Learn Accounting

Vertical Analysis of Balance Sheets

2010-09-10T03:55:00.000-05:00

Learn how to do vertical analysis of a balance sheet.

Vertical Analysis

2010-05-15T19:26:00.000-05:00

What is the Difference Between Bookkeeping and Accounting?

2010-05-01T18:55:00.000-05:00

What is the difference between bookkeeping, accounting, and accountancy? When someone says they are an accountant, are they really a bookkeeper? Does it really matter?

Bookkeeping

Bookkeeping is the process of systematically recording the financial transactions of a business, so as to show how the transactions relate to each other. Bookkeeping is largely a mechanical process and does not involve any analysis of the financial transactions, but rather the recording of them.

Traditionally, the records were kept in a book, hence the name bookkeeping. These days, bookkeeping is normally performed using a bookkeeping software package, but the names of the books (daybook, cashbook, journal, and ledger) are still used.

A bookkeeper's function is primarily one of recording transactions in the journal and posting to the ledger, and is sometimes referred to as an accounts clerk.

There are two types of bookkeeping: single entry and double-entry. In single entry bookkeeping, the record of each transaction is carried to either the debit or credit column of a single account. In double-entry bookkeeping, two entries of each transaction are carried to the ledger: one to the debit side, and one to the credit side, of the corresponding account. This is so the two entries can be used to check each other.

Accounting

Accounting is the systematic recording, reporting, and analysis of financial transactions of a business. As bookkeeping involves making a financial record of business transactions, it is true to say that the role of bookkeeping is encompassed within the scope of accounting, and the bookkeeping system used by a business would form part of the accounting system.

Accounting also includes the preparation of statements concerning assets, liabilities and the operating results of a business.

Accountancy is the occupation related to accounting, and an accountant is the person who does, or at least is responsible for, the work. Accountants often specialize in a particular area of accounting such as taxes, auditing, or management.

In a small company, all of the bookkeeping and accounting tasks may well be performed by a single person. In this situation, that person would normally be referred to as an accountant.

About the Author: John Dixon is a web developer working through his own company John Dixon Technology. As well as providing web development services, John's company also provides a free bookkeeping tool.

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Different Methods of Allocating Costs

2010-04-17T19:02:00.002-05:00

By Peter Robertson

Different methods of allocating costs

First, we will start with Direct Costs. In the previous article I indicated that it is advisable to allocate direct or (known) costs to the product or service whenever possible.

There are a number of methods used. The most common one being used by service type industries such as the local mechanic:-

DIRECT COSTS

Job Costing

For some, this takes the form of a docket book in which they write down each expense relative to the job being undertaken. In larger workshops and small factories there is often a job sheet or card that follows the product along the assembly line. These can be specially printed, or with many of the Small to Medium Enterprises (SME) the accounting package used may print one.

On jobs that extend over a longer period if these cards are collected and entered into the accounting program then the value of Work in Progress for each job may be obtained. It is also possible to see how actual costs compare with those in the quotation.

One of these expenses is of course Workshop Labour. Few firms are ever able to track each employee's direct labour cost as the employee often is shifted from one job to another too frequently for this to be practicable. The clerical cost of this recording of labour is also prohibitive.

Once a firm has been able to establish a cost history for labour the most sensible way of allocating this is to establish how many different categories of employee are on the payroll. That is, an average cost may be established for a supervisor, another average cost for leading hands, another for permament tradesmen and yet another for casual employees. With apprentices, there may be different average rates based on years of training.

All these labour rates should take into account not only gross wages paid, but also such extra costs as employer superannuation contribution, WorkCover levy, any regular tool or car allowances, and any salary sacrifice costs that affect the employer.

Process or Batch Costing.

The theory here is not much different to Job Costing except that instead of the costs being allocated to a specific job to be charged out, they are being allocated to a production run of some product. The end result is that an average cost can be established for one of a number of products being processed at one time.

Standard Costs

These are established by larger firms such as automotive manufacturers. When a production run is scheduled the costs are accumulated at standard contract rates as soon as Purchase Orders are issued. A detailed analysis is subsequently undertaken of the costs of over or under supply of materials and labour. Even the costs of wear and tear of plant are charged against the run based on standard machine hours that should occur. I consider that it is unlikely that any SME would need to consider seven variable Standard Cost reporting.

INDIRECT COSTS

These are usually associated with the cost of running the front office, sales team costs, advertising and any other cost that can not be reasonably allocated direct to the Job or Process Cost.

As mentioned in the previous article all costs have to be recovered, and provision made for replacement of plant (as distinct from depreciation of historic cost by the Tax Agent), and of course a profit for the investors. The most usual method of applying these indirect or on-costs is as a percentage to be added to the Direct or known costs.

Modern accounting software for SME provides for Plussage to be added to purchase cost e.g. in MoneyWorks Gold, and when the selling price is shown, the percentage mark-up can be set to also show on the screen. This then enables the salesperson to know how much they can safely reduce the price if bargaining is practiced.

A future article will deal with the concepts of budget setting in more detail.

Peter Robertson ACIS, CPA, PNA is not a Registered Tax Agent, however, he had forty years of practical experience covering both industrial and government accounting, and including efficiency and effectiveness audits. He has decided to pass on some proven costing and general accounting theories in the hopes that it may assist prospective entrepreneurs. Peter may be contacted through http://www.money-works.com.au.

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http://EzineArticles.com/?Practical-Accounting-2&id=162416

Tips For Church Bookkeepers

2010-04-03T19:27:00.003-05:00

Accruals and Deferrals

2008-11-27T00:48:00.000-05:00

What Is EBITDA?

2008-11-25T02:21:00.000-05:00

What Is EBITDA And Why Is It Important
By Easwar Koovappadi

EBITDA is an acronym for earnings before interest, tax, depreciation and amortization. Investors, owners, business managers need to understand profitability. While it may be possible to understand profitability for a business, they would also like to benchmark against trends, other companies in the same industry, different geographical areas etc. Each company is structured differently. This makes profitability ratios difficult to compare. To enable comparisons, therefore, EBITDA has evolved. Each business structure may be different. Let us see what impact these differences will have on the profitability.

The capital invested in any two businesses may not be the same. Some businesses have more owned capital and others may have more of debt. Interest is paid on debt. So while one business may not have interest expense, the other might have interest expense. This has nothing to do with profitability from operations. The interest expense is eliminated to enable a fair comparison.

The tax structure of any two businesses may not be the same. The tax structure depends on a number of factors such as the ownership structure, geographical location, incentives provided by various levels of the government for different businesses. A fair comparison may not take place unless impact of all these items is eliminated.

Each business may also have different levels of automation. Automation requires more of capital expenditure that will also require a higher level of depreciation expense. The age of the business also determines the depreciation expense. Older capital equipment might have a lower level of spend and therefore lower depreciation. There are various intangibles that a company may have on its Balance sheet such a goodwill etc. Goodwill needs to be estimated and amortized once a year. This might result in swings in profitability between different companies and also between different years for the same business.

Therefore, while comparing profitability, it makes sense to eliminate the impact of these items that could be due to a non - operational reason. EBITDA serves his purpose.

Easwar has an extensive knowledge of issues related to currency,exchange,taxes,cost savings ideas and loves to write about it. For additional resources please visit http://www.improveprofitsnow.blogspot.com

Send an email to costreduction@aweber.com to get your copy of "16 quick wins to improve your bottom line in 90 days"

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http://EzineArticles.com/?What-Is-EBITDA-And-Why-Is-It-Important&id=901711

Inventory Costing

2008-11-20T02:34:00.001-05:00

By Donna MacMillan

There are several ways to determine the value of your inventory and each type of valuation has benefits. The most common type used by small businesses is average cost or weighted average costing. This is based on the average cost of identical units. Using the total actual cost of all similar items available for sale divided by the number of units available for sale would result in a weighted average cost per unit. Multiplying the weighted average cost per unit times the number of units unsold gives you the value of your inventory.

First-In, First-Out Costing (FIFO) assumes that the first goods purchased are the first goods sold and therefore that the last goods purchased are the ones remaining in inventory. This system is used frequently because whenever the flow of inventory can be controlled it makes sense that the oldest items are sold first satisfying the accounting convention that inventory should be shown on the balance sheet at the most current cost possible. Also because this method has been used for such a long time, continued use assures consistency for income calculations comparability.

Last-In, First-Out Costing (LIFO) assumes that the most recent purchases are the first to be sold leaving the older items remaining in inventory. One argument for using this method is that it matches the most current cost of items purchased against the current sales revenue. Also when prices are rising net income calculated by this method is smaller than the amount determined from using other methods resulting in a smaller income tax. This would be reversed if pricing were falling.

One other, however uncommon, method is specific identification costing which requires that each item that is sold and each item remaining in inventory is separately identified in respect to it’s purchase cost. This method is not practical for most businesses. Only those businesses that sell items where the cost is relatively high, and sales volume is low and it is easy to identify the cost and sale price of each item separately would find this method useful.

When choosing a method consider the practical issues of how the valuation can be accomplished accurately and with the least amount of effort, and be sure to consult your tax preparer for tax return considerations.

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http://EzineArticles.com/?Inventory-Costing&id=249699

Explaining The Income Statement

2008-11-18T00:45:00.000-05:00

By Michael Russell

In layman’s terms, what is the income statement? We will look at the various components of the income statement: revenues, cost of goods sold, expenses and net income. Income statements are helpful, because they will give you some history of the business in order to budget for future operations and assess risk of future cash flows. An income statement is also known as a profit-and-loss statement.

The nature of the income statement is that it is a reflection of operations over a period of time, i.e., “for the month ended June 30, 2006”, or “for the year ended December 31, 2006”. This is different from the balance sheet, which reflects a certain point in time. Income statements contain what is known as “temporary” accounts and the balance sheet contains “permanent” accounts. Temporary accounts such as sales revenues and expenses are “closed out”, net income/loss is determined and this net amount ends up in an owner’s equity account. The accounts are closed at the end of one period, reopened and reused for the next period.

The income statement is revenues less cost of goods sold, less expenses, equals the net income or loss. Revenues are the sales of items normally sold in your business; what are you selling? Do you sell goods? Do you sell services? It is the selling price times the number of items sold. Sales are usually shown as net sales and some adjustment to sales would include sales discounts, sales returns and allowances.

If the business sells goods, the next part of the income statement would be the cost of goods sold section. If the business sells services, it won’t have this section. Because this is such a large part of expenses for a retail establishment, while it is an expense, it is broken out separately from other expenses. The business will need to know how much inventory it started with and how much inventory it had during the end of the period. Additionally, it will need to know how much inventory was purchased during the period. There are a number of ways to value inventory, such as Fifo (first in, first out), Lifo (last in, first out), average cost, specific identification, etc. Since we are taking a high-level glance at the income statement, it is just important at this time to note that, because of subjectivity of inventory methods, this can be more of an art than a science. Beginning inventory plus goods purchased equals goods available for sale; goods available for sale minus ending inventory will give you the cost of goods sold.

Expenses are outflows of cash necessary to the operation of the business. Some expenses are easily identified, such as rent or mortgage, utilities, office salaries, supplies, etc. and these are referred to as selling and administrative expenses. Selling expenses are costs related to selling goods, such as the salesperson’s salaries, shipping, freight, advertising, etc. Research and development costs are also valid expenses. If you own the building, vehicles, or equipment, there are depreciation costs. That just means if you own an asset that lasts for a couple of years, you can write off part of the cost of that asset as a depreciation expense for a certain number of years. Like inventory costs, there are a number of ways to subjectively determine depreciation, such as straight line, accelerated depreciation methods, etc. so there isn’t just one possible answer to determine depreciation costs.

To determine net income or loss, you take revenues minus cost of goods sold minus expenses. If this number is positive, it is net income. If this number is negative, it is net loss. This amount is closed to an equity account, such as an owner’s capital account for a sole proprietorship or stockholder’s equity for a corporation.

Expenses and/or income outside the realm of usual business operations should be included in its own separate section. For example, the business is a shoe store and they sell one of their buildings or part of their vacant lot, which creates an inflow of money. This is not what you would expect a shoe store to do. In order to make income statements comparable by year, this special income will need to be shown in a separate section above net income.

So, at a high level we’ve looked at the income statement, defined the components of revenue, cost of goods sold, expenses and net income. We’ve pointed out areas such as inventory valuation and depreciation where different methods can be used which will determine different financial amounts. Businesses need to select their methods carefully and stick with them for consistency. It is not totally impossible to change these valuation methods, but it would require special disclosures, etc. Once we understand the basics of the income statement, it will help us understand income statements from a number of different companies, regardless of the nature of their business.

Michael Russell Your Independent guide to Accounting

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http://EzineArticles.com/?Accounting---Explaining-The-Income-Statement&id=500778

Trick to Remember Debits and Credits

2008-11-13T01:14:00.001-05:00

Tax Deductions For Home Business

2008-11-11T00:32:00.000-05:00

By Marie Soriano

Home businesses enjoy more tax advantage than a business that is located in a commercial area. But a lot of home business owners do not take advantage of these tax deductions because they do not declare their exemptions that they are entitled to. So it is important to know all the deductions you can avail of.

The basic concept you need to remember is that any income you may incur is subject to tax. Here is the formula that is applicable whether you are a home business owner or an employee:

Gross Income - Expenses = Taxable Income

But note that the expenses in this case include miscellaneous deductions and the depreciation on your assets; this is where you need to focus on because most of the tax deductions can be found.

To give you an idea of the different items that can be included in your deductions, here is the list of deductions you can include in your expenses, miscellaneous deductions, and depreciation:

Expenses:

Expenses that should be included in the tax deduction of a home business include the payroll, the supplies, the materials, and the interest rate on business loans among others. There are many other kinds of expenses that can be included and you may consult with the IRS or your accountant if a particular expense you incur can be included.

Depreciation:

The depreciation of your assets should likewise be included whether it is the depreciation of your real estate property or equipment for business use. But you should also remember that the IRS has many difference depreciation schedules for these types of assets so you need to know the rules in these types of write-offs.

Miscellaneous deductions:

Then there are the miscellaneous deductions that you can take advantage of. You need to track the different expenses you incur during the whole course of doing business because you will need a proof for each of these transactions when you want to deduct these from the tax you have to pay. Some of the most common miscellaneous deductions you can avail of include auto expenses, books and magazines, cleaning expenses, meals with clients, educational expenses, advertising, and licensing and regulatory payments.

Start your internet business without obligation by visiting Internet Business For Start Ups website and start earning. For more reports and articles on running a homebased business, Tips And Resources For Home Business is a good source of information.

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http://EzineArticles.com/?Tax-Deductions-For-Home-Business&id=713750

Top 5 Accounting Software for Small Business

2008-11-06T00:01:00.000-05:00

By Nipa Wongdee

1) Intuit QuickBooks Accounting Software
Quickbooks is a popular full featured accounting and payroll program designed for small businesses - or, I should say, a small business accounting software series. QuickBooks is available in Basic, Online, Pro, and Premier editions; the Pro Edition of this accounting program includes management tools such as a Vehicle Mileage Tracker and a Cash Flow Projector.

2) Simply Accounting Accounting Software
Full featured accounting and payroll package with all the features and reports any small business needs, including Internet and e-commerce features. This small business accounting software's data entry screens resemble their paper counterparts, and the screen tips and drag and drop functionality make the accounting program easy to learn. Professional versions include a time and billing module. Comes multi-user ready.

3) MYOB Plus Accounting Software
A double entry small business accounting software system with a user-friendly interface and over 100 financial and management reports. Includes a Professional Time Billing Module that is ideal for service businesses and the Officelink feature allows direct one click access to MS Word and Excel. Comes multi-user ready; just purchase an additional workstation license for each additional accounting program user.

4) Peachtree Complete Accounting Software
The Complete version of this small business accounting software program includes over 125 reports and features such as in-depth inventory, time and billing and job costing. The accounting program comes multi-user ready and "value packs" for 3 or more users are available. Peachtree accounting software is also available in Premium and First Accounting versions

5) Microsoft Office Small Business Accounting
The big selling feature of this small business accounting software is integration – and that’s a pretty big selling feature if you’re already using Microsoft Office. Being able to reuse data already entered into Excel or Outlook is a really useful feature and the integration with the Business Contact Manager makes it easy to stay on top of accounts. A slate of add- on services ranges from online payroll through PayPal invoicing

http://www.accountpro.org/

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Calculating Bond Price When Market Rate is Higher Than Stated Rate

2007-11-02T08:20:00.000-05:00

Calculating the price of bonds always seems to be the hardest thing remember if you don't use it on a daily basis. Some key ideas to keep in mind are:

Price of bonds = Present value of principal + Present value of interest payments

Interest to be paid each period is determined by coupon rate (stated interest rate) for that period.

Present value calculation is based on market interest rate.

On January 1, 2006, Company A issues long-terms bonds which are due on January 1, 2011. Interest is paid semiannually on January 1 and July 1 each year. Face amount of bonds is $500,000 with stated interest rate (coupon rate) of 10%. At the time of issuance, market interest rate is 12%. What will be the price of bonds issued by Company A?

Market interest rate = 12%

Market interest rate for a semiannual period = 12% / 2 = 6%

r = 0.06 (per semiannual period),

n = 10 (semiannual periods)

Present value of principal

= $500,000 x Present value factor for a single payment (6%, 10 periods)

= $500,000 x 0.5584

= $279,200

Interest payment each semiannual period

= $500,000 x 5%

= $25,000

(Coupon rate for a semiannual period = 10% / 2 = 5%.)

Present value of interest payments

= Interest payment each semiannual period

x Present value factor for an ordinary annuity (6%, 10 periods)

= ($500,000 x 5%) x 7.3601

= $184,002

Price of bonds

= Present value of principal + Present value of interest payments

= $279,200 + $184,002

= $463,202

The bonds will be sold at a $36,798 discount from the face amount.

($500,000 - $463,202 = $36,798)

Technorati Tags: Bonds, Value, Calculating

Calculating Bond Price When Market Rate Is Lower Than Stated Rate

2007-10-17T08:24:00.001-05:00

Calculating the price of bonds always seems to be the hardest thing remember if you don't use it on a daily basis. Some key ideas to keep in mind are:

Price of bonds = Present value of principal + Present value of interest payments

Interest to be paid each period is determined by coupon rate (stated interest rate) for that period.

Present value calculation is based on market interest rate.

On January 1, 2006, Company A issues long-terms bonds which are due on January 1, 2011. Interest is paid semiannually on January 1 and July 1 each year. Face amount of bonds is $500,000 with stated interest rate (coupon rate) of 10%. At the time of issuance, market interest rate is 8%. What will be the price of bonds issued by Company A?

Market interest rate = 8%

Market interest rate for a semiannual period = 8% / 2 = 4%

r = 0.04 (per semiannual period),

n = 10 (semiannual periods)

Present value of principal

= $500,000 x Present value factor for a single payment (4%, 10 periods)

= $500,000 x 0.6756

= $337,800

Interest payment each semiannual period

= $500,000 x 5%

= $25,000

(Coupon rate for a semiannual period = 10% / 2 = 5%.)

Present value of interest payments

= Interest payment each semiannual period

x Present value factor for an ordinary annuity (4%, 10 periods)

= ($500,000 x 5%) x 8.1109

= $202,773

Price of bonds

= Present value of principal + Present value of interest payments

= $337,800 + $202,773

= $540,573

The bonds will be sold at a $40,573 premium over the face amount.

($540,573 - $500,000 = $40,573)

Tech Tags: Bonds Accounting Discounts Pricing Finance

Rolling Your Retirement Into An IRA

2007-10-11T00:01:00.000-05:00

Technorati Tags: Retirement,, IRA

Expense Accounts

2007-10-10T00:01:00.000-05:00

A list of typical expenses found in accounting work. Expenses have a normal debit balance and get debited when they increase. Credit them to decrease the expense.

Advertising Expense
Amortization Expense
Depletion Expense
Income Tax Expense
Insurance Expense
Interest Expense
Loss on Disposal of Fixed Assets
Loss on Redemption of Bonds
Loss on Sale of Investments
Payroll Tax Expense
Pension Expense
Rent Expense
Salaries Expense
Supplies Expense
Transportation Out
Uncollectible Accounts Expense
Utilities Expense
Vacation Pay Expense

Technorati Tags: Accounting,, Expense,, Chart_of_Accounts

How To Lower Your Property Tax

2007-10-05T01:09:00.000-05:00

Technorati Tags: Property, Taxes

Writing Off Equipment

2007-09-19T11:27:00.000-05:00

Whenever you dispose of equipment you have to make an entry in your General Ledger. In most cases you experience a loss so that is one account that will be used. You will also use the Equipment account and the Accumulated Depreciation account. For this example, the equipment cost 10,000 and the accumulated depreciation is 8500. The entry to write of this piece of equipment is:

Loss on Disposal of Equipment 1,500 debit
Accumulated Depreciation 8,500 debit
Equipment 10,000 credit

Technorati Tags: Accounting, Equipment, Write off

Production Method of Depreciation

2007-09-12T11:35:00.000-05:00

The production method is based solely on the use of the machine instead of how long you have it. Calculating depreciation is very similar to the straight line method. You need to know the cost, the residual value, and the estimated units of useful life. The formula is:

(Cost - Residual Value)/Estimated Units of Useful Life

For example, The cost of the machine is $10,000 and the Residual Value is $1000. You can produce 100,000 units with it. To calculate the depreciation for 1 unit, you need to do the following:

(10,000 - 1,000) = 9000 to depreciate

9000 / 100,000 = .09 per unit

First year you make 5000 units. The depreciation for the first year is:

5000 x .09 = 450

Technorati Tags: Accounting, Depreciation, Production

Double Declining Depreciation Method

2007-09-10T19:22:00.001-05:00

The double declining balance method is an accelerated method of depreciation. The first thing that you have to fiqure is the yearly percentage of depreciation. For example, the machine you just purchased has a useful life of 5 years. That amounts to 20% per year for depreciation on a regular basis, but we are doubling that each year under the double declining method. We depreciate until we reach the residual value by multiplying the carrying value by the double percentage. The chart below best illustrates the process

Technorati Tags: Accounting, Depreciation, Declining

Cost of Goods Accounts

2007-06-25T09:15:00.000-05:00

List of accounts that are generally under the Cost of Goods Accounts

Cost of Goods Sold
Purchases
Purchases Discounts
Purchases Returns and Allowance
Transporation In

In Memory - Karen L. Evert

2007-06-07T00:01:00.000-05:00

Karen L. Evert, my wife of 13 wonderful years, went home to the Lord on May, 27, 2007. Karen fought a courageous almost 2 year battle with Leiomyosarcoma, a rare cancer.

Even after 9 rounds of chemo, she still had a smile.

Karen was a great friend, mother, wife and just one amazing person. I’m sad that she is gone from the physical world, but I am extremely happy that she is singing and rejoicing in heaven. I’m glad I got to spend 14 wonderful years with you. Personally, you were the better half of this marriage. You made me a better person. It was such a great honor to have known you.

You will always have a place in my heart.

Calculating Straight Line Depreciation

2007-06-01T15:51:00.001-05:00

Calculating straight line depreciation is a fairly easy process. There are three things you need to know to fiqure it out.

Cost

Residual Value

Useful Life

The formula is:

(cost - residual value)/useful life = yearly depreciation

For example, you buy a new car and it costs $12,000 and has residual value in 5 years of $2000.

(12,000 - 2000)/5 = 2000 per year for depreciation.

The accounting entry for this would be:

Depreciation Expense $2000 debit

Accumulated Depreciation $2000 credit

Technorati Tags: accounting, depreciation, straight line

How To Calculate Present Value

2007-04-17T05:17:00.001-05:00

The concept of present value is rather simple. If I want $1000 by the end of 2 years and then interest rate is 10%, how much do I need to invest today? The answer is $826.

Today this is a pretty simple calculation. Just push the buttons on your calculator and done. But, what if you had to fiqure it out the "old-fashioned" way. Well here's the formula fiqure it out.

Present Value = Future Value/ (1 + Interest Rate)

For example, What would be the present value of $100 at 8% interest for 1 year?

Present Value = $100/(1 + .08)

Present Value = $100/1.08

Present Value = $92.59

Pretty simple, but what if you needed to fiqure it out for 3 years? Here's how to do that.

Year 1 Present Value = $100/1.08 = $92.59

Year 2 $92.59/1.08 = $85.73

Year 3 $85.73/1.08 = $79.38

So in three years, if we invest $79.38 today, we will have $100

Of course there are a couple of shorter ways to calculate present value. Here is a formula that uses exponents.

Another quick short cut is to use the present value interest tables. This chart is usually labeled as the PVIF table. The tables already have the (1 + interest rate) fiqured out for you. For example, 5% interest for 8 years gives us a factor of .677.

Take $100 x .677 to get $67.70 as the answer. Can't get any easier than that.

Technorati Tags: Accounting, Finance, Present Value

Fixed Assets

2006-12-06T16:01:00.000-05:00

List of fixed assets. Fixed assets have a normal debit balance except Accumulated Depletion and Accumulated Depreciation and can be found on the balance sheet.

Accumulated Depletion
Accumulated Depreciation
Building
Equipment
Investment in Bonds
Investment in Stocks
Investment in Subsidary
Land

Tags: Accounting, Assets, Fixed, Balance, Sheet

Current Liabilites

2006-12-05T20:59:00.000-05:00

List of current liabilites that can be found on a Balance Sheet. They all have a normal credit balance.

Accounts Payable
Deferred Income Tax Payable
Employees Federal Income Tax Payable
Federal Income Tax Payable
Federal Unemployment Tax Payable
Income Tax Payable
Medicare Tax Payable
Salaries Payable
Sales Tax Payable
Social Security Tax Payable
State Unemployment Tax Payable
Unearned Rent
Vacation Pay Payable

Tags: Accounting, Liabilities, Balance, Sheet

Income Accounts

2006-12-04T07:40:00.000-05:00

Here is a list of income accounts. They have a normal credit balance except the Sales Discounts and the Sales Returns and Allowances, which have a normal debit balance. These items can be found on the Income Statement.

Dividend Revenue
Exchange Gain
Gain on Disposal of Fixed Asset
Gain on Redemption of Bonds
Gain on Sale of Investments
Interest Revenue
Rent Revenue
Sales
Sales Discounts
Sales Returns and Allowances

Tags:Accounting, Revenue, Income, Statement, Dividend, Sales, Gain, Discounts

Current Assets

2006-12-03T15:51:00.000-05:00

This is a list of current assets that you normally use. They have a normal debit balance except the Allowance for Doubtful Accounts, which has a credit balance. These accounts are found on the balance sheet.

Accounts Receivable
Allowance for Doubtful Accounts
Cash
Finished Goods
Interest Receivable
Marketable Securities
Materials
Merchandise Inventory
Notes Receivable
Petty Cash
Prepaid Insurance
Supplies
Work in Progress

Tags:Accounting, Current, Assets

The Accounting Equation

2006-11-29T21:29:00.000-05:00

The very essence of accounting can be broken down to what is called the Accounting Equation. This equation has 3 major parts. They are:

Assets - which are things of value , such as cash, equipment, supplies, buildings, and land.

Liabilities - which are the debts that you owe.

Equity - is what is left after you subtract liabilities from assets.

So the equation is:

Assets = Liabilities + Equity

If you know any of the 2 parts of the equation, you can solve for the third part. Here is an example:

Assets (?) = Liabilities (3,500) + Equity (10,000)

? = 3,500 + 10,000

13,500 = Assets

Pretty simple stuff, but one thing that is not stressed enough in beginning accounting courses. If you know this equation you then should be able to figure out most of your entries. Why? Because everything has to equal.

Here are a couple of variations on the equation that you can work on.

Assets (10,000) - Liabilities (5000) = Equity (?)

Assets (15,000) = Liabilities (?) + Equity (5000)

Assets (12,500) = Liabilities (3500) + Equity (?)