MODULE 2 LECTURE Bookkeeping, Internal Controls & Assets
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Glossary of Financial Terms
GLOSSARY OF FINANCIAL TERMS Balance sheet The balance sheet sets out the assets and liabilities of a business and its net worth. Bottom line The closing cash balance, which then becomes the next month’s opening balance and provides the basis for comparison with the firm’s monthly cash-book total. Current assets Assets used or turned over within 12 months: cash in hand or at the bank, debtors and work in progress. Current liabilities Liabilities that need to be met regularly or within the current reporting year. They may include trade creditors, disbursements, bank overdrafts, lease or hire purchase payments and accrued expenses such as annual leave and insurance. Disbursements Client disbursements can be both an income and an expenditure component. Over a period these will be the same, apart from a small net outflow due to growth of the practice and increasing charges. Investing activities This category refers primarily to the cash flow of sales and purchases of assets relating to the business. An example of an inflow of revenue from an investing activity is the sale of an office, property or equipment. An outflow would be the purchase of such assets. Fees or income Cost basis when fees paid for legal services. Accruals when invoice raised for legal service. Financing activities This category relates to such things as the borrowing and repaying of loans, and returning investments to investors. Financial performance statement Also known as a profit and loss statement; shows all income and expense accounts over time while indicating profitability over the same period. The main items shown on a financial performance statement for a legal practice are: fees or income operating expenses net profit before tax provision for income tax net profit after tax. -
An Introduction to Basic Farm Financial Statements: Balance Sheet
W 884 An Introduction to Basic Farm Financial Statements: Balance Sheet Victoria Campbell, Extension Intern S. Aaron Smith, Associate Professor Christopher N. Boyer, Associate Professor Andrew P. Griffith, Associate Professor Department of Agricultural and Resource Economics The image part with relationship ID rId2 was not found in the file. Introduction Basic Accounting Overview To begin constructing a balance sheet, we Tennessee agriculture includes a diverse list need to first start with the standard of livestock, poultry, fruits and vegetables, accounting equation: row crop, nursery, forestry, ornamental, agri- Total Assets = Total Liabilities + Owner’s tourism, value added and other Equity nontraditional enterprises. These farms vary in size from less than a quarter of an acre to The balance sheet is designed with assets on thousands of acres, and the specific goal for the left-hand side and liabilities plus owner’s each farm can vary. For example, producers’ equity on the right-hand side. This format goals might include maximizing profits, allows both sides of the balance sheet to maintaining a way of life, enjoyment, equal each other. After all, a balance sheet transitioning the operation to the next must balance. generation, etc. Regardless of the farm size, enterprises and objectives, it is important to keep proper farm financial records to improve the long- term viability of the farm. Accurate recordkeeping and organized financial statements allow producers to measure key financial components of their business such A change in liquidity, solvency and equity can as profitability, liquidity and solvency. These be found by comparing balance sheets from measurements are vital to making two different time periods. -
Statement of Cash Flows
Title: Statement of Cash Flow Speaker: Christina Chi online.wsu.edu Cash vs. Accrual Accounting Cash basis accounting Recognizes revenue when cash is received and expenses when cash is paid Beginning cash + cash revenue – cash payments = ending cash Accrual basis accounting Recognizes revenue when earned and expenses when incurred Overview of Financial Statements Balance sheet provides a point-in-time statement of overall financial position of a hotel - “snapshot” of financial health of a hotel Income statement Assess hotel’s operating performance over a period of time Reports the profitability of a hotel’s operating activities Prepared on accrual basis accounting and include noncash revenues & expenses Neither can answer questions regarding cash inflows and outflows during an operating period Purpose of Statement of Cash Flows Report and identify the effects of cash receipts and cash disbursements on hotel’s business activities during a period of time Allows an evaluation of hotel’s liquidity & solvency Provides basis for the evaluation of managers’ performance on cash management Provides basis for cash budgeting Provides a foundation to predict hotel’s future cash flows Cash Flow Activity Levels Operating activities Relate to hotel’s primary revenue generating activities; such activities are usually included in determining income. Investing activities Include buying and selling fixed assets, buying and selling securities/investments not classified as cash equivalents, etc. Financing activities Include borrowing -
Classification of Land by Real Estate Developer
PHILIPPINE INTERPRETATIONS COMMITTEE (PIC) QUESTIONS AND ANSWERS (Q&A) Q&A No. 2018-11 Issue What is the correct classification of the land owned by real estate developer? Classification of land by real estate developer Background A real estate developer develops residential and commercial units which are sold or leased out to customers. These projects can be horizontal or vertical projects which are either: (a) units in a high-rise building which can be for office or residential use; (b) serviced lot; or (c) serviced lot and house. Projects can be in a single phase or in multiple phases and usually take more than one year to complete (e.g. 3-5 years). In the normal course of its business, the real estate developer purchases the following raw land: Land A - The entity has plans to construct and develop the parcel of land as a residential subdivision for sale as approved by the entity’s Board of Directors. The preparation of the master plan, detailing the plans as residential property, has commenced but the entity intends to start the physical construction activities (e.g. excavation) two years from the government approval of the master plan. Land B –The entity has plans to construct and develop the parcel of land as a residential subdivision for sale as approved by the entity’s Board of Directors. The preparation of the master plan, detailing the plans, has not commenced. Land C - The entity intends to develop the land into a commercial center for lease but preparation of master plan has not commenced and the entity does not intend to commence the physical construction activities within the year. -
Balance Sheet 101 by Mark Snyder | Focuscfo
Balance Sheet 101 By Mark Snyder | FocusCFO Accounting is the language of business, but unfortunately, it’s confusing almost to the point of mystifying to the layperson. A company’s balance sheet is one of the most important financial statements, yet many people don’t understand the “how” and “why” behind its purpose and structure. The purpose of the balance sheet is simple, it is merely a summary, at a point in time, of what a company owns [assets], owes [liabilities] and net worth [equity]. Why is it organized in such a weird way where the total Assets equals the total of Liabilities plus Equity? Wouldn’t it make more sense to have your Assets less your Liabilities equal your Equity? Accounting is based on the key concept of double entry bookkeeping in which debits have to equal credits. This key principle of balancing debits and credits hews well to the concept of a balance sheet and makes perfect sense to an accounting professional. Assets and Liability The asset and liability portions of the balance sheet are organized between current and non- current sections. Anything in the current section is something that will impact cash in 12 months or less. For example, accounts receivable is considered a current asset as it should be collected as cash within 12 months. Conversely accounts payable is considered a current liability as the amount will be paid to the vendor out of the company’s cash balance within the next 12 months. Working Capital The essence of the balance sheet is highlighting the working capital of a company. -
Simplifying Classification of Deferred Taxes
Simplifying Classification of Deferred Taxes On November 20, the Financial Accounting Standards Board (FASB) updated U.S. generally accepted accounting principles (GAAP) to simplify presentation of deferred taxes. Accounting Standards Update (ASU) 2015-17, Balance Sheet Classification of Deferred Taxes, amends Accounting Standards Codification Topic 740 (formerly FAS 109), Income Taxes, by requiring the classification of all deferred tax liabilities and assets as noncurrent in a classified statement of financial position. The amendments in this ASU have no effect on entities not presenting a classified statement of financial position. The standard is effective for annual and interim periods beginning after Dec. 15, 2016, for public business entities. For all other entities—including not-for-profit organizations and employee benefit plans with activities subject to income taxes—the amendments are effective for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. An entity may apply the amendments either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. All entities would disclose the nature of and reason for the change in accounting principle in both the interim and annual period first adopted. For prospective application, an entity would note that prior periods were not retrospectively adjusted; for retrospective application, an entity would disclose quantitative information about the effects of the accounting change on prior periods. FASB’s position is that presenting deferred tax assets and liabilities in one place, as a noncurrent asset or liability, won’t negatively affect the quality of information given to investors because the current and noncurrent classification generally does not reflect when a temporary difference will reverse and become a taxable or deductible item. -
Debit and Credit During Invoice
Debit And Credit During Invoice andhisParticipatory palatinate meretricious. Ralph laminates retrains, reminds his bikini immitigably. collets polingsRustie resumetranscriptionally. her four-pounder Million and jejunely, slant Halvard unmoveable burking If any particular dollar amount will be done is a regular invoice debit expenses allow customers might be due for this post This is the date the transaction will be posted. That means the vendor is giving money to the company. Learn more transactions are recorded as well as such as journal. This topic explains how you can view invoice and payment settlement information in a convenient and simple format. In order for a journal entry in the account ledger to be valid, etymologists, Account receivable figures will show a negative figure as this will directly obligate the entity to provide the committed obligations in a fixed portion of time and under specified terms and conditions. Balance is debit and credit during invoice? Fixed amount to. All financing and using a debit memos to debit and invoice entry, the concept in the same solution finder tool for acceptance of invoices. This wording is next business, rent receipts reflect adjustments tab displays any sanctions for. Some of any web address or invoice debit memosis identical to entering the current asset account ledger is any personal or reviewed and expense account while a credit? The bundle is recent to be assigned in data order billing document of category M with a negative leading sign. Great Examples of Accounting Transactions Debit and Credit. How do happen from anywhere: explaining your business and a debit and debit and credit during invoice, you were not store customer. -
What Cash Should Appear in the Current Asset Section of the Balance Sheet?
Woman C.P.A. Volume 5 Issue 11 Article 7 6-1943 What Cash Should Appear In the Current Asset Section of the Balance Sheet? LaVerne Nettle Follow this and additional works at: https://egrove.olemiss.edu/wcpa Part of the Accounting Commons, and the Women's Studies Commons Recommended Citation Nettle, LaVerne (1943) "What Cash Should Appear In the Current Asset Section of the Balance Sheet?," Woman C.P.A.: Vol. 5 : Iss. 11 , Article 7. Available at: https://egrove.olemiss.edu/wcpa/vol5/iss11/7 This Article is brought to you for free and open access by the Archival Digital Accounting Collection at eGrove. It has been accepted for inclusion in Woman C.P.A. by an authorized editor of eGrove. For more information, please contact [email protected]. PAGE 114 The Woman C. P. A. JUNE, 1943 What Cash Should Appear In the Current Asset Section of the Balance Sheet? By LAVERNE NETTLE It would seem that a solution to this able for the payment of current liabilities question must conform with several well would vitiate the value of this classifica established accounting concepts. These tion. are: The application of these concepts to cur rent asset cash may be clarified by a few (1) The balance sheet presents “going illustrations. Except in the case of an at concern” values—meaning that so tachment, the cash in general checking ac far as is known the assets will con counts or in the cash receipts drawer is tinue to be used as their classifica undoubtedly unrestricted and available for tions indicate. -
Accounting for Statement of Cash Flows
Revised Summer 2016 Chapter Review ACCOUNTING FOR STATEMENT OF CASH FLOWS Key Terms and Concepts to Know Statement of Cash Flows • Reports the sources of cash inflows and cash outflow during an accounting period. • Inflows and outflows are divided into three sections or categories based on the underlying cause or nature of the cash flows: o Operating Activities o Investing Activities o Financing Activities • Cash forms a fourth section at the bottom of the statement in which the beginning cash balance is added to the total of the three sections to determine the ending balance for cash. • Cash is separated because the statement explains the changes in the cash balance during the period. Transactions Not Affecting Cash • At times, companies enter into investing and financing transactions that do not involve cash, such as issuing common stock to purchase land. • These transactions are not reported on the statement of cash flows because they do not provide or use cash. • Instead, they are reported in a separate section or note that is presented after the ending cash balance. Free Cash Flow • Cash flows from operating activities is available to the company is use, but not without some reservations. • The company must invest in new fixed assets to maintain the current level of operations (think of this as nothing lasts forever and therefore someday must be replaced) • The company must also satisfy current stockholders (owners) by maintaining the current dividend payout. • Therefore Free Cash Flow = Cash from Operating Activities – “maintenance” capital expenditures – cash dividends Page 1 of 24 Revised Summer 2016 Chapter Review Key Topics to Know Overview The Statement of Cash Flows explains the changes in the balance sheet during an accounting period from the perspective of how these changes affect cash. -
Beginning Governmental Accounting
Beginning Governmental 0011 0010 1010 1101 0001 0100Accounting 1011 Presented by: Elizabeth Alba, Instructor Yakima Valley Community College 0011 0010 1010 1101 0001 0100 1011 WMCA Workshop 1 March 19, 2014 2 45 0011 0010 1010 1101 0001 0100 1011 Please turn your cell phone to vibrate mode…. Thank you 12 45 Agenda • Basic Accounting Theory – Understanding the basic accounting equation – Identify asset and liability accounts • Double Entry Accounting – Record transactions using debits and credits – Understand how debits and credits affect accounts • Accounting System and Records – Understand the difference between journals and ledgers – Relate the journals and ledgers to computerized records – Learn the value and purpose of a trial balance • The Basis of Accounting – Define the basis of accounting – Contrast the three common bases of accounting – Understand when to recognize a revenue or expense under the modified accrual basis of accounting. • Budgets – Why are they important – Analysis of the budget Basic Accounting Theory Why Use Accounting? Generally Accepted Accounting Principles (GAAP) is a set of rules for businesses and governments to follow so their financial statements/reports can easily be compared to other businesses. Without GAAP, businesses could record and report data in any manner – making comparison difficult. Government vs. Private Business 0011 0010• Providing 1010 1101 0001services 0100 1011 • Profit driven • Fiscal and operational • Value for the owner or accountability shareholder is a major • Must comply with focus finance related legal • Income is expect to be and contractual issues more than the1 cost • Sometimes Revenues (Revenues must will not cover the cost exceed expenses to be of governmental profitable) 2 activites 45 Understanding the Accounting Equation • The basic accounting equation is the cornerstone of the accounting process. -
Accounting 101U Script Slide 1
Accounting 101U Script Slide 1 (SCEIS Accounting 101U) Welcome to SCEIS Accounting 101U. This class is designed to give a general overview of fundamental accounting principles, concepts and terminology used in organizations. Slide 1A (Accounting 101 Index) The lessons in this course include General Accounting Overview and Fundamentals, Accounting Concepts and Methods, General Ledger Accounts and Account Structure, and the Accounting Cycle. Slide 2 (Lesson 1) Lesson 1: General Accounting Overview and Fundamentals Slide 3 (Accounting Overview) Accounting is the process used to identify, record and communicate finances and financial activities in businesses and organizations. Accounting is often referred to as the “language of business”. 1 Slide 4 (Accounting Overview) Accounting records and tracks financial transactions and business events showing what a business owns and what it owes others. Organizations analyze this information. Slide 5 (Accounting Overview) With the need to provide financial information to internal and external users, there becomes a logical division of accounting to help meet the needs of both types of users. Financial Accounting is concerned with providing financial information and reporting to users outside the organization. This is a diverse group and could include stockholders, government/tax authorities, customers, creditors and external auditors. Since this reporting is distributed outside of the organization for external use it is subject to certain guidelines and standards so all users can interpret information equally. 2 Slide 6 (Accounting Overview) The second division of accounting is Managerial Accounting which provides accounting information and reporting to internal users. Managerial accounting is especially important to an organization’s management team. The internal users could consist of managers, owners and even employees. -
Off Balance Sheet Finance
CHAPTER 11 Off balance sheet finance 11.1 Introduction The main purpose of this chapter is to introduce the concept of ‘off-balance sheet finance’ which arises when accounting treatments allow companies not to recognise assets and liabilities that they control or on which they suffer the risks and enjoy the rewards. Various accounting standards have been issued to try to ensure that the statement of financial position properly reflects assets and liabilities such as IAS 37 Provisions, Contingent Liabilities and Contingent Assets and IAS 10 Events after the Reporting Period. Also the conceptual framework of accounting is important in how it requires the substance of transactions to be reflected when giving reliable information in financial statements. Objectives By the end of this chapter, you should be able to: ● understand and explain why it is important that companies reflect as accurately as possible their assets and liabilities, and the implications if assets and liabilities are not reflected on the statement of financial position; ● understand and explain the concept of substance over form and why it is important in accounting; ● account for provisions, contingent liabilities and contingent assets under IAS 37 and explain the potential changes the IASB is considering in relation to provisions. 11.2 Traditional statements – conceptual changes Accountants have traditionally followed an objective, transaction-based, book-keeping system for recording financial data and a conservative, accrual-based system for classifying into income and capital and reporting to users and financial analysts. Capital gearing was able to be calculated from the balance sheet on the assumption that it reported all of the liabilities used in the debt/equity ratio; and income gearing was able to be calculated from the income statement on the assumption that it reported all interest expense.