amacom - accounting demystified

[...]... records to the preparation of financial statements There are other types of accounting as well, such as managerial accounting, cost accounting, and tax 1 2 Accounting Demystified accounting, to name a few These other types of accounting are covered in other books The end user of financial accounting is the public; therefore, financial accounting has a lot of rules These rules are necessary to make the information... financial accounting, the financial statements, then jump back to the first step in the accounting process, making journal entries This may seem out of order, but it follows the way accounting is best understood and learned rather than following the chronology of how accounting is done You cannot be a good accountant if you are not a good bookkeeper Bookkeeping is considered a lower-level profession than accounting, ... stand-alone volume It is designed to present the subject in a straightforward, approachable manner Financial accounting is an incremental process What you learn in earlier chapters is used in later ones There are no shortcuts to learning financial accounting, but at the same time, if it is taught clearly, it is not difficult Financial accounting involves all the steps from the original entries in the accounting. .. page intentionally left blank Accounting Demystified This page intentionally left blank C H A P T E R 1 Introduction The success or failure of a business is measured in dollars And dollars are recorded and reported using accounting Accounting is truly the language of business No matter what your role may be, if you are involved in business, you can benefit from learning accounting That’s what this book... Summary This chapter covered the end result of financial accounting, the preparation of financial statements Now we jump back to the beginning of the accounting process and look at how the information gets recorded in order to be available to be put on the financial statements C H A P T E R 3 The Accounting Process We started with the end product of the accounting process, the financial statements The steps... Cash (which will increase the balance of the Cash account) and a credit to The Accounting Process 15 Sales (which will increase the balance of the Sales account) How do we know when debits will increase or decrease an account? We know the effect debits and credits have from the accounting equation The Accounting Equation The accounting equation is the algebraic formula: Assets ‫ ס‬Liabilities ‫ ם‬Equity... $10,000 ‫ ,000,53$ ס 000,5$ ם 000,02$ ם‬and the FIGURE 3-2 Cash 10,000 18 Accounting Demystified FIGURE 3-3 Sales 10,000 total credits are $15,000 Subtracting the total debits and total credits produces $20,000 ($35,000 ‫ ,)000,51$ מ‬which we write on the larger side, in this case the debit side.] The T account for this situation is shown in Figure 3-4 Another way to show the balance in the T account is... Figure 3-5 It is customary to draw a line before writing the balance Today, general ledger pages often do not have a large T drawn on them, but the essential information remains the same—the name of the account, debits in a column on the left, and credits in a column on the right There can be additional columns FIGURE 3-4 Cash 10,000 20,000 5,000 20,000 15,000 19 The Accounting Process FIGURE 3-5 Cash... possess skills that bookkeepers do not However, the first step in learning accounting is to learn bookkeeping What makes it accounting and not simply bookkeeping is going beyond just recording the entries into such areas as preparing the financial statements, analyzing the statements, and making necessary adjusting entries at the end of the accounting period A last thing to keep in mind when reading this book... tradition There is a special type of Balance Sheet called a classified Balance Sheet In a classified Balance Sheet, the assets are separated into current and noncurrent (or long-term; the names noncurrent and long-term are synonymous in accounting) assets, and the liabilities are similarly classified as current and noncurrent Included in the current section of the assets are those assets that are expected . 10288$ $ACK 0 8-2 9-0 3 08:30:28 PS 10288$ $ACK 0 8-2 9-0 3 08:30:28 PS This page intentionally left blank Accounting Demystified 10288$ HFTL 0 8-2 9-0 3 08:30:33 PS 10288$ HFTL 0 8-2 9-0 3 08:30:33 PS This. of - nancial statements. There are other types of accounting as well, such as managerial accounting, cost accounting, and tax 1 10288$ $CH1 0 8-2 9-0 3 08:30:59 PS 2 Accounting Demystified accounting, . sought. Library of Congress Cataloging-in-Publication Data Haber, Jeffry R., 1960– Accounting demystified / Jeffry R. Haber. p. cm. ISBN 0-8 14 4-0 79 0-0 1. Accounting. I. Title. HF5635.H112 2004 657—dc22 2003017265 ᭧