Basic bookkeeping terms sbdc

Basic Bookkeeping Basic Bookkeeping Terms- Module 1Terms- Module 1

Copyright @ Anita R Johnson & Copyright @ Anita R Johnson & Associates, IncAssociates, Inc


1

Basic Bookkeeping TermsBasic Bookkeeping Terms




2

Basic Bookkeeping TermsBasic Bookkeeping Terms BASIC BOOKKEEPING TERMSBASIC BOOKKEEPING TERMS

MODULE 1MODULE 1

Mission: The mission of this module is to Mission: The mission of this module is to educate the participant in basic bookkeeping educate the participant in basic bookkeeping terms and to build a chart of accounts while terms and to build a chart of accounts while using any accounting software. using any accounting software.




3

Basic Bookkeeping TermsBasic Bookkeeping Terms Learning ObjectivesLearning Objectives

To understand & apply bookkeeping To understand & apply bookkeeping terms. terms.

To build & use the Chart of AccountsTo build & use the Chart of Accounts



Understand & Apply Understand & Apply Bookkeeping TermsBookkeeping Terms

Account Account Accrual basis *Accrual basis * Accounting Equations *Accounting Equations * Adjusting entriesAdjusting entries Account numbers Account numbers Assets *Assets * Accountant *Accountant * Accounting Accounting Accounts payable Accounts payable Accounts receivableAccounts receivable


4



Accountant VS Accountant VS BookkeeperBookkeeper


5




Accountant – A person, whose profession is accounting, that classifies business transactions and interprets business transactions.


6




Bookkeeper – A person who earns his or her living by recording financial activities of a business and who is concerned with recording of transactions.


7




Balance Sheet* Bank Reconciliation Bookkeeper* Capital* Cash* Cash Disbursement Journal Cash Receipts




9

Accruals VS CashAccruals VS Cash Accrual basis Accrual basis – An accounting system in which – An accounting system in which

revenue is recognized when earned and revenue is recognized when earned and expenses are recognized only when incurred. expenses are recognized only when incurred.




10

Accruals VS CashAccruals VS Cash Cash basis accountingCash basis accounting - An accounting - An accounting

method where receipts are recorded during the method where receipts are recorded during the period they are received, and expenses are period they are received, and expenses are recorded in the period in which they are recorded in the period in which they are actually paid. Cash accounting is one of the actually paid. Cash accounting is one of the two forms of accounting.two forms of accounting.




Charts of Accounts* Check Checking Account Closing Entry Corporations* Cost of Goods Sold




Credit* Creditors Current Assets Debit * Double-entry Accounting* Draw




Expense* Equity* Federal Unemployment Tax FICA Taxes Financial Statement* Fiscal Period Footing




Gross Pay General Journal General Ledgers Income Statement* Interest Journal Journalizing




Ledger Liabilities* Long-term Liabilities Net Income* Net Purchases Net Sales Opening Entry




Outstanding Checks Partnership* Payroll Accounting Payroll Register Payroll Tax Expense Payroll Expense Purchase Journal




Retained Earning Revenue* Salary Sales Discount Sales Journal Schedule of Accounts of Payable Schedule of Accounts of Receivable




Sole Proprietorships* State Unemployment Taxes Subsidiary Ledger “T” Accounts* Trail Balance




19

Build & Use The Chart Of AccountsBuild & Use The Chart Of Accounts

What is Chart of Accounts?What is Chart of Accounts? The Chart of Accounts (COA) is designed to The Chart of Accounts (COA) is designed to

mirror the accounting equation. The COA by mirror the accounting equation. The COA by definition is a list of accounts used by a definition is a list of accounts used by a business to define each class of items of which business to define each class of items of which money or its equivalent that is spent or money or its equivalent that is spent or received. The COA serves as a useful source received. The COA serves as a useful source for locating a given account within the ledger.for locating a given account within the ledger.




20

The Chart Of AccountsThe Chart Of Accounts The Accounting EquationThe Accounting Equation

The accounting equation is Assets = The accounting equation is Assets = Liabilities + Equity. Liabilities + Equity.

Example = $1,000 = $100 + $900Example = $1,000 = $100 + $900




21

The Chart Of AccountsThe Chart Of Accounts“T” Accounts“T” Accounts The Accounting EquationThe Accounting Equation




22

Preparing Chart Of Preparing Chart Of AccountsAccounts

When preparing the COA, the bookkeeper should know When preparing the COA, the bookkeeper should know the following:the following:

The Accounting EquationThe Accounting Equation Accrual or cash accountingAccrual or cash accounting AssetsAssets LiabilitiesLiabilities Equity or Capital Equity or Capital RevenuesRevenues ExpensesExpenses

Type of Company (non-profit, profit, service, retail)Type of Company (non-profit, profit, service, retail) Corporation, Partnership, Sole Owner, LLC, LLPCorporation, Partnership, Sole Owner, LLC, LLP




23

Preparing Chart of Preparing Chart of AccountsAccounts

Determine what basis the client is…Determine what basis the client is… Accrual basis Accrual basis – An accounting system in which – An accounting system in which

revenue is recognized when earned and revenue is recognized when earned and expenses are recognized only when incurred. expenses are recognized only when incurred.

Cash basis accountingCash basis accounting - An accounting method - An accounting method where receipts are recorded during the period where receipts are recorded during the period they are received, and expenses are recorded in they are received, and expenses are recorded in the period in which they are actually paid. Cash the period in which they are actually paid. Cash accounting is one of the two forms of accounting.accounting is one of the two forms of accounting.




24

What is in the Chart of What is in the Chart of AccountsAccounts

Assets – Property owned that hasAssets – Property owned that hasmonetary value. The total resources of a person ormonetary value. The total resources of a person orbusiness. business.

Types of Assets:Types of Assets: Accounts Receivable Accounts Receivable BuildingBuilding CarsCars CheckingChecking Money MarketsMoney Markets PropertyProperty




25


Liabilities – Monies owed to outsiders Liabilities – Monies owed to outsiders

Types of liabilities:Types of liabilities: Accounts PayableAccounts Payable Loan PayableLoan Payable Note PayableNote Payable




26


Equity or Capital Equity or Capital

Capital- Capital- InvestmentInvestment Withdrawals Withdrawals

Backup

Review definitions or change content

Backup

Make sure have definition in book as well.




27

Types of Companies that Types of Companies that require Chart of Accountsrequire Chart of Accounts

Type of Company (non-profit, profit, service, Type of Company (non-profit, profit, service, retail)retail)

Corporation, Partnership, Sole Owner, LLC, Corporation, Partnership, Sole Owner, LLC, LLPLLP Partnership – An association of two or more Partnership – An association of two or more

persons to carry on as co-owners of a business persons to carry on as co-owners of a business Sole Proprietorships – A business owned by one Sole Proprietorships – A business owned by one

person that is not incorporated person that is not incorporated




28

Another Component Another Component Needed for Chart of Needed for Chart of

AccountsAccountsRevenueRevenue is income net sales, other income (interest is income net sales, other income (interest income), cost of goods sold, and operating revenue. income), cost of goods sold, and operating revenue. Revenue’s normal balance is found on the credit side Revenue’s normal balance is found on the credit side (right) of the “T” account. (right) of the “T” account.

Types of Revenue:Types of Revenue: Rent ExpenseRent Expense InterestInterest Income Income Limousine RentalLimousine Rental Insurance Income Insurance Income Consulting FeesConsulting Fees




29

Components Needed for Components Needed for Chart of AccountsChart of Accounts

Expense: Expense: The expenses are classified as all the The expenses are classified as all the expenses that are ordinary and necessary for the expenses that are ordinary and necessary for the business. The normal balance for the expenses is business. The normal balance for the expenses is found on the debit side (left) of the “T” account. found on the debit side (left) of the “T” account.

Types of Expenses:Types of Expenses: Telephone ExpenseTelephone Expense Rent ExpenseRent Expense Interest ExpenseInterest Expense Insurance ExpenseInsurance Expense




30

Activity for Chart of Activity for Chart of AccountsAccounts

Prepare a Chart of Accounts for an Prepare a Chart of Accounts for an Accounting Consulting Corporation/Accrual Accounting Consulting Corporation/Accrual

Accounting Accounting Bank of America/Checking AccountsBank of America/Checking Accounts No Employees No Employees Line of CreditLine of Credit 2 Buildings2 Buildings 1 Company Car1 Company Car Revenue Taxes Revenue Taxes Consulting FeesConsulting Fees




31


AssetsAssets Current AssetsCurrent Assets Bank of America/Checking AccountsBank of America/Checking Accounts Accounts Receivables Accounts Receivables Company CarCompany Car Long-Term AssetsLong-Term Assets

Building #1Building #1 Building #2Building #2




32


Liability Liability Current LiabilityCurrent Liability Line of CreditLine of Credit Accounts PayableAccounts Payable

Capital Capital InvestmentsInvestments Retained Earnings Retained Earnings




33


RevenueRevenue Tax Preparation Tax Preparation Consulting Consulting

ExpensesExpenses TelephoneTelephone Interest ExpenseInterest Expense Office Supplies Office Supplies Meals ExpensesMeals Expenses Insurance Insurance




34





35

Fill in the BlankFill in the Blank

Assets are found on the Assets are found on the ________ Financial Statement.________ Financial Statement.

Debits are usually on the _____ Debits are usually on the _____ side of the “T” account.side of the “T” account.




36

Fill in the BlankFill in the Blank Credits are found on the ______ side of Credits are found on the ______ side of

the “T” accounts.the “T” accounts.




37

Fill in the BlankFill in the Blank

Define the accounting equation:Define the accounting equation:

Describe chart of accounts:Describe chart of accounts:




38

Basic Bookkeeping Basic Bookkeeping Answers Answers

Slide 17-Balance SheetSlide 17-Balance Sheet -Left Side-Left SideSlide 18-Rigth SideSlide 18-Rigth SideAssets=liabilities + OEAssets=liabilities + OEChart of AccountsChart of Accounts




39


Summary Summary

Questions?????????????Questions?????????????




40





41


Anita R Johnson, Financial Psychologist Anita R Johnson, Financial Psychologist

Business

Basic bookkeeping terms sbdc