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CHAPTER 2 : BASIC OF ACCOUNTING - Coggle Diagram
CHAPTER 2 : BASIC OF ACCOUNTING
What is accounting? To help businness maintain accurate and timely records
Assets
Resources value that an individual
2 Major asset classes :
Tangible assets (something that can touch)
Intangible assets (something that cannot touch)
Example of assets :
Cash
Receivable
Supplies
Machinery
Lamd
Inventory held for sale
Main financial accounting statement.
(to show the financial position of bussiness)
1)profit and loss
2) balace sheet
3) cash flow
Broad type
management account
ffinancial account
accounting transaction
payment of product
invesment
inventory
insurance
Liability
A company's legal debts or obligation that arise during business operations
Example of liability :
Account payable
Notes payable
Bank loan payable
Mortgage payable
Owner equity (Net assets)
The owners claim to company assets after all kf the liabilities have been paid off
Expenses
Costs that a business incurs through it's operations to earn revenue
Example of expenses
Advertising expenses
Supplies expenses
Telephone expenses
Utilities expenses
Wages expenses
Rent expenses
Insurance expenses
stakeholder
INTERNAL
director and manager
employee
share holder
EXTERNAL
suppliers
goverment
customer
Investor
to provide enomous information about a company
Revenue
Amount of money that company receives during a specific period
Example of revenue
Sales
Commission earned
Professional fees earned
Rent revenue
Interest earned
managers
to make important business decisions
PROFIT & LOSS STATEMENT
an entry for revenue and subtract from revenue the cost of running the bussiness including cost of goods sold, operating expenses, tax expense and interest expense
main component of profit and loss
revenue
cost of goods sold
gross profit
expenses
net profit
Revenue - sale or total earned
Cost of goods sold - cost of merchandise sold during period
Gross profit - income that is left after production costs have been subtracted from revenue
Expenses - cost incurred for the purpose of earning income
Net profit - To calculate net profit for a venture (such as a company, division, or project)
Balance sheet
Statement of assets , liabilities and. capital of a business.
Financial statements used to report on the financial position of the business.to the owner and stakeholders such as banks and investors.
3 keys section
Asset
Liabilities
Owner's equity
Cash flow
Report the amount of cash collection and paid out by a company
Cash inflow
Sell good or service
Sell others assets
Receive cash from investment
Cash outflow
Pay operating
Expand operations
Pay owner