“Rich Dad Poor Dad is a starting point for anyone looking to If you purchase this book without a cover, or purchase Word Power Made Easy. CFI's Principles of Accounting book is free, available for anyone to download as a PDF. Download the free book now for 66 pages of valuable accounting lessons made easy. The bookkeeping section of CFI's accounting eBook includes. Where We're Going This book is broken down into two main parts: 1. it's likely easier to think of the Accounting Equation this way: Assets – Liabilities = Owners' Equity. We hope you learned what you expected to learn from this eBook.
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Read "Real Estate Accounting Made Easy" by Obioma A. Ebisike available from Rakuten Kobo. Sign up today and get $5 off your first purchase. All the. Accounting Made Simple: Accounting Explained in Pages or Less. Home · Accounting downloads Views KB Size Report. DOWNLOAD. Check our section of free e-books and guides on Accounting now! This note explains the following topics: Cost Accounting: Nature and Scope, Cost . accounting information to analyze business performance and make business decisions.
This section contains free e-books and guides on Accounting, some of the resources in this section can be viewed online and some of them can be downloaded. This note explains the following topics: Cost Accounting: This note covers the following topics: Topics covered includes: This note consists basically of the treatment of accounting transactions according to the provisions of relevant accounting standards. The aim of this note is to introduce you to basic principles of accounting and to understand how financial documents are posted into accounting record in order to determine the profit or loss of an organisation.
And the sale would show up on a September income statement. The second major difference between the income statement and the cash flow statement is that the cash flow statement includes several types of transactions that are not included in the income statement. XYZ Consulting takes out a loan with its bank. The loan will not appear on the income statement, as the transaction is neither a revenue item nor an expense item.
It is simply an increase of an asset Cash and a liability Notes Payable. As discussed in Chapter 4, dividends are not an expense. Therefore, the dividend will not appear on the income statement. It will, however, appear on the cash flow statement as a cash outflow. Categories of Cash Flow On a cash flow statement such as the example on page 39 all cash inflows or outflows are separated into one of three categories: Cash flow from operating activities, 2.
Cash flow from investing activities, and 3. Cash flow from financing activities. Cash Flow from Operating Activities The concept of cash flow from operating activities is quite similar to that of Operating Income.
The goal is to measure the cash flow that is the result of activities directly related to normal business operations i. Common items that are categorized as cash flow from operating activities include: Cash Flow from Investing Activities Cash flow from investing activities includes cash spent on—or received from—investments in financial securities stocks, bonds, etc.
Typical items in this category include: Common items that would fall in this category include: Dividends paid to shareholders 25, Cash received from issuing new shares , Net Cash Flow From Financing Activities , Net increase in cash: For the most part, this work is done by calculating and comparing several different ratios. Liquidity Ratios Liquidity ratios are used to determine how easily a company will be able to meet its short-term financial obligations.
Generally speaking, with liquidity ratios, higher is better. The most frequently used liquidity ratio is known as the current ratio: The difference between quick ratio and current ratio is that the calculation of quick ratio excludes inventory balances. This is done in order to provide a worst-case-scenario assessment: How well will the company be able to fulfill its current liabilities if sales are slow that is, if inventories are not converted to cash? ABC Toys see balance sheet on page 43 would calculate its liquidity ratios as follows: However, a quick ratio of only 0.
But the two businesses are of such different sizes that the comparison is rather meaningless, right?
Using the balance sheet from page 43 and the income statement below, we can calculate the following profitability ratios for ABC Toys: Virginia runs a business selling cosmetics. Gross profit margin is often used to make comparisons between companies within an industry. For example, comparing the gross profit margin of two different grocery stores can give you an idea of which one does a better job of keeping inventory costs down. Gross profit margin comparisons across different industries can be rather meaningless.
For instance, a grocery store is going to have a lower profit margin than a software company, regardless of which company is run in a more cost-effective manner. Financial Leverage Ratios Financial leverage ratios attempt to show to what extent a company has used debt as opposed to capital from investors to finance its operations. There is, however, something to be gained from using leverage.
The more highly leveraged a company is, the greater its return on equity will be for a given amount of net income. In short, the question of leverage is a question of balance. Being more highly leveraged i.
On the other hand, financing a company primarily with loans is obviously a risky way to run a business. Asset Turnover Ratios Asset turnover ratios seek to show how efficiently a company uses its assets.
The two most commonly used turnover ratios are inventory turnover and accounts receivables turnover. Inventory period shows how long, on average, inventory is on hand before it is sold.
Average collection period is exactly what it sounds like: Obviously, higher receivables turnover and lower average collection period is generally the goal. The two most frequently used liquidity ratios are current ratio and quick ratio. Return on assets and return on equity are the most important profitability ratios. Inventory turnover and receivables turnover are the most important turnover ratios. The goal of GAAP is to make it so that potential investors can compare financial statements of various companies in order to determine which one s they want to invest in, without having to worry that one company appears more profitable on paper simply because it is using a different set of accounting rules.
All publicly traded companies are required by the Securities and Exchange Commission to follow GAAP procedures when preparing their financial statements.
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Governmental entities are required to follow GAAP as well. That said, there are a different set of GAAP guidelines created by a different regulatory body for government organizations. So, while they are following GAAP, their financial statements are quite different from those of public companies. For each transaction, one entry is made either an increase or decrease in the balance of cash in the account.
Likely the single most important aspect of GAAP is the use of double-entry accounting, and the accompanying system of debits and credits. With double-entry accounting, each transaction results in two entries being made.
If each transaction resulted in only one entry, the equation would no longer balance. Debits and credits are simply the terms used for the two halves of each transaction.
That is, each of these two-entry transactions involves a debit and a credit.
That is, however, not exactly true. A debit or credit to an account may increase it or decrease it, depending upon what type of account it is: This transaction could be recorded as a journal entry as follows: Equipment 40, CR. Cash 40, As you can see, when recording a journal entry, the account that is debited is listed first, and the account that is credited is listed second, with an indentation to the right.
Also, this helps you to remember that the debit half of a journal entry is on the left, while the credit half is indented to the right. To increase Cash an asset account , we will debit it. To increase Notes Payable a liability account , we will credit it. Cash 50, CR.
Building Supplies 10, CR.
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To decrease a liability, we debit it, and to decrease an asset, we credit it. Accounts Payable 10, CR. Naturally, journal entries need to be made for income statement transactions as well.
For the most part, when making a journal entry to a revenue account, we use a credit, and when making an entry to an expense account, we use a debit. We need to decrease Cash and increase Rent Expense. Rent Expense 4, CR. Cash 10, CR. Sales 10, Sometimes a transaction will require two journal entries. Cash 1, CR. Sales 1, DR. Cost of Goods Sold CR. Of course, hardly anybody uses an actual paper document for a general ledger anymore. T-Accounts In many situations, it can be useful to look at all the activity that has occurred in a single account over a given time period.
The Trial Balance A trial balance is simply a list indicating the balances of every single general ledger account at a given point in time. The trial balance is typically prepared at the end of a period, prior to preparing the primary financial statements.
The purpose of the trial balance is to check that debits—in total—are equal to the total amount of credits. If debits do not equal credits, you know that an erroneous journal entry must have been posted. The purpose of a trial balance is to check that total debits equal total credits.
Pam runs a retail ice cream store. Her lease requires her to prepay her rent for the next 3 months at the beginning of every quarter. For example, in April, she is required to pay her rent for April, May, and June. If Pam uses the cash method of accounting, her net income in April will be substantially lower than her net income in May or June, even if her sales and other expenses are exactly the same from month to month. This is, of course, a distortion of the reality. The Accrual Method Under the accrual method of accounting, revenue is recorded as soon as services are provided or goods are delivered, regardless of when cash is received.
This is why we use an Accounts Receivable account. Similarly, under the accrual method of accounting, expenses are recognized as soon as the company receives goods or services, regardless of when it actually pays for them. Accounts Payable is used to record these as-yet-unpaid obligations. The goal of the accrual method is to fix the major shortcoming of the cash method: Distortions of economic reality due to the frequent time lag between a service being performed and the service being paid for.
Mario runs an electronics store. On the 5th of every month, he pays his sales reps their commissions for sales made in the prior month. If Mario uses the accrual method of accounting, he must make the following entry at the end of August: Commissions Payable 93, Cash 93, A few points are worthy of specific mention.
First, because Mario uses the accrual method, the expense is recorded when the services are performed, regardless of when they are paid for. This ensures that any financial statements for the month of August reflect the appropriate amount of Commissions Expense for sales made during the month.
Second, after both entries have been made, the net effect is a debit to the relevant expense account and a credit to Cash. Last point of note: Advances in Accounting, Volume 19 Advances in Accounting.
Accounting regulation in Europe. Investigative Accounting in Divorce. Advances in Management Accounting. Exploring Careers in Accounting. Research methods in accounting. Advances in International Accounting. Recommend Documents. Accounting BarCharts, Inc.
Helps an organization to achieve its goals and objectives by gathering, organi The book begins with income statements. Although it sounded really complex, it was actually very simple to understand.
Using a business that I could understand as an example was a simple way of clarifying the details of an income statement. First, the book explained the basic terms to start with. Revenue, expenses, and net income were all easily defined and then turned into an equation that I could understand. The book then went on to describe cash accounting and accrual accounting. Cash accounting is simply recording the money when it is actually received or paid out from your bank account but should only be used by small businesses.
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Accrual accounting is used for most businesses. Accrual accounting uses invoice sent out as "sales" even if they have not been paid yet.
It also considers expenses during the period, but not when it is actually paid out. Accrual accounting seems a little more complex to me, but because of this book I was able to comprehend it. The author goes above and beyond to define the term and then use and example to help you better understand it.
This book also helps you clearly decide which type of accounting you should be doing. If you have a simple small business you may go for cash accounting.
Cash accounting has some limitations that are easily defined. Understanding the advantages and disadvantages can help you decide what type of accounting that you need to use.
There is a section of the book that contains 14 terms that are used in basic accounting. Some of them I had actually heard of while others I had not. Either way, when I completed this book I was able to speak about each of these terms in an educated manner. I want to encourage anyone who needs to learn the basics of accounting to read this book.
It is a simple book that is very easy to understand. If you need to read about the topic in depth they can be found on the website too. Jay Pope. Working Capital Management - Unpleasant surprises are one thing you want to avoid or keep to a minimum, especially when it's to do with your responsibilities at work. Every manager relies on the contributions of others both inside and outside of his or her organization. Knowing how healthy your suppliers and customers are will help you to make the right decisions so that you perform your role successfully.
Understanding Assets and Liabilities - Knowing the difference between an asset and a liability is important for every member of management, mostly due to the fact that these are both used when putting together a 'Balance Sheet' for the company. While you may not be an accountant or even in the accounting department, knowing the difference will make it much easier for you to understand the normal, day to day affairs of your organization.
Such knowledge can even make you more attractive when the time comes for you to be considered for a promotion… which can lead to higher pay and a more desirable title. Importance of Understanding Accounting Terms - As a manager, you most likely have a drive to move forward in your career.
You probably want more responsibility, more authority, a better position, and in the end… more pay. You may even want to climb to the top of the ladder! To achieve the recognition you deserve you need to be fluent in 'financial speak' so that you can converse with senior managers, CPA's and accountants at their level.
It is essential that you know and can talk about the difference between 'net sales' and 'net income' is more important than you may think.
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