Thursday, May 2, 2013
9:51 AM
Accounting Course: Lesson 1 - Understanding Chart of Accounts
A chart of accounts is the listing of all accounts, a company needs to use for recording of transactions. Chart of accounts is designed by keeping in view the needs of the company.
Accounts are usually listed in chart of accounts as below;
Accounts are usually listed in chart of accounts as below;
Balance Sheet
- Assets
- Liabilities
- Equity/ Capital
Income Statement
- Revenues
- Expenses
- Non Operating Revenues
- Non Operating Expenses
Expenses are usually breakdown into further categories;
Production expenses
Selling Expenses
Marketing expenses
Human Resource Expenses
Sample Chart Of Accounts :
Current Assets: (Account numbers : 0001-0100)
0001 Raw Material 1
0002 Raw Material 2
0003 Raw Material 3
0004 Work in Progress 1
0005 Work In progress 2
0006 Cash
0007 Trade receivables
Sub Ledgers: 0007-001 ABC debtor
0007-002 CDE debtor & so on
Property Plant & Equipment : (Account numbers : 0101-0200)
0101 Vehicles
0102 Furniture
0103 Plant
0104 Land & so on
Current Liabilities :( Account numbers : 0201 -0300)
0201 Bank Loan
0202 Notes
0203 Suppliers
Sub ledger : 0203 -001 ABC Supplier
Long Term Liabilities : (Account numbers 0301-0400)
0301 Bank Loan
0302 Lease Liability
Equity : (Account numbers 0401-0500)
0401 Paid up Share Capital
0402 Retained Earnings
0403 Treasury Stock
Income statement accounts shall be explained in detail in Lesson 2. Keep visiting us for a 1 month Accounting course.
Wednesday, May 1, 2013
11:04 AM
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10:42 AM
Learn Accounting by DEBITS & CREDITS - No mistake in double entry
It is often said that if you have learnt the basic rules of DEBITS and CREDITS, accounting is no more difficult. I am writing this to make the most confusing topic easy for you.
Remember there are 5 elements of Financial Statements, these are;
Asset : Increase in Asset >>> Debit
Decrease in Asset >>> Credit
If you have purchased a property by paying cash of $100,000, then it means You have in fact made an increase in your asset by corresponding decrease in asset i.e cash.
Entry would be:
Property Dr
Cash Cr
Liabilities: Opposite of Assets
Increase >>>>Cr
Decrease>>>>Dr
If you have taken a loan of $100,000 for paying to supplier. Means you have increased your bank liability for decreasing liability towards supplier
Entry would be:
Supplier Account >>>> Dr
Bank Loan>>>>>>>>> Cr
Capital: Same as Liabilities
Expenses: Same as Assets
Income: Same as Liabilities/ Capital
Conclusion: Just remember two scenarios
1) Assets & Expenses >>>>>>>>>>Same Treatment
2) Liability, Capital and Income >>>Same Treatment
Be confident! you will never make an error in double entry. Best of Luck!
Remember there are 5 elements of Financial Statements, these are;
- Assets
- Liabilities
- Capital
- Expenses
- Income
Asset : Increase in Asset >>> Debit
Decrease in Asset >>> Credit
If you have purchased a property by paying cash of $100,000, then it means You have in fact made an increase in your asset by corresponding decrease in asset i.e cash.
Entry would be:
Property Dr
Cash Cr
Liabilities: Opposite of Assets
Increase >>>>Cr
Decrease>>>>Dr
If you have taken a loan of $100,000 for paying to supplier. Means you have increased your bank liability for decreasing liability towards supplier
Entry would be:
Supplier Account >>>> Dr
Bank Loan>>>>>>>>> Cr
Capital: Same as Liabilities
Expenses: Same as Assets
Income: Same as Liabilities/ Capital
Conclusion: Just remember two scenarios
1) Assets & Expenses >>>>>>>>>>Same Treatment
2) Liability, Capital and Income >>>Same Treatment
Be confident! you will never make an error in double entry. Best of Luck!
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