Basic Accounting Course YESCO 2009 Office Managers Conference

What are Financial Statements?  Documents that show the results of business decisions made by management  They are used by creditors, investors and managers as a basis for making future decisions

Types of Financial Statements  Balance Sheet: A snapshot of a company’s financial position  Income Statement: Report of a company’s profitability for a specific period of time  Other Financials: Statement of Cash Flows, Statement of Retained Earnings or Stockholder’s Equity

Balance Sheet  Assets = Liabilities + Owner’s Equity Assets: Things of value owned by a business Assets: Things of value owned by a business Liabilities: Creditor claims against assets Liabilities: Creditor claims against assets Equity: Owner claims against assets Equity: Owner claims against assets

Income Statement  Revenue – Expenses = Net Income Revenue: Inflow of assets that result from the sale of products or rendering services to a customer Revenue: Inflow of assets that result from the sale of products or rendering services to a customer Expenses: Costs incurred to produce revenue (cost of goods sold) or maintain the business Expenses: Costs incurred to produce revenue (cost of goods sold) or maintain the business

Accounting for Transactions  Double Entry Accounting – A system of recording each business transaction by means of a two-way, self balancing entry There must always be at least 1 debit and 1 credit There must always be at least 1 debit and 1 credit Debits and Credits are simply terms that indicate whether to increase or decrease the balance in an account Debits and Credits are simply terms that indicate whether to increase or decrease the balance in an account T Accounts are used to provide a visual representation of account activity T Accounts are used to provide a visual representation of account activity

T Account DEBIT – Left Side CREDIT – Right Side

Debits  Increase assets  Decrease liabilities  Decrease stockholder’s equity  Decrease revenue  Increase expenses  Increase dividends

Credits  Decrease assets  Increase liabilities  Increase stockholder’s equity  Increase revenues  Decrease expenses  Decrease dividends

Business Transactions  Measurable events that affect the financial condition of a business  Examples of business transactions Paying a vendor for product/service Paying a vendor for product/service Creating an invoice to a customer Creating an invoice to a customer Paying salaries to an employee Paying salaries to an employee Issuing petty cash to an employee for purchase of permits Issuing petty cash to an employee for purchase of permits

YESCO Processes a Utility Bill for $100 UtilitiesAccounts PayableCash 100

YESCO Pays the Utility Bill for $100 UtilitiesAccounts PayableCash 100

YESCO Processes Time Card for $500 Bonus – charge to XXXX - WageWages PayableCash 500

YESCO Issues check for $500 Bonus – charged to XXXX - WageWages PayableCash 500

Yesco Invoices Customer for Cash Sale Job with the below detail  Amount of Invoice - $500  Customer has a resale certificate  Job Costs Labor costs - $150 Labor costs - $150 Materials costs - $100 Materials costs - $100 PCO costs - $50 PCO costs - $50

YESCO Creates Invoice to Customer Accounts Receivable Revenue – Cash Sale

YESCO Closes Job Work in Process Labor MaterialPCO 10050

Customer Pays YESCO Invoice Cash Accounts Receivable

Group Exercises and Fun!!!!