Accounting Notes

In: Business and Management

Submitted By kingBFaisal
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Financial Accounting
Chapters 1,2,3

Double Entry Accounting- each business transaction has dual effects. As a result, every transaction affects at least two accounts. One Debit and One Credit ACCOUNT | Debit | Credit | Assets | + | - | Expenses | + | - | Dividends or Withdrawals | + | - | Revenue | - | + | Liabilities | - | + | Capital | - | + | Retained Earnings | - | + |
Normal Balance- side the account increases
Contra Account- has a normal balance opposite of its companion account balance.
Few examples of contra account – Allowance for doubt full account (ADA) for A/R - Sales Discount for Sales Revenue - Sales Return for Sales Revenue - Accumulated Depreciation for Capital Assets - etc.
Accounting Equation- Assets = Liabilities + Owners Equity Assets | Liabilities | Equity | | | | -Cash- Accounts Receivable- Notes Receivable- Prepaid Expenses-Land- Building- Equipment- Furniture & Fixtures | -Accounts Payable- Notes Payable- Accrued Liabilities- Mortgage Payable | - Capital- Withdrawals- Revenue - Expense |

4 Financial Statements- Order Of Preparation 1) Income Statement – presents a summary of the revenues and expenses of a company for a specific period of time (ex: month or year). Net Income/ Net Loss = Revenue – Expense. I/S is for the month ended December 31,20XX 2) Statement of Owner’s Equity- presents a summary of the changes that occurred in the entity’s owner’s equity during a specific period of time (such as a month or a year). The statement is for the month ended December 31,20XX.
Opening Balance + Investment by owner+ Net Income (or subtract net Loss)- Withdrawals by owners = Ending owner’s equity balance.
Beginning Retained Earnings + NI (or subtract NL)- Dividends= Ending R/E. 3) Balance Sheet- lists all the assets, liabilities and owner’s equity of an entity as of a specific…...

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