Financial Accounting

On this page will be the basics of financial accounting. Listed below is the accounting equation, the steps of opening and closing the books, and a few detailed pieces of accounting.


The Accounting Equation


Assets=Liabilities-Owners Equity (OE-Drawings+Revenues-Expenses)


Four types of statements accountants use are listed below


  1. Income Statement
  2. Statement of Owners Equity
  3. Balance Sheet
  4. Statement of Cash Flow

The Accounting Process


Assets=Liabilities-Owners Equity (OE-Drawings+Revenues-Expenses)


Adjusting Accounts



Closing Books


  • Temporary Accounts=Revenue, Expenses, Drawings, Income Summary
  • Permanent Accounts=Balance Sheet Items

    • Merchandising Accounts

    Periodic vs Perpetual

    Recording merchandise buying

    Merchandise,150 Cash 150 Delivery Expense 150 Cash 150

    Purchase returns and allownaces

    Accounts payable 300 Merchandise inventory 300

    Discounts

    Accounts payable 3500 Merchandise inventory 70 Cash 3430

    Recording Sales

    Accounts receivable 3800 Sales 3800 Cost of goods sold 2400 Merchandise inventory 2400

    Sales, Returns, and Allowances

    SRA 300 Accounts Receivable 300...Merchandise Inventory 140 Cost of goods sold 300

    Discounts

    Discounts cash 3430 sales discounts 70 accounts recevable 3500

    Adjusting Entries

    Cogs 500 Merchandising inventory 500


    FIFO. LIFO, Weighted Average

    First in First out, Last in First out, Weighted average.


    Internal Controls

    Segregation of duties, human resources, and bank deposits.


    Accounts and Notes Receivale

    Similar to merchandising except with receivables.