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One-Page Accounting

I. Introduction to Financial Accounting II. Accounting for Assets

III. The Present and Future Value of Money IV. Liabilities and Equity

V. Income Measurement and Reporting Cycle VI. Related Booklets

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Financial Accounting For Owners Managers and Administrators

I. Introduction to Financial Accounting Links provide added explanation.
    A. Financial Accounting must account money.
    B. Balance Sheet states the value of business from an financial prospective.
         1. Value = Equity = Net Worth = Assets/Items of Value - Liabilities/Amounts Owed
         2. A business begins with an investments of assets. A = E.
       Business Equity may consist of  one owner (sole proprietorship),
            two or more (partnership), and many (corporations)
         3. More assets are acquired with existing assets or liabilities.
             Financing a Business With Debt is leverage financing.
         4. Business activities takes place, assets and liabilities go up and down,
             and equity changes.     A(+/-) - L(+/-) = E(+/-).
         5. An increase in equity during an accounting period is called income,
             a decrease is a loss.
    C. Income Statement: measures the change in equity from business activities
          during an accounting period (usually a year?)
         1. Activities that generates assets (cash and/or receivables) are
              revenue activities.
          2. Activities that use assets ( cash) and/or create liabilities payables
              are expense activities.
          3. Merchandisers sell a physical product and have cost of goods sold.
D. Cash Flow follows the movement of cash, a company's most important asset.
         Movement of cash is analyzed according to operating activity, Investing activity,
         and financing activity
    E. Cash versus Accrual Accounting
     1. With cash accounting, the Income Statement and Balance Sheet
            whenever cash movers into and out of the business.
         2. With accrual accounting, income is recorded when earned and expenses
             are match with the revenue being generated.
F. See Overview of Accounting Cycle describes the use of debits and credits.

Accounting Principles, The Accounting Equation, Recording Transactions

Adjustments Worksheet, and Statements, Completing The Accounting Cycle,

Merchandising, Accounting Systems

e-mail the author, Walter for free quizzes with solutions

II. Accounting for Assets Links provide added explanation.
    Read, if necessary, upon completing this Part I.
      A. Cash and Short-Term Investments
          1. When a number of people are responsible for purchasing, vouchers
               and other financial controls are used to protect from wastes, fraud,
               and insure accurate financials.
          2. Cash equivalents are highly liquid assets that mature within 90 days
               meaning little interest rate risk, and include T. Bills, short-term
               commercial paper, and money markets funds.
      B. Accounts Receivable
          1. Selling on credit increases sales and customer defaults normally
              result in few bad debt expenses.
          2. If sales are small and collected quickly, bad debts may be written off
              directly when collection fails. Otherwise, an allowance is estimated,
              charged to expense, and lowered when appropriate.
          3. Bad debts may be estimated as a percentage of credit sales,
              a percentage of current receivables, or receivables may be aged
              with older receivables estimated to have a higher failure rate.
      C. Inventory
          1. Items purchased, marked up, and stored for later sale may be
              inventoried to Goods Available for Sale.
              An end of period inventory is subtracted leaving Cost of Good Sold.
          2. Periodic Inventory has costing at the end of a period, while a perpetual
              inventory has costing continually.
          3. Income Statement and Balance Sheet amounts are affected differently
              so wanting low taxes would mean a different method than wanting high
              asset valuations. IRS frowns on changing methods.
      D. Plant and Equipment

      1. Long lasting assets not intended for resale have a value equal to cost,
              transportation, instillation, and cost to get running properly.
          2. Cost is recovered through the process of depreciation in that cost/unit or
              time period is calculated by dividing cost minus salvage by units or years.
          3. Accelerated depreciation delays taxes and is allowed to encourage capital
              investment which leads to economic growth.
          4. Sale of plant assets above or below book value (Cost - Accumulated
               Depreciated) results in a gain/loss which is not part of operating income.
       E. Natural Resources and Intangibles
           1. Wasting assets from the earth are long term assets valued at cost plus
               development cost and cost is recovered through depletion.
           2. Intangibles are nonphysical, concurrent, and their purchase and
               development cost is recovered through amortization.
       F. Those who want a debits and credits explanation should see: