Saturday, February 25, 2012
Introduction
Introduction
In our days it is important to have a knowledge on basic accounting to carry a successful control of our lives economic, take this control will help the person physical or legal that read this manual, to acquire knowledge about accounting basic terms and process and so serves, besides to have a better vision on the steps to follow to take your company a proper order and will not suffer from damage penalized by the law or other institutions to the breaching with some procedure or not to implement the necessary documentation for made movements.
Objectives
Share basic information about important steps in accounting
Provide the reader with information about how to run a business
Give information on why it is important to have knowledge of accounting
Index
In this manual, you may find the following information:
- Accounting basic concepts
- Management accounting and tax accounting
- Main Ledger accounts
- Bank recomciliation
- Petty cash
- Fixed assets and depreciation
- Five essential funtions of accounting
- T count and doble entry accounting
- Journal entries
- Financial statement
- Accounting book
- Commercial documents
Glossary
To expand vocabulary terms about the book we offer the next page where you can clarify any doubts:
http://www.tuition.com.hk/dictionary/a.htm
Accounting Basic concepts
Accounting Basic concepts
Since ancient times the man is forced to carry logs and controls of possessing it, by what we can define Accounting as annotations, calculations and States numerical lead both individuals and legal, in order to register, classify and control property values.
Accounting is a tool that can help us to easily reach a budgeted life without overdrafts.
In business terms accounting can help us with:
- Show numerically what happens in the company
- Indicated as the real life of a company is
This is due to that is should register all the movements that take place and this allows to control entries, exits, money subtractions, also can keep track of income and expenses, allowing to justify and explain to the owners if the company's sustainability. Is of great importance that all the accounting process generally accepted accounting principles:
• "Principle of regularity: Regularity can be defined as conformity to enforced rules and laws.
• Principle of consistency: This principle states that when a business has once fixed a method for the accounting treatment of an item, it will enter all similar items that follow in exactly the same way.
• Principle of sincerity: According to this principle, the accounting unit should reflect in good faith the reality of the company's financial status.
• Principle of the permanence of methods: This principle aims at allowing the coherence and comparison of the financial information published by the company.
• Principle of non-compensation: One should show the full details of the financial information and not seek to compensate a debt with an asset, revenue with an expense.
• Principle of prudence: This principle aims at showing the reality "as is": one should not try to make things look prettier than they are. Typically, revenue should be recorded only when it is certain and a provision should be entered for an expense which is probable.
• Principle of continuity: When stating financial information, one should assume that the business will not be interrupted. This principle mitigates the principle of prudence: assets do not have to be accounted at their disposable value, but it is accepted that they are at their historical value
• Principle of periodicity: Each accounting entry should be allocated to a given period, and split accordingly if it covers several periods. If a client pre-pays a subscription. The given revenue should be split to the entire time-span and not counted for entirely on the date of the transaction.
• Principle of Full Disclosure/Materiality: All information and values pertaining to the financial position of a business must be disclosed in the records.
• Principle of Utmost Good Faith: All the information regarding to the firm should be disclosed to the insurer before the insurance policy is taken."
Summary accounting provides information on the actual status of a company through financial statements, this facilitates to decision-making is correct, because these decisions up to the company to improve or go into decline.
Written by
Angie Rivera
Sources consulted:
According to the above information is important for us to apply these basic principles of accounting to get a better result in the development of the company, this is an instructional support for walking and maintaining transparency and accountability in the management of the institution .
Written by
Angie Rivera
Author: Gerardo Guajardo
Second Edition
http://www.infomipyme.com/
Management accounting and Tax Accounting
Management accounting or managerial accounting is concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis to make informed business decisions that will allow them to be better equipped in their management and control functions.
Tax Accounting
Balance sheet items can be accounted for differently when preparing financial statements and tax payables. For example, companies can prepare their financial statements implementing the first-in-first-out (FIFO) method to record their inventory for financial purposes, yet they can implement the last-in-first-out (LIFO) approach for tax purposes. The latter procedure reduces the current year's taxes payable. Sources consulted
Written by Edwin Fernández
Main ledger accounts
There are five basic categories in which all accounts are grouped:
Assets
A resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit. A balance sheet item representing what a firm owns. Assets are bought to increase the value of a firm or benefit the firm's operations.
The assets are divided into three groups
Current assets
• Banks counts: This is money which is preserved in any bank. You can have this money at the time deemed necessary.
• Accounts receivable: Sales by products or services offered by the company.
Fixed assets
Goods that acquired the company are not intended to sell, but to stay at this.
Some examples to current assets are:
• Buildings
• Transport equipment
• Furniture and office equipment
Other Assets
These are not classified in the Group of current assets and fixed assets, but are owned by the company and are used to carry out their programmes.
Some examples to current assets are:
• Software licenses
Liabilities
A company's legal debts or obligations that arise during the course of business operations. Liabilities are settled over time through the transfer of economic benefits including money, goods or services.
Recorded on the balance sheet (right side), liabilities include loans, accounts payable, mortgages, deferred revenues and accrued expenses. Liabilities are a vital aspect of a company's operations because they are used to finance operations and pay for large expansions. They can also make transactions between businesses more efficient. For example, the outstanding money that a company owes to its suppliers would be considered a liability.
Liabilities are divided in: 
1. Short-term liabilities: Obligations which must cancel with in less to a year.
Ex: Accounts payable
Taxes payable
2. Long-term liabilities: Obligations that the company must cover one period of more than one year.
Ex: Notes payables (Promissory note)
Capital - Stock holders
Capital: It is the difference between assets and liabilities of the company.
Stock holders: Contribution of the shareholders to begin the company.
It is calculated either as a firm's total assets minus its total liabilities, or as share capital plus retained earnings minus treasury shares:
Stock holder's Equity = Total Assets - Total Liabilities
OR
Stock holder's Equity = Share Capital + Retained Earnings - Treasury Shares
Revenues
They are all the funds it receives the organization. They can be generated by donations, sale or rental of products or services.
Expensives
Payments that perform the company by receive any product to service:
Example:
- Rent
- Salaries
- Transportation
- Public servicesThe five ledger accounts should be handled as best as possible in order to know why? is being used and taking into account the whole operation should take into account specific information, with clear detail of what happened so that it can be useful for future.
Written by
Angie Rivera
Sources consulted
Author: Gerardo Guajardo
Second Edition
Bank reconciliation
Bank reconciliation is the process of matching the balances in an entity's accounting records for a cash account to the corresponding information on a bank statement, with the goal of ascertaining the differences between the two and booking changes to the accounting records as appropriate. The information on the bank statement is the bank's record of all transactions impacting the entity's bank account during the past month.
At a minimum, you should conduct bank reconciliation shortly after the end of each month, when the bank sends the company a bank statement containing the bank's beginning cash balance, transactions during the month, and ending cash balance. It is even better to conduct bank reconciliation every day, based on the bank's month-to-date information, which should be accessible on the bank's web site. By completing a bank reconciliation every day, you can spot and correct problems immediately.
The essential process flow for a bank reconciliation is to start with the bank's ending cash balance, add to it any deposits in transit from the company to the bank, subtract any checks that have not yet cleared the bank, and either add or deduct any other items. Then, go to the company's ending cash balance and deduct from it any bank service fees, NSF checks and penalties, and add to it any interest earned. At the end of this process, the adjusted bank balance should equal the company's ending adjusted cash balance.
Bank Reconciliation Terminology
The key terms to be aware of when dealing with a bank reconciliation are:
• Deposit in transit: Cash and/or checks that have been received and recorded by an entity, but which have not yet been recorded in the records of the bank where the entity deposits the funds. If this occurs at month-end, the deposit will not appear in the bank statement, and so becomes a reconciling item in the bank reconciliation. A deposit in transit occurs when a deposit arrives at the bank too late for it to be recorded that day, or if the entity mails the deposit to the bank (in which case a mail float of several days can cause a delay), or the entity has not yet sent the deposit to the bank at all.
• Outstanding check: A check payment that has been recorded by the issuing entity, but which has not yet cleared its bank account as a deduction from cash. If it has not yet cleared the bank by the end of the month, it does not appear on the month-end bank statement, and so is a reconciling item in the month-end bank reconciliation.
A check that was not honored by the bank of the entity issuing the check, on the grounds that the entity's bank account does not contain sufficient funds. NSF is an acronym for "not sufficient funds." The entity attempting to cash an NSF check may be charged a processing fee by its bank. The entity issuing an NSF check will certainly be charged a fee by its bank.
We should remember two basic concepts which will be used in this process:
• One is bank statement - list of all transactions which occurred during a particular period of time and impacted cash in bank account of business. Such statement is prepared by bank and is provided to the company owning account in the bank.
• The other is cash book - it is accounting book of prime entry listing all the transactions which impacted cash in bank and this book is prepared by the accountant
It is required that entries on the bank statement are exactly the same as entries in the cash book, since cash book is a reflection of bank statement. Also the final balance in the bank statement should be equal to the final balance in the cash book.
If we take cash book, in it we can see how much cash business has at the end of particular period.
However actually it might happen, that balance of cash book is not the same as the balance in the bank statement. The question how to do bank reconciliation covers process how to explain and eliminate such difference.
To prepare the bank reconciliation statement, the following rules may be useful for the students:
1. Check the cash book receipts and payments against the bank statement.
2. Items not ticked on either side of the cash book will represent those which have not yet passed through the bank statement.
3. Make a list of these items.
4. Items not ticked on either side of the bank statement will represent those which have not yet been passed through the cash book.
5. Make a list of these items.
6. Adjust the cash book by recording therein those items which do not appear in it but which are found in the bank statement, thus computing the correct balance of the cash book.
Method (Starting With the Cash Book Balance):
a) If the cash balance is a debit balance, deduct from it all ck´s, drafts etc., paid into the bank but not collected and credited by the bank and added to it all cheques drawn on the bank but not yet presented for payment. The new balance will agree with bank statement.
b) If the bank balance of the cash book is a credit balance (overdraft), add to it all cheques, drafts, etc., paid into the bank but not collected by the bank and deduct from it all cheques drawn on the bank but not yet presented for payment. The new balance will then agree with the balance of the bank statement.
Alternatively:
Example
Condition:
March 31, 2009. Company ABC has a balance in the cash book equal to $706.56. In the bank statement there is a balance equal to $987,45
Checking cash book and bank statement it was determined that:
$50 of cash receipt during March was not recorded in the cash book.
Amount paid by CK and recorded into the cash book, but not yet recorder into the bank statement amount to $ 145.90
Ck submitted for payment and recorded in the cash book, but not yet presented to the bank amount to $376.79
The task is to do bank reconciliation
1. First step: is to make correction to the cash book
Cash Book
Opening balance $706.56
Correction of error +$50
Closing balance $756.56
2. Second step: is to make adjustments to the bank statements
Bank Statement $ 987.45
Check received but not included into the bank statement +$ 145.90
Ck´s paid but not yet submittedto the bank -$ 376.79
Closing balance $756.56
After finalizing the process how to do bank reconciliation we have the same final balance in cash book and bank statement
Video
Written by
Natasha Méndez
Sources consulted
Author: Harold Averkamp
Date: june 14 of 2011
http://www.accountingcoach.com/online-accounting-course/13Xpg01.html
Video
Written by
Natasha Méndez
Sources consulted
Author: Harold Averkamp
Date: june 14 of 2011
http://www.accountingcoach.com/online-accounting-course/13Xpg01.html
Petty cash
Petty cash refers to small amounts of cash kept on hand in a business. (The term "petty" comes from "petite," or "small.") There are two reasons to keep petty cash:
• To make change for customers or patients.
• To pay for small purchases which require cash, such as food for the office lunch or coffee supplies, or for parking. Most retail businesses keep a cash drawer as do health care practices.
Using a petty cash log or petty cash slips will help capture these expenses so they can be used to offset income for business tax purposes.
Keep as much cash as you need in your cash drawer, but not too much, so it isn't a temptation for employees or robbers.
Sources consulted
Written by Edwin Fernández
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