Accounting Files

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The accounting presentations are following the QuickLinks table and are not indexed within the QuickLinks table.
Click here to access the top of those presentations.

QuickLinks

Conventions Financial Statements Income Statement
Common Revenue Accounts Common Expense Accounts Statement of Retained Earnings
Balance Sheet Common Asset Accounts Common Liability Accounts
Common Owners' Equity Accounts Statement of Cash Flows Cash Accounting
Accrual Accounting Tax Accounting Accounting Terms
Revenues Expenses Assets
Liabilities Owners' Equity Debits
Credits Accounting Equation  
Financial Accounting Using Sage 50 Complete Accounting
0100A-Business and Accounting-2015-01-01 0110A-The Chart of Accounts-2015-01-01 0112A-Building an Account In Sage 50 Complete Accounting-2015-01-01
0120A-Intro to Financial Statements with Sage 50 Complete Accounting-2015-01-01 0130A-Intro to Income Statements with Sage 50 Complete Accounting-2015-01-01 0140A-Intro to the Retained Earnings Statement with Sage 50 Complete Accounting-2015-01-01
0150A-Intro to the Balance Sheet with Sage 50 Complete Accounting-2015-01-01 0160A-Intro to the Statement of Cash Flows with Sage 50 Complete Accounting-2015-01-01
Financial accounting clippettes on numerous subjects
Managerial accounting clippettes on numerous subjects
TI BA-II Plus calculator clippettes on numerous subjects

Accounting Presentations Created of the January 1, 2015, Series

Intended for personal growth and educational use on. May not be sold, copied, transferred, or traded without my express permission.

A primer for Microsoft Excel by Rex A Schildhouse - 2017-08-28

A primer for Microsoft Excel by Rex A Schildhouse

Listed in alphabetical order.

Absorption vs. Variable Costing

Absorption vs. Variable Costing-2015-01-01-Video

Absorption vs. Variable Costing-2015-01-01-PDF

Absorption vs. Variable Costing Microsoft Excel Template-2015-01-01

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Accounting Rate of Return

Accounting Rate of Return-2015-01-01-Video

Accounting Rate of Return-2015-01-01-PDF

Accounting Rate of Return Microsoft Excel Template-2015-01-01

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Activity-Based-Costing

Activity-Based-Costing-2015-01-01-Video

Activity-Based-Costing-2015-01-01-PDF

Activity-Based-Costing Microsoft Excel Templat-2015-01-01

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Breakeven in Units and Dollars

Breakeven in Units and Dollars-2015-01-01-Video

Breakeven in Units and Dollars-2015-01-01-PDF

Breakeven in Units and Dollars Microsoft Excel Template-2015-01-01

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Budgets and Budgeting

This is a sequential walk through of a budget cycle. The full budget in on the single Microsoft Excel template.

Budgets Full Microsoft Excel Template for Budgets-2015-01-01

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Introduction to Budgets - A in the series

Introduction to Budgets - A in the series-2015-01-01-Video

Introduction to Budgets - A in the series-2015-01-01-PDF

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The Sales Budget - B - in the series

The Sales Budget - B in the series-2015-01-01-Video

The Sales Budget - B in the series-2015-01-01-PDF

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The Production Budget - C in the series

The Production Budget - C in the series-2015-01-01-Video

The Production Budget - C in the series-2015-01-01-PDF

The Direct Materials Budget - D in the series

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The Direct Materials Budget - D in the series-2015-01-01-Video

The Direct Materials Budget - D in the series-2015-01-01-PDF

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The Direct Labor Budget - E in the series

The Direct Labor Budget - E in the series-2015-01-01-Video

The Direct Labor Budget - E in the series-2015-01-01-PDF

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The Factory / Manufacturing Overhead (FOH / MOH) Budget - F in the series

The Factory / Manufacturing Overhead (FOH / MOH) Budget - F in the series-2015-01-01-Video

The Factory / Manufacturing Overhead (FOH / MOH) Budget - F in the series-2015-01-01-PDF

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The Operating Expense Budget - G in the series

The Operating Expense Budget - G in the series-2015-01-01-Video

The Operating Expense Budget - G in the series-2015-01-01-PDF

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The Cash Collections Budget - H in the series

The Cash Collections Budget - H in the series-2015-01-01-Video

The Cash Collections Budget - H in the series-2015-01-01-PDF

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The Cash Payments Budget - I in the series

The Cash Payments Budget - I in the series-2015-01-01-Video

The Cash Payments Budget - I in the series-2015-01-01-PDF

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The Cash Budget - J in the series

The Cash Budget - J in the series-2015-01-01-Video

The Cash Budget - J in the series-2015-01-01-PDF

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Calculating the Cost of Goods Manufactured and Sold

Calculating the Cost of Goods Manufactured and Sold-2015-01-01-Video

Calculating the Cost of Goods Manufactured and Sold-2015-01-01-PDF

Calculating the Cost of Goods Manufactured and Sold Microsoft Excel Template-2015-01-01

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Cash Payback Period

Cash Payback Period-2015-01-01-Video

Cash Payback Period-2015-01-01-PDF

Cash Payback Period Microsoft Excel Template-2015-01-01

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Constraint Theory

Constraint Theory-2015-01-01-Video

Constraint Theory-2015-01-01-PDF

Constraint Theory Microsoft Excel Template-2015-01-01

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Cost-Volume-Profit

Cost-Volume-Profit-2015-01-01-Video

Cost-Volume-Profit-2015-01-01-PDF

Cost-Volume-Profit Microsoft Excel Template-2015-01-01

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Direct and Indirect Manufacturing Costs

Direct and Indirect Manufacturing Costs-2015-01-01-Video

Direct and Indirect Manufacturing Costs-2015-01-01-PDF

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Discontinued Operations - Death Spiral

Discontinued Operations - Death Spiral-2015-01-01-Video

Discontinued Operations - Death Spiral-2015-01-01-PDF

Discontinued Operations - Death Spiral Microsoft Excel Template-2015-01-01

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Equivalent Units

Equivalent Units-2015-01-01-Video

Equivalent Units-2015-01-01-PDF

Equivalent Units Microsoft Excel Template-2015-01-01

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Factory / Manufacturing Overhead (FOH / MOH)

Factory / Manufacturing Overhead-2015-01-01-Video

Factory / Manufacturing Overhead-2015-01-01-PDF

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Financial vs. Managerial Accounting

Financial vs. Managerial Accounting-2015-01-01-Video

Financial vs. Managerial Accounting-2015-01-01-PDF

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Fixed and Variable Costs

Fixed and Variable Costs-2015-01-01-Video

Fixed and Variable Costs-2015-01-01-PDF

Fixed and Variable Costs Microsoft Excel Template-2015-01-01

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High-Low Method

High-Low Method-2015-01-01-Video

High-Low Method-2015-01-01-PDF

High-Low Method Microsoft Excel Template-2015-01-01

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Income Statement Comparison

Income Statement Comparison-2015-01-01-Video

Income Statement Comparison-2015-01-01-PDF

Income Statement Comparison Microsoft Excel Template-2015-01-01

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Internal Rate of Return-2015-01-01

Internal Rate of Return-2015-01-01-Video

Internal Rate of Return-2015-01-01-PDF

Internal Rate of Return Microsoft Excel Template-2015-01-01

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Inventoriable Period Costs

Inventoriable Period Costs-2015-01-01-Video

Inventoriable Period Costs-2015-01-01-PDF

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Job Order Costing

Job Order Costing-2015-01-01-Video

Job Order Costing-2015-01-01-PDF

Job Order Costing Microsoft Excel Template-2015-01-01

Make or Buy

Make or Buy-2015-01-01-Video

Make or Buy-2015-01-01-PDF

Make or Buy Microsoft Excel Template-2015-01-01

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Managerial vs. Financial Accounting

Managerial vs. Financial Accounting-2015-01-01-Video

Managerial vs. Financial Accounting-2015-01-01-PDF

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Planning, Directing, and Controlling

Planning, Directing, and Controlling-2015-01-01-Video

Planning, Directing, and Controlling-2015-01-01-PDF

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Prime and Conversion Costs in Manufacturing

Prime and Conversion Costs in Manufacturing-2015-01-01-Video

Prime and Conversion Costs in Manufacturing-2015-01-01-PDF

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Process Costing

Process Costing-2015-01-01-Video

Process Costing-2015-01-01-PDF

Process Costing Microsoft Excel Template-2015-01-01

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Regression Analysis

Regression Analysis-2015-01-01-Video

Regression Analysis-2015-01-01-PDF

Regression Analysis Microsoft Excel Template-2015-01-01

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Sales Mix

Sales Mix-2015-01-01-Video

Sales Mix-2015-01-01-PDF

Sales Mix Microsoft Excel Template-2015-01-01

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Sell as is or Process Farther

Sell as is or Process Farther-2015-01-01-Video

Sell as is or Process Farther-2015-01-01-PDF

Sell as is or Process Farther Microsoft Excel Template-2015-01-01

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Service, Merchandising, or Manufacturing Company?

Service, Merchandising, or Manufacturing Company?-2015-01-01-Video

Service, Merchandising, or Manufacturing Company?-2015-01-01-PDF

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Skills of an Accountant

Skills of an Accountant-2015-01-01-Video

Skills of an Accountant-2015-01-01-PDF

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Special Orders

Special Orders-2015-01-01-Video

Special Orders-2015-01-01-PDF

Special Orders Microsoft Excel Template-2015-01-01

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Value Chain

Value Chain-2015-01-01-Video

Value Chain-2015-01-01-PDF

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Variances - Material, Labor, and Factory / Manufacturing Overhead

There is one master Microsoft Excel template for all of the Variance presentations.

Variances - Full Variance Microsoft Template-2015-01-01.xlsx

Variances-A-Introduction-2015-01-01-Video

Variances-A- Introduction - 2015-01-01-PDF

Variances-B-Material Variances-2015-01-01-Video

Variances-B-Material Variances-2015-01-01-PDF

Variances-C-Labor Variances-2015-01-01-Video

Variances-C-Labor Variances-2015-01-01-PDF

Variances-D- Factory / Manufacturing Overhead Variances-2015-01-01-Video

Variances-D- Factory / Manufacturing Overhead Variances-2015-01-01-PDF

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Return to the QuickLinks Index

There are numerous types of accounting and they include accrual, cash, financial, inventory, managerial, and tax accounting. Each is its own special aspect of accounting. Here are some basic explanations.

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Conventions

Account titles are what appear in the general ledger. I will try to keep account titles in title case - Accounts Receivable. There is a problem here and it goes by interpretation. "Dana paid cash on their accounts receivable."This may be read as an event not affecting the Cash or Accounts Receivable accounts. There is no question with the statement "You need to debit Cash and credit Accounts Receivable when a customer makes a payment on account."

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Financial Statements

There are four financial statements and they are all interlinked. The balance sheet gives the income statement assets such as Merchandise Inventory and liabilities such as Wages Payable as expenses such as Cost of Goods Sold and Wages Expense so the company can earn revenues. Revenues are (HOPEFULLY) greater than the expense so you have net income. Net income increases Retained Earnings on the statement of retained earnings and Retained Earnings increases owners' equity on the balance sheet. At the same time Cash or Accounts Receivable increased by more than the value of the asset such as Merchandise Inventory was decreased by or the value that liabilities such as Wages Payable was increased by. In the following sections the four financial statements are addressed.

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Income Statement

The income statement has the first header line of the full, legal name of the company. The second header line is the title. In the U.S. it is common to be called "Income Statement" while another title may be "Statement of Operations." The third header line is always a date RANGE line. It reads for a period of time such as "For the Month Ending January 31, 2013," or "For the Quarter Ending March 31, 2013," or "For the Year Ending December 31, 2013." You may see "For the" dropped i some companies. The date line will never read simply "January 31, 2013" unless it is a very special managerial accounting report.

The income statement only shows two types of accounts - revenue and expense. These accounts may be titled such as Sales Revenues, Service Revenues, and Admissions Revenues. There may be contra revenue accounts such as Sales Discounts, and Sales Returns & Allowances. When these are deducted from the total of the sales accounts you have net sales. Expenses are the cost of earning those revenues. When properly structured all expense accounts except Cost of Goods Sold will have the word "Expense" in their title. Common expenses include Cost of Goods Sold, Insurance Expense, Rent Expense, Utilities Expense, and Wages Expense. Miscellaneous Expense may appear in textbook accounting. However, due to U.S. tax code which prohibits such a declaration on a tax return it should not be utilized in real accounting situation. Financial reporting allows non-material accounts of nonmaterial values to be "clumped" into a "Miscellaneous Expenses" presentation. DIVIDENDS ARE NOT AN EXPENSE!!

The income statement may contain several lines that are not accounts. These include titles such as net sales, total sales, gross profit, total expenses, and net income. Total sales type titles are the simple sum of all sales type events. Net sales titles indicate that the presented value is the result of something like Sales - Sales Discounts - Sales Returns & Allowances = Net Sales. Gross profit is the result of Net Sales - Cost of Goods Sold. Total expenses is the mathematical sum of all expenses not otherwise used to this point. If gross profit is a shown value total expenses will not include cost of goods sold. Net income is the result of all revenues - sales discounts - sales returns & allowances - expenses. Critical that it is understood this is value and not cash.

All accounts on the income statement are nominal or temporary accounts - they intentionally get set to zero at the end of fiscal periods. This is so that period information is clear - What are our sales for the month of January 2013? What are our rent expenses for the first quarter of 2013? and What are our wages expenses for the year ended December 31, 2013? These answers are the total values between intentional zeros in the accounts. Usually placed there at the end of each month or quarter as the last entries of that fiscal period.

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Common Revenue Accounts:

Admissions Revenues, Dividend Revenue, Interest Revenue, Sales Revenues, and Service Revenues. The terms "Gain" and "Loss" will appear on the income statement as you progress deeper into accounting and reporting.

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Common Expense Accounts:

Advertising Expense, Bad Debt Expense, Cost of Goods Sold, Depreciation Expense, Income Tax Expense, Payroll Tax Expense, Rent Expense, Repairs & Maintenance Expense, Salaries Expense, Supplies Expense, Utilities Expense, and Wages Expense.

In the following example, notice that there are no negatives shown on the financial statement. It is assumed you know that "Less" means deduct and that total expenses reduce revenues to attain net income.

We-B-Doing-It Company
Income Statement
For the Month Ended January 31, 2013

Gross Sales Revenues
$1,250
Less: Sales Allowance & Returns
120
Net Sales
$1,130
Cost of Goods Sold
750
Gross Profit
380
Expenses
Wages Expense
130
Rent Expense
115
Utilities Expense
25
Total Expenses
270
Net Income
$110

 

Here is a relational clue, notice that expenses are shown on the left side? They increase with debit values which are in the left column of journal entries. Revenues go right so they increase with credit values which are in the right column of journal entries.

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Statement of Retained Earnings

The statement of retained earnings has the same header structure as the income statement. The first header line of the full, legal name of the company. The second header line is the title. The title may vary to meet the needs and common titles include statement of retained earnings, statement of owners' equity, statement of partners' equity, and statement of shareholders' equity. Each has its own differences. The third header line is always a date RANGE line. It reads for a period of time such as "For the Month Ending January 31, 2013," or "For the Quarter Ending March 31, 2013," or "For the Year Ending December 31, 2013." You may see "For the" dropped in some companies. The date line will never read simply "January 31, 2013" unless it is a very special managerial accounting report.

The statement of retained earnings converts the nominal or temporary accounts of revenues and expenses into the permanent or real accounts of the balance sheet. This is through a process of Beginning balance Retained Earnings + Period net income = Unidentified subtotal - Dividends = Ending balance Retained Earnings.

This series answers the unasked question, "How did the value of the company change through operations?" And the answer is provided by "Beginning balance Retained Earnings + Period net income = Unidentified subtotal." Then the statement answers the unasked question, "How did the value of the company change due to dividends?" This is answered by "Unidentified subtotal - Dividends = Ending balance Retained Earnings."

Retained Earnings is a perm en ant or real account, it does not get set to zero at the end of a fiscal period such as the nominal or temporary accounts of revenues, expenses, and dividends. These nominal or temporary account values are "placed" into the Retained Earnings account through the statement of retained earnings.

Remember, Dividends are not an expense, you do not generate revenues by paying dividends so it is not an expense. They are "rewards" to the owners for taking the risks of business.

We-B-Doing-It Company
Statement of Retained Earnings
For the Month Ended January 31, 2013

Beginning Balance, Retained Earnings
$225
Plus: Period net income
110
 
335
Less: Dividends
35
Ending Balance, Retained Earnings
$300

 

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Balance Sheet

The balance sheet contains several "issues." First, it contains only permanent or real accounts. These are accounts that continue from fiscal period to fiscal period without being set to an intentional zero to determine period active. Under normal circumstances you would not ask "What is my cash for the month ended January 31, 2013?" Second, in the book format, assets on the left side and liabilities & owners' equity on the right side, it presents the accounting equation which is Assets = Liabilities + Owners' Equity. An option for the presentation of the balance sheet is called report or form format where assets are listed first, then below them liabilities are listed, followed by owners' equity below the liabilities.

Using book format, left and right, has some aids. Assets are on the left side and they increase with debit values in journal entries which are in the left column. Liabilities and owners' equity accounts are on the right side and they increase with credit values in journal entries which are in the right column. Relational.

The balance sheet has a slightly different header structure than the income statement and statement of retained earnings. The first header line of the full, legal name of the company. The second header line is the title. The title may vary to meet the needs and common titles include balance sheet and statement of financial position. The third header line is always A SIMPLE DATE. It reads "January 31, 2013," or "March 31, 2013," or "December 31, 2013." It answers that "What is my Cash balance since Day1 of the business?" "How much do my customers owe me through Accounts Receivable as of today?" and "How much do I owe my vendors since Day 1 of the business?" type questions.

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Common Asset Accounts:

Cash, Accounts Receivable, Merchandise, Supplies, Interest Receivable, Prepaid Insurance, Prepaid Rent, Land, Buildings, Equipment, and Copyrights.

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Common Liability Accounts:

Accounts Payable, Notes Payable, Income Taxes Payable, Sales Tax Liability, Wages Payable, Salaries Payable, Payroll Taxes Payable, Bonds Payable, and Warranty Liability. Some textbooks will use Sales Taxes Payable and Warranty Payable however, since sales taxes are collected from the customer on behalf of the taxing agency this is never company value or a cost of doing business. Warranty issues are resolved with values - labor and parts, and are not resolved by writing a check normally, so they should not be "payable."

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Common Owners' Equity Accounts:

Owners' equity depends on the legal structure of the company. For a sole proprietorship the single equity account may be "Morgan, Owner's Equity" with a contra account of "Morgan, Withdrawals" rather than a dividend account. A sole proprietorship may use a statement of owner's equity as the statement between the income statement and the balance sheet - singular and possessive. For a partnership you may have "Morgan, Partner's Equity" paired with a contra account of "Morgan, Withdrawals" along with "Dana, Partner's Equity" paired with "Dana, Withdrawals." Like a sole proprietorship, there are no dividends in a partnership structure of business. The partnership may use a statement of partners' equity as the statement between the income statement and the balance sheet - plural and possessive. A corporation will have Stock (Unless otherwise defined this si common stock), Common Stock, Additional Paid in Capital - Common Stock, Preferred Stock, Additional Paid in Capital - Preferred Stock, Retained Earnings, and Dividends. Corporations may use the statement of retained earnings, statement of shareholders' equity, or statement of stockholders' equity between the income statement and the balance sheet.

Retained Earnings - sole proprietorships and partnerships may or may not "roll" the period retained earnings into the owners equity accounts. Corporations will not normally do this keeping the "growth" value of the company apart from "contributed" value. Notice Retained Earnings is the same value as on the statement of retained earnings.

The balance sheet is the balance sheet in the book format because left must equal right. If not, something is wrong. Assets = Liabilities + Owners' Equity and Debits = Credits. Asset balances are normally debits and liabilities and owners' equity account balances are normally credits.

We-B-Doing-It Company
Balance Sheet
January 31, 2013

Assets   Liabilities  
Cash
$750
Accounts Payable
$95
Accounts Receivable
145
Stockholders' Equity
Inventory
55
Common Stock
700
Equipment
275
Add. Paid-in Value
130
 
Retained Earnings
300
 
Total Stockholders' Equity
1,130
Total Assets
$1,225
Total Lia & Stockholders' Equity
$1,225

 

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Statement of Cash Flows

There are two statements of cash flows and textbook accounting is going to present them wrong. The type types are 1) the direct method and 2) the indirect method. What is the difference? Numerous depending on who is answering the questions.

First,the statement has the same header structure as the income statement and the statement of retained earnings. The first header line of the full, legal name of the company. The second header line is the title such as statement of cash flows. The word "direct" or "indirect" may be inserted in the title line but it is not necessary. The third header line is always a date RANGE line. It reads for a period of time such as "For the Month Ending January 31, 2013," or "For the Quarter Ending March 31, 2013," or "For the Year Ending December 31, 2013." You may see "For the" dropped in some companies. The date line will never read simply "January 31, 2013" unless it is a very special managerial accounting report.

There are numerous parts to the statement of cash flows. The three lines of the header, a cash flow as the result of operations section, a cash flow as the result of investments section, a cash flow as the result of finance section, and a reconciliation to the Cash account beginning and ending balance for the period in the date line. The only difference between the direct and indirect method is the cash flow as the result of operations section. The indirect statement starts with net income then removes any issues with changed net income related to investment or financing activities and addressed non-cash issues such as Depreciation Expense. The result is Cash Provided by (or Cash used by) Operations. The direct statement contains details - cash received from customers, cash paid to vendors, cash paid for rent, cash paid for wages, etc.

Textbooks will state that something like 97%+ of businesses utilize the indirect method. True - FOR PUBLICLY RELEASED FINANCIAL REPORTING. No good manager manages from "adjustment to net income" to hide value and cash movement. Managers need the direct presentation to manage the business. Most textbooks will tell you that it takes longer to format a direct statement of cash flows than an indirect statement of cash flows. Most computerized accounting applications costing more than $500 have both statements in their pre formatted reports. Which do you click? The computer time is less than five seconds either way. If you have to complete one manually, the header, investments, finance, and reconciliation sections are identical and no noticeable difference was detected when I conducted surveys of students formatting the reports.

Key - the sections of the statement of cash flows are in reverse alphabetical order Operations, Investment, and Finance, O-I-F.

So, what does a statement of cash flows show? Cash flows. (Giggle.) Think of the life cycle of a business, ground floor to top floor. First you FINANCE your business with owners' equity type investments - contributed capital and long-term loans. Now that your company has money you INVEST that money with the purchase land, build a building, and purchase equipment to operate the store with. Then you OPERATE your business by purchasing merchandise, hiring employees, and getting an insurance policy. Since OPERATIONS is how the company grows with proper management and it is done every day of the business' life it is shown first. Since you should only have to FINANCE your business it is shown last. Since you have a first and last, INVESTMENT is in the middle. And investing activities should reoccur during the life of the company - buy more land, build more buildings, purchase more equipment to grow your business. However, these are not every day activities, less often than operating activities and more often than financing activities.

Cash is the only true account on the statement of cash flows. Here is a general, no value, look at the direct and indirect statements of cash flows.

We-B-Doing-It Company
Statement of Cash Flows
For the Month Ended January 31, 2013

Cash flows from operating activities
Direct Method Indirect Method
Cash received from customers Net income
Cash paid to vendor Deduct increase in Accounts Receivable
Cash paid for wages Add Depreciation Expense - noncash expense
Cash paid for rent Deduct Gain on Sale of Equipment - Investment value
Cash provided by operating activities
 
Cash flows from investing activities (Same in both direct and indirect formats)
Cash received for the disposal of any land, building or equipment, gain or loss is not a factor
Cash paid for the acquisition of any land, building or equipment
Cash provided by or (used by) investing activities
 
Cash flows from financing activities (Same in both direct and indirect formats)
Cash received for the issuance of stock
Cash received from the issuance of long-term debt
Cash paid for dividends
Cash paid to resolve long-term debt
Cash provided by or (used by) financing activities
Change in cash over the period
Plus beginning balance cash (This must be penny-for-penny with the balance sheet.)
Ending balance cash (This must be penny-for-penny with the balance sheet.)

 

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Cash Accounting

If it is not in the checkbook as a deposit it is not a revenue. It does not matter when you did the work or delivered the goods. If it is not in the checkbook as a check being paid, it is not an expense. It does not matter when the item was consumed, used, or transferred to another party. Cash accounting is considered inaccurate and unacceptable except in very small businesses with limited revenues and expenses. When compared to accrual accounting there will be a difference in revenue and expense recognition dates caused by the difference between actions and values.

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Accrual Accounting

Accrual accounting is primarily the movement of values. When you provide a service or a product you record the event as a revenue generation process whether you receive cash or not. This increases the value of the business through revenues filtering down through the income statement to net income then through the statement of retained earnings as retained earnings into the balance sheet as an increase in owners' equity. It also increases the asset cash, accounts receivable, or notes receivable for the value of the difference between the cost of that service or product. It is possible that you received the payment before the event so you reduced a liability such as Unearned Revenues rather than increasing cash. And earning revenue has a cost called expense. Even if you did not pay the expense, such as wages or rent, at the immediate time of the sales transaction.

As a result accrual accounting has many more transactions than cash account, however, the growth of the company is presented in a more stable format. Consider purchasing a building for $500,000. In cash accounting that is an expense in one month of $500,000. In accrual accounting a process known as depreciation will amortize (slice that cost into little chunks) that building over its entire life. For a building with an assumed life of forty years this amortization process could put $1,042.67 into each month of the the income statements reports. That value is offset by monthly sales much easier.

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Tax Accounting

Tax accounting is a hybrid of cash and accrual accounting. When you sell on account tax accounting does not consider it a taxable event. When you purchase on account tax accounting does not consider it a deductible issue. However, you pay cash for that $500,000 building? Not a full deduction either. Tax accounting requires amortization of that building over a period of time. Tax accounting is its own, special aspect of accounting.

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Accounting Terms

In the order of the financial statements and in my words.

Revenues

Values coming into the business through operations such as sales, service, and admissions. May not be cash as they may be earned and recorded as receivables in Accounts Receivable or Notes Receivable. They may also be earning previously received cash allowing the company to reduce liabilities. A well structured chart of accounts will include "Revenue" or a similar word in every revenue account title. Common revenue accounts are Sales Revenues, Service Revenues, and Admissions Revenues.

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Expenses

Expenses are the cost of doing business. Every business has expenses and they may or may not be paid at the time of the revenue generating event. A sale may convert the asset Merchandise Inventory to the expense of Cost of Goods Sold as the asset is "consumed" in the transaction - the customer took it away. Wages Expense are the recognition that you have an employee in the store to assist with the sale. That employee's time become Wages Payable, a liability, and Wages Expense. A wells structured chart of accounts will include "Expense" in every expense account title except Cost of Good Sold, a special account. Common expense accounts include Advertising Expense, Depreciation Expense, Insurance Expense, Payroll Tax Expense, Rent Expense, Supplies Expense, and Wages Expense.

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Assets

Assets are things that will render the business a service or value in the future. Cash is a common asset, it allows you to pay bills. Accounts Receivable is a common asset - when collections are made you get cash. Merchandise Inventory is a common asset - it allows you to sell to your customers. Prepaid Rent is a common asset - it allows you to stay in the building to conduct your sales. Equipment is a common asset - it allows you to function. Other common asset accounts include Prepaid Insurance and Office Supplies.

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Liabilities

Liabilities are obligations of the business. They must be resolved by providing a product, a service, or a value sometime in the future. When a customer places a special order requiring a prepayment that is not revenue but a liability, Unearned Sales Revenue, until you deliver the product. As a lawn care business you require prepayment from clients. While your Cash increased so did your obligation of Unearned Service Revenue. This liability will be decreased when your crew tends to the lawn. Common liabilities include Accounts Payable, Notes Payable, Unearned Sales Revenues, and Unearned Service Revenue. Notice the reoccurrence of "Payable" and "Unearned" in these titles?

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Owners' Equity

Owners' equity is normally shown as plural, possessive in general presentation. Due to the fact that the owner gets leftovers in any liquidation or bankruptcy process, I refer to this as "VALUE AT RISK" as it is not cash either. The owner can increase owners' equity by contributing cash and he gets VALUE in return. He can contribute an item such as land, a building, equipment, supplies, or merchandise. Again, the company gets an asset, he gets VALUE. These events are referred to as "Contributed Capital." As the company conducts business it should have net income which increases the value of the company that the owner owns. This growth value is contained in Retained Earnings as shown on the statement of retained earnings. Again, this is VALUE. The cash is in the Cash account or the value is in Accounts Receivable. Retained Earnings is referred to as earned or retained value since it was 1) not contributed by the owners, and 2) not distributed to them through dividends. Common owners' equity accounts are Dana, Contributed Capital, Dana Withdrawals, Morgan, Partnership Capital, Morgan Withdrawals, Casey, Partnership Capital, Casey Withdrawals, Common Stock, Additional Paid-in Capital Common Stock, Preferred Stock, Additional Paid-in Capital Preferred Stock, Dividends - Common Stock, and Dividends - Preferred Stock.

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Debits

Debits means left and keep it that simple. When you are writing journal entries debit values go in the left column. Debits increase expenses, assets, and dividends or withdrawals as well as Sales Discounts and Sales Returns & Allowances. If these accounts increase with debits / left, they decrease with credits / right.

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Credits

Credits means right and keep it that simple. When you are writing journal entries credit values go in the right column. Credits increase revenues, liabilities, and owners' equity accounts other than dividends or withdrawals. If these accounts increase with credits / right, they decrease with debits / left.

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Accounting Equation

The Accounting Equation is Assets = Liabilities + Owners' Equity. The laws of math tell us that if you know any two of these you actually know all of them - 5 = 3+2, 5 - 3 = 2, 5 - 2 = 3. Therefore Assets - Liabilities = Owners' Equity and Assets - Owners' Equity = Liabilities.

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New Accounting With Sage 50 Complete Accounting Files

These files are available free. Please do not sale, charge for transfer, or exchange them for compensation. If and when they get revised the letter and date will change.

0100A-Business and Accounting-2015-01-01.pdf

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0110A-The Chart of Accounts-2015-01-01.pdf

0110A-The Chart of Accounts-2015-01-01.xlsx

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0112A-Building an Account In Sage 50 Complete Accounting-2015-01-01.pdf

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0120A-Intro to Financial Statements with Sage 50 Complete Accounting-2015-01-01.pdf

0120A-Intro to Financial Statements with Sage 50 Complete Accounting-2015-01-01.xlsx

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0130A-Intro to Income Statements with Sage 50 Complete Accounting-2015-01-01.pdf

0130A-Intro to the Income Statements with Sage 50 Complete Accounting-2015-01-01.xlsx

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0140A-Intro to the Retained Earnings Statement with Sage 50 Complete Accounting-2015-01-01.pdf

0140A-Intro to the Retained Earnings Statement with with Sage 50 Complete Accounting-2015-01-01.xlsx

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0150A-Intro to the Balance Sheet with Sage 50 Complete Accounting-2015-01-01.pdf

0150A-Intro to the Balance Sheet with Sage 50 Complete Accounting-2015-01-01.xlsx

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0160A-Intro to the Statement of Cash Flows with Sage 50 Complete Accounting-2015-01-01.pdf

0160A-Intro to the Statement of Cash Flows with Sage 50 Complete Accounting-2015-01-01.xlsx

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Financial Accounting Clippettes

These are self-produced financial accounting clippettes by Rex A Schildhouse. They WERE intended for use by my students while they are taking my course. I now consider them public access for non-commercial use. They are copyrighted and may not be used for any purpose not directly education or self-improvement. They may not be copied or downloaded. If you need captioned materials please let me know through the class e-mail account.
Thanks,
Rex

These are listed by alphabetically by title. Most are less than ten minutes in length and address only one subject. They are not directly related to any specific chapter and need not be viewed in any specific order.

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Introduction to the 10-column worksheet

Introduction to accounts receivable

Introduction to accrual accounting

Introduction to the bank reconciliation

Introduction to basic accounting terms

Introduction to bonds payable

Introduction to chart of accounts

Introduction to corporate income taxes

Introduction to depreciation

Introduction to discontinued segments and extraordinary events

Introduction to the equity method of investments

Introduction to errors in financial statements

Introduction to financial statements - Income statement

Introduction to financial statements - Statement of retained earnings

Introduction to financial statements - The balance sheet

Introduction to financial statements - The statement of cash flows – General

Introduction to financial statements - The statement of cash flows – Indirect

Introduction to financial statements - The statement of cash flows - Direct

Introduction to financial statements - The statement of cash flows – Investments

Introduction to financial statements - The statement of cash flows – Finance

Introduction to financial statements - The statement of cash flows

Introduction to financial accounting

Introduction to fiscal periods

Introduction to the flow of accounting

Introduction to inventory terms

Introduction to inventory - Average cost

Introduction to inventory - First-in, First-out, FIFO

Introduction to inventory - Last-in, First-out, LIFO

Introduction to notes receivable and interest

Introduction to posting and the general ledger

Introduction to purchasing and disposing of fixed assets

Introduction to sales taxes

Introduction to short-term investments

Introduction to stock splits - Part 1

Introduction to stock splits - Part 2

Introduction to stockholders' equity - Part 1

Introduction to stockholders' equity - Part 2

Introduction to wages payable

Introduction to warranties

Introduction to writing general journal entries

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Managerial Accounting Clippettes

These are self-produced managerial accounting clippettes by Rex A Schildhouse. They WERE intended for use by my students while they are taking my course. I now consider them to be public access. They are copyrighted and may not be used for any purpose not directly associated with education or self-improvement. They may not be copied or downloaded. If you need captioned materials please let me know through the class e-mail account.
Thanks,
Rex

These are listed by alphabetically by title. Most are less than ten minutes in length and address only one subject. They are not directly related to any specific chapter and need not be viewed in any specific order.

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Introduction to bottleneck theory

Introduction to budgeting

Introduction to cost of goods manufactured statement

Introduction to cost-volume-profit – CVP

Introduction to equivalent units – EU

Introduction to factory overhead - Rates and drivers

Introduction to fixed and variable costs

Introduction to job order costing

Introduction to make or buy

Introduction to the managerial accounting income statement

Introduction to managerial accounting terms

Introduction to managerial accounting

Introduction to process costing - Part 1

Introduction to process costing - Part 2

Introduction to product mix

Introduction to responsibility centers

Introduction to sell or process further

Introduction to standard costs - Part 1

Introduction to standard costs - Part 2

Introduction to the death spiral

Introduction to the variable costing income statement

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Texas Instruments BA-II Plus Calculator Clippettes

These are self-produced Texas Instruments BA II Plus accounting calculator clippettes by Rex A Schildhouse. They WERE intended for use by my students while they are taking my course. I now consider them a public access resource. They are copyrighted and may not be used for any purpose not directly associated with education or self-improvement. They may not be copied or downloaded. If you need captioned materials please let me know through the class e-mail account.
Thanks,
Rex

These are listed by alphabetically by title. Most are less than ten minutes in length and address only one subject. They are not directly related to any specific chapter and need not be viewed in any specific order.

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Calculating days between dates with the TI BA-II+ calculator

Real life calculations with the TI BA-II+ calculator

Setting up the TI BA-II+ calculator

Time value of money calculations with the TI BA-II+ calculator

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