Accounting Basics

What’s Inside? Basics of double-entry accounting Debits and Credits How the sub-ledgers “feed” into the general ledger How ledger accounts are represented in OAKS

What’s NOT Inside? General ledger processing in OAKS Journal entry processing in OAKS How to enter receivables or payables in OAKS Entering ChartField values in... you guessed it!... OAKS Your one-way, non-stop ticket to becoming a CPA

What is Accounting? Accounting is the recording of all business transactions to provide a financial picture of an organization Say “Cheese” !

Ancient Bookkeeping WHEAT GOATS Tokens representing ownership

Luca Pacioli “The Father of Accounting” c. 1495, Attrib to Jacopo de’ Barbari

Accounts Record... What we own What we owe What we’ve paid What we are owed What we have been paid

Accounts in the GL I am a copier. My monetary value to the organization might be found in an account called “Copiers” I am cash. My value might be found in an account called “Cash” I am a bill for rent. The amount the organization owes might be found in an account called “Rent Expense”

The amount in a particular account can increase or decrease, depending on the business transaction that affected it

Types of Accounts Assets: things of value an organization owns Liabilities: obligations an organization owes to someone else Expenses: the cost of doing business Revenue: income an organization has earned At least two of these account types are involved in any transaction! They can be two of the same or two different account types

Double-Entry Accounting Every transaction has two parts that must balance!

Debits and Credits Debits: Usually mentioned first Always on the left Must equal credits Credits: Always on the right Must equal debits Account Title Goes Here “T-Account”

TYPE OF ACCOUNTDEBITCREDIT AssetIncreaseDecrease LiabilityDecreaseIncrease ExpenseIncreaseDecrease RevenueDecreaseIncrease Neat Big Chart

Pending Transactions Please hold Cash will be incoming or outgoing at a later date

Receivables RECEIVABLE ACCOUNT +- Debit me when the organization is owed money! Credit me when the organization gets paid! I’m an asset!

A Receivable Example Your organization performed a service for $500 and billed the customer who has 30 days to pay ACCOUNTS RECEIVABLE $500 REVENUE $500 Part One: at time of service

Part Two Your organization gets paid! CASH $500 ACCOUNTS RECEIVABLE $500

Payables PAYABLE ACCOUNT -+ Debit me when the organization pays a debt for goods or services performed at an earlier date! Credit me when the organization owes money for goods or services performed in the past! I’m a liability!

A Payable Example Your organization purchased a copier for $500 and has 30 days to pay for it COPIERS $500 ACCOUNTS PAYABLE $500 Part One: at time of purchase

Part Two Your organization pays for the copier! ACCOUNTS PAYABLE $500 CASH $500

Accounting Basics and OAKS... that “feeds” into the general ledger Each sub-module in OAKS has its own ledger...

Asset accounts begin with a “1” Liability accounts begin with a “2” Revenue accounts begin with a “4” Expense accounts begin with a “5” In OAKS...

Debits and Credits Account types impacted The Credit always appears as a negative! A Journal Line in OAKS

Try This Example: 1 What type of account is debited and credited? What’s going on here?

Try This Example: 2 What type of account is debited and credited? What’s going on here?

What’s Wrong With This Picture? What’s going on here?

Accounting Basics Take Aways Double-Entry System Account Types (assets, liabilities, revenue, expenses) Debits and Credits (they have to equal!) Pending Transactions

OAKS Specifics OAKS did NOT change any of accounting’s basic principles! Credits appear as negative values