Accounting cheat sheat

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Accounting Tips and its cheat Sheet.. …

Accounting Tips and its cheat Sheet..
Financial Accounting standards boards
Securities and exchange commission
American institute of certified public accountants
FASB emerging tasks force
Cost accounting standard board
Internal revenue service
American accounting Association

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  • 1. 1 www.transtutors.com https://www.facebook.com/transtutorsCall Us: +1.617.933.5480 https://twitter.com/transtutors Governing bodies influencing GAAP Financial Accounting standards boards Securities and exchange commission American institute of certified public accountants FASB emerging tasks force Cost accounting standard board Internal revenue service American accounting Association International accounting standards board Governmental accounting standard board Public company accounting oversight board
  • 2. 2 www.transtutors.com https://www.facebook.com/transtutorsCall Us: +1.617.933.5480 https://twitter.com/transtutors Accounting equation and double entry system Classification of Accounts: Permanent Account Temporary Account All assets, liabilities and stockholders equity All revenues and expenses Permanent Account Temporary Account (Debit) Increase (Credit) Decrease (Debit) Decrease (Credit) Increase (Debit) Decrease (Credit) Increase (Debit) Decrease (Credit) Increase (Debit) Decrease (Credit) Increase (Debit) Increase (Credit) Decrease (Debit) Increase (Credit) Decrease Assets = Liabilities + Stockholder’s Equity Asset Accounts Liability Accounts Capital Stock Accounts Retained Earnings Revenue Accounts Expense Accounts Dividend Accounts
  • 3. 3 www.transtutors.com https://www.facebook.com/transtutorsCall Us: +1.617.933.5480 https://twitter.com/transtutors Accounting Cycle * Income statements, Owners’s equity statements, Balance Sheet Analyze business transactions Journalize the transactions Post to ledger accounts Prepare a trial balance Journalize and post adjusting entries: Deferrals/ Accruals Prepare an adjusted trial balance Prepare Financial statements* Journalize and post closing entries Analyze business transactions 8 9 1 2 3 4 5 6 7 Optional Steps: If a worksheet is prepared, steps 4, 5 and 6 are incorporated in the worksheet. If reversing entries are prepared, they occur between steps 9 and 1 as discussed below.
  • 4. 4 www.transtutors.com https://www.facebook.com/transtutorsCall Us: +1.617.933.5480 https://twitter.com/transtutors Forms of Business Organization Partnerships Corporations Sole Proprietorship Owned by single person (proprietor) and owner is personally liable for debts of business Unincorporated business jointly owned by two or more people, which is not a separate legal entity Perpetual separate legal entity, with limited liability, where ownership exist in transferrable shares.
  • 5. 5 www.transtutors.com https://www.facebook.com/transtutorsCall Us: +1.617.933.5480 https://twitter.com/transtutors Key Financial Statements Income Statement The income statement shows a company’s revenue, expenses, gains and losses appear on this financial statement. Balance Sheet The balance sheets lists the company’s assets, liabilities and equity Cash Flow Statement This financial statement reveals how a company is bringing in and spending its cash. Partnership Partner’s equity is used instead of Owner's Equity and listed separately Proprietorship The equity section contains only the equity of the proprietor Corporation Shareholders equity is divided into capital stock and retained earnings.
  • 6. 6 www.transtutors.com https://www.facebook.com/transtutorsCall Us: +1.617.933.5480 https://twitter.com/transtutors Income Statement Revenue Cost of goods sold Gross Profit Operating Expense Non-Operating Income Operating Income Components of Income Statement
  • 7. 7 www.transtutors.com https://www.facebook.com/transtutorsCall Us: +1.617.933.5480 https://twitter.com/transtutors Pro forma: Income Statement Multi-step income statement Ruth's Place Income Statement For Year Ended December 31, 2001 Sales Less: Sales discounts - Net sales - Cost of goods sold Gross profit - Operating expenses: Selling expenses: Total selling expenses - General and administrative expenses: Total general and administrative expenses Total operating expenses - Net income - $ -
  • 8. 8 www.transtutors.com https://www.facebook.com/transtutorsCall Us: +1.617.933.5480 https://twitter.com/transtutors Main Components of Balance Sheet • Assets are economic resources that are owned by a business and are expected to benefit future operations. • Examples: buildings, machinery, accounts receivable. • Valued at cost value... that is what you paid for the asset, not what it is worth today. Assets • Debts of a business • All businesses have debts. It is convenient to buy with credit • The purchase of goods of services for credit is an account payable • When money is borrowed it is a note payable Liabilities • Represents the resources invested by the owner • Residual claim because claims of creditors come first • Equal to the total assets minus the total liabilities • Increase in Owner's Equity comes from Investment and Earnings • Decreases come from Withdrawals and Losses Owners’ Equity Assets Liabilities Owner's Equity
  • 9. 9 www.transtutors.com https://www.facebook.com/transtutorsCall Us: +1.617.933.5480 https://twitter.com/transtutors Performa: Balance Sheet Note As at 31 December 2011 2010 ASSETS Non-current assets Property, plant and equipment Intangible assets Deferred income tax assets Trade and other receivables Total non-current assets 0 0 Current assets Inventories Trade and other receivables Cash and cash equivalents (excluding bank overdrafts) Total current assets 0 0 TOTAL ASSETS 0 0 EQUITY AND LIABILITIES Equity Share capital Share premium Other reserves Retained earnings Total equity 0 0 Liabilities Non-current liabilities Borrowings Deferred income tax liabilities Provisions for other liabilities and charges Total non-current liabilities 0 0 Current liabilities Trade and other payables Current income tax liabilities Borrowings Provisions for other liabilites and charges Total current liabilities 0 0 Total liabilities 0 0 TOTAL EQUITY AND LIABILITIES 0 0
  • 10. 10 www.transtutors.com https://www.facebook.com/transtutorsCall Us: +1.617.933.5480 https://twitter.com/transtutors Journal Entry An amount entered on the right side of an account, which cause increase in revenue and gains and decrease in assets and expenses Each bookkeeping or accounting entry will involve at least two accounts: at least one account will be debited, one account will be credited. An amount entered on the left side of an account, which causes increase in assets and expenses and decrease in liabilities and revenue.
  • 11. 11 www.transtutors.com https://www.facebook.com/transtutorsCall Us: +1.617.933.5480 https://twitter.com/transtutors Basic Ledgers Used in Accounting Accounts Receivable Accounts Payable Notes Receivable Petty Cash Account Cash Account Inventory
  • 12. 12 www.transtutors.com https://www.facebook.com/transtutorsCall Us: +1.617.933.5480 https://twitter.com/transtutors Accounts Receivable Accounts Receivable Journal entry to create allowance for doubtful account Uncollectible Accounts Expense XXX Allowance for Doubtful accounts XXX Allowance for Doubtful Accounts will appear on the balance sheet as a deduction from A/R Accounts Receivable XXX Allowance for doubtful accounts XXX Final A/R Amount XXX Journal entry to record bad debt entry Allowance for Doubtful Accounts XXX Accounts Receivable (Simons) XXX Any product sold on credit creates an asset which is yet to receive , thus termed as Account Receivable.
  • 13. 13 www.transtutors.com https://www.facebook.com/transtutorsCall Us: +1.617.933.5480 https://twitter.com/transtutors Cash Account and Cash Management Listed first because it is available to meet obligations. Assets are listed in order of liquidity and it is most liquid asset. Some short term investments are combined with cash on the balance sheet because of their liquidity. Creditors are interested in how cash compares with accounts payable, i.e. Solvency Cash Account Creation of Petty cash Funds Petty Cash XXX Cash XXX Replenishing Cash Funds Office Supply Expenses XXX Entertainment Expense XXX Cash XXX