Accounting Tutorials and Notes

how to read a balance sheet

Financial accounting – external

Managerial Accounting – internal

Private vs. public

Public Accounting : CPA for public, public company (stocks)

Private accounting: working for a company, private company(no public stocks)


Accounting Rules:

GAAP – General Accepted Accounting Principals

–Written by FASB- Financial Accounting Standards Board

IFRS – International Financial Reporting Standards

–Written by IASB- International Accounting Standards Board


Sasanes Oxley – created PCAOB – Public Companies Accounting Oversight Board


Sole proprietorship – 1 person owning business. Person liable

Partnership- 2 people operating business: They have liability

Corporation: business is liable. Separate entity


Assets = Liabilities + Equity

-Assets: owned, can derive future benefits

— Most assets are held on books at historical costs (what the original price was)

Liabilities: Obligations

Equity: Ownership of company

-contributed capital (owners gave) (stock)

-retained earnings- earnings kept from net income. Net income minus dividends


4 Basic Financial Statements:

X Balance sheet: Assets, liabilities and equity and a point in time

how to read a balance sheet

how to read a balance sheet


X Income Statement: results of operations

–revenue minus expenses = net income

X  Equity Statement-

Contributed capital – selling stock

Retained earnings: beginning balance+ net income – dividends = ending balance

-changes in equity during a period

X Cash Flow Statement- Shows sources and uses of cash

-operating: operations

-investing: investing in the future, buying/selling assets

-financing: borrowing money / pay back/ equity transactions

— total change in cash


All statements interrelated


Accounts: Basic Summary Device

Transactions: Events requiring accounting recognition

Journal: Chronological list of transactions

Ledger- ledger of accounts Listing of all the accounts, shows transactions on account

Chart of accounts: List of accounts used




Double Entry Bookkeeping

Left                            Right

Debit                      Credit






Prepare tax return

–          Deliver return  to customer, get check  for $1000

Debit                     Credit

cash              1000

Revenue:                                  1000



Records transaction in journal

Pay employee $200

debit                         credit

Payroll expense          200

Cash                                                    200

Assets = liability + equity

Debit balance : + debit               |   Credit balance:    + credit

: – credit             |                            : – debit

Revenues are credits, expenses are debits

Revenues are credits, expenses are debits


Purchase computer equipment for $1,000

Debit                              credit

Computer Equipment       1,000

Cash                                                                             1,000


Purchase equipment for $2,000. Pay $500 cash. Sign note for the rest of it



Debit                                    credit

Equipment                       2000

Cash                                                                                  500

Note Payable                                                                     1500



Payable – liability

Accounts Payable – vendors that are owed money

Receivable- Asset

–          Accounts Receivable

Accrual Accounting(use this)         vs.          Cash Accounting

Record when events occur   vs.      Record events when cash moves




Perform service for $2,000 on account (no cash received yet)


Debit                                       Credit

Accounts Receivable        2000

Revenue                                                                            2000


Sell stock to owners for $5,000

Debit                                         Credit

Cash                    5,000

Stock                                                                      $5,000





Ledger example:

Account Name

Date     Description                                           Debit          Credit               Total


T accounts – Ledger




–          Make one for each account

–          — account receivable, cash, stock, revenue,  computer equipment, note payable, equipment

Assets- liabilities- common stock = retained

Trial Balance- list of accounts at a point in time

Revenues are credits, expenses are debits

Debit                  Credit

Accounts Receivable       2000

Cash                                3500

Computer equipment     1000

Equipment                       2000

Note payable                                                1500

Stock                                                           5000

Revenue                                                      2000

8500                         8500





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