User:Jukeboksi/BBA studies/Accounting
Accounting for a New Business 1
Definition of accounting and accountacy
- Accounting ( verb ) or accountancy ( noun ) is the process of communicating financial information about a w:business entity to users such as shareholders and managers.The communication is generally in the form of financial statements that show in money terms the economic resources under the control of management; the art lies in selecting the information that is relevant to the user and is reliable.
- The principles of accountancy are applied to business entities in three divisions of practical art, named
- accounting (w:fi:laskentatoimi ) which is classically split to ( financial and managerial accounting )
- bookkeeping ( w:fi:kirjanpito ) and
- auditing ( w:fi:auditointi, mahd. w:fi:tilintarkastus ). ( Wikipedia )
- The principles of accountancy are applied to business entities in three divisions of practical art, named
Terminology
Double-entry bookkeeping, credit and debit
- In w:double-entry bookkeeping a minimum of 2 w:ledger accounts are touched, one w:debited and another w:credited with every action recorded.
Balances and flow statements
- For every fiscal year a business must produce a w:annual report which contains ( in w:Finland )
- the annual w:financial statement ( w:fi:Tilinpäätös ) which contains naturally
- the w:balance sheet ( main document of accounts, w:fi:tase )
- the w:income statement ( main flow document, w:fi:tuloslaskelma )
- the attachments for balance sheet and income statements w:fi:liitteet
- the w:statement of changes in equity (SOCE)
- Textform description of businesses activities ( w:fi:toimintakertomus )
- the annual w:financial statement ( w:fi:Tilinpäätös ) which contains naturally
- For every fiscal year a business must produce a w:annual report which contains ( in w:Finland )
Income statement or profit and loss statement
- Mnemonic: "The w:income statement describes the income possibilities of the w:entrepreneur with 100% of shares not the income of the business, that's called the w:top line and is only small part of the whole thing."
- An w:income statement (also referred to as profit and loss statement (P&L), revenue statement, statement of financial performance, earnings statement, operating statement or statement of operations) is a company's w:financial statement that indicates how the w:revenue (money received from the sale of products and services before expenses are taken out, also known as the "top line") is transformed into the w:net income (the result after all revenues and expenses have been accounted for, also known as Net Profit or the "bottom line"). It displays the revenues recognized for a specificperiod, and the w:cost and w:expenses charged against these revenues, including w:write-offs (e.g., w:depreciation and w:amortization of various w:assets) and w:taxes. The purpose of the income statement is to show managers and w:investors whether the company made or lost money during the period being reported. ( Wikipedia )
Formula for income statement
- incoming w:revenue == w:top line == w:turnover == w:income == w:cash flow
- minus outgoing w:expenses
- equals w:net income == The w:bottom line == w:net profit == w:net earnings
Example for small scale import/export business income statement
- an example of an income statement for a really small business involved in international trade
- '+ w:Revenue
- - w:Fixed costs (
- - w:Personel costs
- - w:Facilities, w:office and w:bookkeeping and w:accounting w:costs )
- - w:Variable costs (
- - w:Unit price x lot size + w:VAT
- - Duties and w:tariffs or in case of w:single-market or w:free trade area no need
- - w:Logistics and w:warehousing
- - w:distribution costs
- )
- ________________________________
- == w:Net income
Balance sheet
- To understand what's going on with a w:business in addition to having an w:income statement one must also have knowledge of where the capital is, what is it's cost and it's payoff i.e. the w:Balance sheet, then you can calculate all sorts of fun w:metrics like w:Return on equity and w:return on investment etc.
In w:financial accounting, a w:balance sheet or statement of financial position is a summary of the financial balances of a w:sole proprietorship, a business partnership, a w:corporation or other business organization, such as an LLC or an w:LLP. w:Assets, liabilities and w:ownership equity are listed as of a specific date, such as the end of its w:financial year. A balance sheet is often described as a "snapshot of a company's financial condition". Of the four basic w:financial statements, the balance sheet is the only statement which applies to a single point in time of a business' calendar year. ( Wikipedia )
Learn in Wikipedia
Accounting classes
Accounting class week 7
- w:Financial accountancy (or financial accounting) is the field of w:accountancy concerned with the preparation of w:financial statements for decision makers, such as stockholders, suppliers, w:banks, employees, w:government agencies, owners, and other stakeholders. Financial capital maintenance can be measured in either w:nominal monetary units or w:units of constant purchasing power. ( Wikipedia )
- Management accounting or w:managerial accounting is concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis to make informed business decisions that will allow them to be better equipped in their management and control functions. ( Wikipedia )
- w:Income statement (also referred to as profit and loss statement (P&L), revenue statement, statement of financial performance, earnings statement, operating statement or statement of operations)is a company's w:financial statement that indicates how the revenue (money received from the sale of products and services before expenses are taken out, also known as the "top line") is transformed into the net income (the result after all revenues and expenses have been accounted for, also known as Net Profit or the "bottom line"). ( Wikipedia )
- A w:Balance sheet or statement of financial position ( in w:financial accounting ) is a summary of the financial balances of a w:sole proprietorship, a business partnership, a w:corporation or other business organization, such as an LLC or an w:LLP. w:Assets, liabilities and w:ownership equity are listed as of a specific date, such as the end of its w:financial year. A balance sheet is often described as a "snapshot of a company's financial condition". ( Wikipedia )
- Balance sheet terms
-
- A w:current asset is an w:asset which can either be converted to cash or used to pay current liabilities within 12 months. Typical current assets include w:cash, w:cash equivalents, short-term investments, w:accounts receivable, w:inventory and the portion of prepaid liabilities which will be paid within a year. ( Wikipedia )
-
- Balance sheet terms
- w:Double-entry accounting ( or double-entry w:bookkeeping system ) is a set of rules for recording financial information in a w:financial accounting system in which every transaction or event changes at least two different nominal w:ledger accounts.
Accounting class week 9
- Team quiz on new terminology ( w:Category:Accounting terminology )
- w:Assets
- w:Liabilities
- w:Equity (finance)
Accounting class week 10
- w:Accrual (accumulation) of something is, in w:finance, the adding together of w:interest or different w:investments over a period of time. It holds specific meanings in w:accounting, where it can refer to accounts on a w:balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These types of accounts include, among others, w:accounts payable, w:accounts receivable, goodwill, w:deferred tax liability and future interest expense. ( Wikipedia )
Accounting class week 11
- w:VAT accounting
- w:VAT vs. w:sales tax ( not the same thing )
- Accrual (accumulation) of something is, in w:finance, the adding together of w:interest or different w:investments over a period of time. It holds specific meanings in w:accounting, where it can refer to accounts on a w:balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These types of accounts include, among others, w:accounts payable, w:accounts receivable, goodwill, w:deferred tax liability and future interest expense. ( Wikipedia )
Accounting class week 12
- Joint exam with Business Math 1
Further learning
- Business and investment analyses:
- Financial statement analysis – the analysis of the accounts and the economic prospects of a firm
- Fundamental analysis – a stock valuation method that uses financial analysis
- w:Technical analysis – the study of price action in securities markets in order to forecast future prices
- Business analysis – involves identifying the needs and determining the solutions to business problems
- Price analysis – involves the breakdown of a price to a unit figure
- Market analysis – consists of suppliers and customers, and price is determined by the interaction of w:supply and demand ( Wikipedia )
- build upon understanding of accounting and business math terminology and procedures.