Basic Accounting

Services

It offers one’s time/service as its main product rather than physical goods

Trading

* Buys and sells good without changing their physical form


* Can be called merchandising or retailing

Manufacture

* A type of business that buys raw materials and process them in to final products.


* They design products

Raw materials

a type of business that grows or extracts raw materials

Infrastructure

A type of business that sells the utilization of infrastructure

Financial

A type of business that receive deposits, lend, and invest money

Insurance

A type of business that pools premiums of many to meet claims of a few

Sole proprietorship

* a form of business that is owned by only one individual


* It is the most common and simplest form of business organization

Partnership

a business owned and operated by 2 or more persons (up to 15) who entered into a contract to carry of the business and divide among themselves the earnings

Corporation

* \`It is a form of business owned by stockholders


* it is created by operation of law rather than a contract

Assets = liabilities + equity

What is the basic accounting equation?

Assets

These are the economic resources you control that have resulted from past events and can provide you with economic benefits

Liabilities

These are your present obligations that have resulted from past events and can require you to give up economic resources when settling them

Equity

* It is simply assets minues liability.
* Other terms for this are “capital” and “net worth”

Assets = liabilities + equity + income - expenses

What is the expanded accounting equation?

Income

This is the increase in the economic benefits during the period in the form of increase in assets, or decrease in liabilities, that result in the increase in equity, excluding those relating to investments by the business owner

Expenses

are decreases in economic benefits during the period in the form of decreases in assets, or increases in liabilities, that result in the decrease in equity, excluding those relating to the distributions to the business owner.

Account

* It is the basic storage of information in accounting


* It is a record of the increases and decreases in a specific item of asset, liability, equity, income or expense

Debit

* Refers to the let side of the account.
* It is sometimes referred to as *values received*

Credit

* Refers to the right side of the account
* Sometimes referred to as the *value parted with*

Balance

The difference between the total debits and credits

Chart of accounts

It is a list of all the accounts used by the business

Balance sheet

Shows the financial position of the business

Income statement

Shows the profot or loss of a business

Allowance for bad debts

the aggregate amount of estimated losses from uncollectible accounts receivable

Inventory

represents the goods that are held for sale by a business

unearned income

items related to income that were collected in advanced before they are earned

owner’s drawings

This account is used to record the temporary withdrawals of the owner during the period. At the end of the accounting period, any balance in this account is closed to to the “Owner’s capital'“ account

Service fees

revenues earned from rendering services

sales

revenues earned from the sale of goods

interest income

revenues earned from the issuance of interest-bearing receivables

gains

income earned from the sale of assets or from enhancements of assets (except inventory) or decreases in liabilities that are not classified as revenue

Cost of sales

Represents the value of inventories that have been sold during the accounting period

Freight-out

represents the seller's’ costs of delivering goods to customers.

Bad debt expense

the amount of estimated losses from uncollectible accounts receivable during the period

Depreciation expense

The portion of the cost of a depreciable asset that has been allocated to the current accounting period

Accumulated depreciation

The total amount of depreciation expenses recognized since the building or equipment was acquired and made available for use