity, income or expense
• Debit side the left side of the account
• Credit side the right side of the account
• Assets - resources owned by the business
• Equity - residual interest in the assets of the business after deducting liabilities
• Liabilities - obligations owed by the business
• Revenue - increase in economic benefits during an accounting period from delivering goods or services to customers
• Liability - obligations to pay money owed to others
• Income Statement - records revenues and expenses over a period of time
• Expense - decrease in economic benefit during an accounting period as a result of using up goods or services to produce revenue
• Gains - increases in equity (net assets) from peripheral or incidental transactions of an entity
• Losses - decreases in equity resulting from other transactions than expenses
• Income Statement (Profit & Loss) - summarizes revenues, gains, expenses, losses, net income/loss over a specific time period.
• Balance Sheet - shows what the company owns (assets) and how it is financed (liabilities)
• Cash Flow Statement - reports cash inflows and outflows, including operating activities, investing activities, and financing activities.
• Balance Sheet - shows what the company owns (assets) and who it owes (liabilities)
• Net Income/Profit = Revenue - Expenses
• Balance Sheet - shows the financial position of a business at a specific point in time, including its assets, liabilities, and owner's equity.
• Assets - resources controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise
• Balance sheet- shows the financial position of business
• Income Statement- shows the profit or loss
• Journals- the book of original entries of the accounting entries of the business
• Specific Journal- used to record the details of a specific transaction or event.
• Sales Journal- A record of sales transactions, including the date, amount, and type of sale.
• Purchases Journal- A journal that records the purchases of inventory items.
• Cash disbursement- cash payments made to suppliers, employees, and other parties
• Cash receipt journal- A journal that records cash receipts and cash payments.
• General Journal- A book of accounts that cannot records all of a business.
• Ledgers- book of secondary entries
• General Ledger- A record of all transactions that have been recorded in the accounting system.
• Subsidiary Ledger- A subsidiary ledger is a ledger that is used to record transactions that are not directly related to the main ledger.
• double entry system- all transactions are recorded in two places, one for the debit side and one for the credit side
• the concept of duality- two fold affect on values
• equilibrium- equal debits and credits on both sides of the balance sheet
• Asset- normal balance is debit
• Liability- normal balance is Credit
• Equity- normal balance is Credit
• Income- normal balance is credit
• Expense- Normal balance is Debit