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- Sprache: Englisch
A complete and easy-to-follow resource covering every critical step of the accounting process Learning to love the language of business is easier than you think! In the newly revised Third Edition of Accounting All-In-One For Dummies with Online Practice, finance expert Michael Taillard walks you through every step of the accounting process, from setting up your accounting system to auditing and detecting financial irregularities. You'll enjoy a unified compilation of mini-books and online practice and video resources that bring together everything you need to know about accounting into one convenient book and web portal. You'll learn to record accounting transactions, adjust and close entries, prepare income statements and balance sheets, and more. You'll also get: * Online instructional videos that describe the modern reality of accounting in the digital age * Guidance and instruction on how to make savvy financial decisions to help guide your business in the right direction * Advice on how to handle case and make intelligent purchasing decisions * Helpful practice quizzes for each topic to help you crunch the numbers Perfect for anyone who's just beginning their career or education in accounting--as well as those who just love numbers--Accounting All-in-One For Dummies is also a must-read for business owners, founders, and managers who want to get a better understanding of the financial side of commerce.
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Accounting All-in-One For Dummies® 3rd Edition
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Library of Congress Control Number: 2022941592
ISBN 978-1-119-89766-8 (pbk); ISBN 978-1-119-89767-5 (ebk); ISBN 978-1-119-89768-2 (ebk)
Accounting All-in-One For Dummies®
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Table of Contents
Cover
Title Page
Copyright
Introduction
About This Book
Foolish Assumptions
Icons Used in This Book
Beyond the Book
Where to Go from Here
Book 1: Accounting for Financial Systems
Chapter 1: Accounting for the Basics
Knowing What Bookkeeping and Accounting Are All About
Wrapping Your Brain around the Accounting Cycle
Working the Fundamental Accounting Equation
Chapter 2: Charting Your Accounts
Navigating the Chart of Accounts
Setting Up Your Chart of Accounts
Giving Credit (Or Is It Debit?)
Understanding Double-Entry Accounting
Chapter 3: Using Journal Entries and Ledgers
Keeping a Journal
Bringing It All Together in the Ledger
Putting Accounting Software to Work for You
Chapter 4: Choosing an Accounting Method
Choosing Your Method
Sorting through Standards for Other Types of Accounting
Chapter 5: Setting the Standards
Exploring the Origins of Accounting Standards
Recognizing the Role of the American Institute of Certified Public Accountants
Checking Out the U.S. Securities and Exchange Commission
Getting to Know the Financial Accounting Standards Board
Grasping Accounting Standards Around the Globe
Book 2: Recording Transactions
Chapter 1: Keeping the Books
Analyzing the Effect of Business Transactions
Managing Your Bookkeeping and Accounting System
Wrapping Up with End-of-Period Procedures
Chapter 2: Tracking Purchases
Keeping Track of Inventory
Buying Supplies
Handling Billing and Payables
Chapter 3: Tallying Your Sales
Collecting on Cash Sales
Selling on Credit
Proving Out the Cash Register
Tracking Sales Discounts
Recording Returns and Allowances
Monitoring Accounts Receivable
Accepting Your Losses
Chapter 4: Processing Employee Payroll and Benefits
Staffing Your Business
Collecting Employee Taxes
Determining Net Pay
Surveying Your Benefits Options
Preparing Payroll and Posting It in the Books
Depositing Employee Taxes
Chapter 5: Taxing Payrolls
Paying Employer Taxes on Social Security and Medicare
Completing Unemployment Reports and Paying Unemployment Taxes
Carrying Workers’ Compensation Insurance
Maintaining Employee Records
Book 3: Adjusting and Closing Entries
Chapter 1: Depreciating Your Assets
Appreciating Depreciation
Comparing Depreciation Options
Tackling Taxes and Depreciation
Chapter 2: Interesting Rates
Deciphering Types of Interest
Handling Interest Income
Delving into Loans and Interest Expenses
Chapter 3: Proving Out Cash
Making Sure That Ending Cash Is Right
Closing the Cash Journals
Using a Temporary Posting Journal
Chapter 4: Reconciling Accounts and Closing Journal Entries
Reconciling Bank Accounts
Prepping to Close: Checking for Accuracy and Tallying Things Up
Posting to the General Ledger
Checking Out Computerized Journal Records
Chapter 5: Checking Your Accuracy
Working with a Trial Balance
Testing Your Balance by Using Computerized Accounting Systems
Developing a Financial Statement Worksheet
Replacing Worksheets with Computerized Reports
Chapter 6: Adjusting the Books
Adjusting All the Right Areas
Testing an Adjusted Trial Balance
Book 4: Preparing Income Statements and Balance Sheets
Chapter 1: Stating Your Income
Understanding the Nature of Profit
Choosing the Income-Statement Format
Deciding What to Disclose in the Income Statement
Examining How Sales and Expenses Change Assets and Liabilities
Considering the Diverse Financial Effects of Making a Profit
Reporting Extraordinary Gains and Losses
Correcting Common Misconceptions about Profit
Chapter 2: Balancing Your Sheets
Homing in on Historic Cost
Discovering What Makes an Asset Current
Exploring the Asset Section of the Balance Sheet
Chapter 3: Digging for Debt in the Balance Sheet
Seeing How Businesses Account for Liabilities
Keeping Current Liabilities under Control
Planning for Long-Term Obligations
Accounting for Bond Issuances
Chapter 4: Explaining Equity
Understanding How Owner Equity Varies among Business Entities
Distinguishing between Two Types of Capital Stock
Defining Paid-In Capital
Recording Retained Earnings
Spotting Reductions to Stockholders’ Equity
Exploring Stock Splits
Computing Earnings per Share
Chapter 5: Interpreting Income Statements and Balance Sheets
Rejoining the Income Statement and Balance Sheet
Introducing Operating Ratios
Adding Fixed Assets, Depreciation, and Owners’ Equity
Completing the Balance Sheet with Debt
Book 5: Reporting Your Statements
Chapter 1: Valuating Finances
Clarifying the Values of Assets in Balance Sheets
Introducing Business Valuation
Comparing Business Valuation Methods
Chapter 2: Watching Cash Flow and Equity
Understanding the Difference between Cash and Profit
Flowing Through Cash Transactions
Navigating the Three Flows
Preparing the Statement of Cash Flows
Interpreting the Statement of Cash Flows
Stating Changes in Stockholders’ Equity
Chapter 3: Analyzing Financial Statements
Judging Solvency and Liquidity
Driving the Balance Sheet
Measuring Profitability
Exploring Activity Measures
Comparing Horizontal and Vertical Analysis
Using Common Size Financial Statements
Chapter 4: Explaining Disclosures
Questioning Self-Governance
Identifying Corporate Characteristics
Reviewing Common Explanatory Notes
Putting the Onus on the Preparer
Chapter 5: Sharing Public Reports
Differentiating between Private and Public Companies
Finding Purpose in Reports
Reading the Annual Report to Shareholders
Walking through Form 10-K
Book 6: Planning and Budgeting for Your Business
Chapter 1: Looking at the Legals
Surveying Structures
Going It Alone: Sole Proprietorships
Choosing the Right Legal Structure for Income Tax
Chapter 2: Incorporating Your Business
Securing Capital: Starting with Owners
Recognizing Legal Roots
Incorporating a Business
Chapter 3: Drawing Up a Business Plan
Outlining the Basic Business Plan
Developing a Business Plan
Incorporating Third-Party Information into Your Plan
Chapter 4: Budgeting for a Better Bottom Line
Brushing Up on Budgeting
Recognizing Factors That Affect Your Budgeting Process
Understanding Budgeting Basics
Reviewing Revenue and Production Budgets
Chapter 5: Mastering Budgeting Strategies
Budgeting with Cash or Accrual Accounting
Budgeting to Produce the Income Statement and Balance Sheet
Flexing Your Budget: When Plans Change
Chapter 6: Planning for Long-Term Obligations
Managing Long-Term Debt
Accounting for Bonds
Book 7: Making Savvy Business Decisions
Chapter 1: Costing Jobs
Understanding How Job Costing Works
Taking a Closer Look at Indirect Costs by Using Normal Costing
Following the Flow of Costs through a Manufacturing System
Chapter 2: Costing by the ABCs
Avoiding the Slippery Slope of Peanut Butter Costing
Designing an Activity-Based Costing System
Using Activity-Based Costing to Compute Total Cost, Profit, and Sale Price
Chapter 3: Contributing to the Margin
Computing Contribution Margin
Preparing a Cost-Volume-Profit Analysis
Generating a Break-Even Analysis
Shooting for Target Profit
Setting a Margin of Safety
Measuring Operating Leverage
Chapter 4: Accounting for Change with Variance Analysis
Setting Up Standard Costs
Understanding Variances
Teasing Out Variances
Chapter 5: Pricing Wisely
Differentiating Products
Taking All Costs into Account with Absorption Costing
Pricing at Cost Plus
Accounting Extremes: Trying Variable-Cost Pricing
Hitting the Bull’s-Eye (Your Target Cost)
Chapter 6: Formulating Equations
Analyzing Profitability
Using Assets Effectively
Evaluating Firm Liquidity
Checking on Company Solvency
Managing Projects and Debt
Book 8: Handling Cash and Making Purchase Decisions
Chapter 1: Matching Costs with Revenue
Defining Costs and Expenses in the Business World
Discovering Which Costs Are Depreciated
Preparing a Depreciation Schedule
Deciding When to Recognize Revenue
Chapter 2: Exploring Inventory Cost Flows
Stating Inventory Valuation
Logging Inventory for Service Companies
Classifying Inventory Types
Knowing Inventory Valuation Methods
Preparing an Inventory Worksheet
Chapter 3: Buying Wisely
Identifying Incremental and Opportunity Costs
Keeping Things Simple: The Cash Payback Method
Netting Present Value
Measuring Internal Rate of Return
Considering Qualitative Factors
Chapter 4: Financing with Debt
Understanding the Basics of Debt Capital
Determining When Debt Is Most Appropriate
Using Loans, Leases, and Other Sources of Debt
Getting Creative with Capital
Chapter 5: Managing Results
Approaching Financial Reports
Reviewing Profit and Earnings
Judging the Company’s Cash Position
Tackling Extraordinary Gains and Losses
Recognizing the Risks of Restatement
Chapter 6: Acquiring New Business
Maximizing Business Value
Becoming a Team Player
Funding a Business Purchase
Working through Due Diligence
Coming to Terms with a Sale Price
Book 9: Auditing for Financial Fraud
Chapter 1: Regulating Securities
Early Securities Laws
The Scope of SOX: Securities and Issuers
The Post-SOX Paper Trail
Chapter 2: Preventing Cash Losses from Embezzlement and Fraud
Preventing Loss with Internal Controls
Putting Internal Controls to Work
Recognizing Limitations of Internal Controls
Chapter 3: Assessing Audit Risk
Introducing Audit Risk
Recognizing the Nature of a Client’s Business: Inherent Risk
Assessing a Client’s Ability to Detect and Correct Problems: Control Risk
Figuring Your Chances of Overlooking Inaccuracies: Detection Risk
Following Risk Assessment Procedures
Figuring Out What’s Material and What Isn’t
Evaluating Your Audit Risk Results
Chapter 4: Discovering Audits
Management Assertions: Assessing the Information a Client Gives You
Eyeing the Four Concepts of Audit Evidence
Applying Professional Judgment
Using Your Audit Program to Request the Right Evidence
Documenting the Audit Evidence
Chapter 5: Auditing Internal Controls
Defining Internal Controls
Identifying the Five Components of Internal Controls
Determining When You Need to Audit Internal Controls
Testing a Client’s Reliability: Assessing Internal Control Procedures
Limiting Audit Procedures When Controls Are Strong
Tailoring Tests to Internal Control Weaknesses
Timing a Client’s Control Procedures
Chapter 6: Scheming Scams
Frauds Committed by Businesses
Frauds Committed against Businesses
Chapter 7: Cooking the Books
Exploring the Financial Statement Fraud Triangle
Spotting the Common Methods of Fraud
Uncovering Financial Statement Fraud
Index
About the Author
Connect with Dummies
End User License Agreement
List of Tables
Book 2 Chapter 2
TABLE 2-1 Comparison of Gross Profit Based on Inventory Valuation Method
Book 2 Chapter 4
TABLE 4-1 Portion of an IRS Tax Table for Employers
Book 2 Chapter 5
TABLE 5-1 Filing Requirements for Employer’s Quarterly Federal Tax Return (Form ...
Book 3 Chapter 1
TABLE 1-1 Depreciation Recovery Periods for Business Equipment
Book 3 Chapter 2
TABLE 2-1 Credit Card Interest Calculation
TABLE 2-2 Six-Month Amortization Chart for Truck Payments
Book 3 Chapter 4
TABLE 4-1 Bank Reconciliation
TABLE 4-2 Aging Summary: Accounts Receivable as of March 31
TABLE 4-3 Aging Summary: Accounts Payable as of March 31
Book 6 Chapter 4
TABLE 4-1 Door Production Budget
TABLE 4-2 Door Cost of Goods Sold Budget
Book 6 Chapter 5
TABLE 5-1 Gift-Shop Cash Budget, Month of March
TABLE 5-2 Gift-Shop Budgeted Statement of Cash Flows
TABLE 5-3 Budgeted Balance Sheet
TABLE 5-4 Budgeted Income Statement
Book 6 Chapter 6
TABLE 6-1 Present Value of $1 Lookup Table
TABLE 6-2 Present Value of an Annuity $1 Lookup Table
Book 7 Chapter 1
TABLE 1-1 Job Cost Sheet — Johnson Fence Job
TABLE 1-2 Normal Job Cost Sheet — Landscaping Job
Book 7 Chapter 2
TABLE 2-1 Order Manager — Monthly Hours Per Customer
TABLE 2-2 Windshield Direct Costs
TABLE 2-3 Indirect Cost Activities — Windshield Production and Installation
TABLE 2-4 Cost Allocation Rates
TABLE 2-5 Cost Allocation as a Percentage of Total Hours
TABLE 2-6 Total Costs by Type — Sedan and Van Windshields
TABLE 2-7 Flower-Bed and Lawn-Care Costs
TABLE 2-8 Costs and Profit by Product — Flower Bed and Lawn Care
TABLE 2-9 Activity-Based Costing by Product — Flower Bed and Lawn Care
TABLE 2-10 Calculating a New Sale Price for Flower Beds
List of Illustrations
Book 1 Chapter 1
FIGURE 1-1: Panoramic view of bookkeeping and accounting.
FIGURE 1-2: Basic steps of the accounting cycle.
Book 1 Chapter 3
FIGURE 3-1: A partial cash receipts journal.
FIGURE 3-2: A partial cash disbursements journal.
FIGURE 3-3: A partial sales journal.
FIGURE 3-4: A partial purchases journal.
FIGURE 3-5: The standard journal entry format.
FIGURE 3-6: Recording service income.
FIGURE 3-7: Journalizing a loan transaction.
FIGURE 3-8: A partial general ledger.
FIGURE 3-9: A partial trial balance.
Book 2 Chapter 4
FIGURE 4-1: You must file IRS Form SS-4 to get an Employer Identification Numbe...
FIGURE 4-2: IRS Form W-4 should be completed by all employees when they’re hire...
FIGURE 4-3: U.S. employers must verify a new hire’s eligibility to work in the ...
FIGURE 4-4: Employers must file Form 941 to report taxes collected on behalf of...
Book 2 Chapter 5
FIGURE 5-1: Employers report their FUTA tax on Form 940.
Book 3 Chapter 1
FIGURE 1-1: A double declining balance depreciation calculation.
FIGURE 1-2: Comparison of depreciation methods.
Book 3 Chapter 4
FIGURE 4-1: Displaying the reconciliation process in QuickBooks.
FIGURE 4-2: To reconcile checking by using QuickBooks, put a check mark next to...
FIGURE 4-3: After you reconcile your accounts, QuickBooks automatically provide...
FIGURE 4-4: Summary of cash receipts journal entries after the first five days....
FIGURE 4-5: A sample accounts receivable journal summary.
FIGURE 4-6: QuickBooks allows you to run reports concerning vendors and payable...
FIGURE 4-7: When you run an Accounts Payable Detail report in QuickBooks, you g...
FIGURE 4-8: In QuickBooks, you can run a series of reports that summarize custo...
FIGURE 4-9: A computerized accounting system keeps a journal of all transaction...
Book 3 Chapter 5
FIGURE 5-1: A sample trial balance.
FIGURE 5-2: The Accountant & Taxes page of QuickBooks’s Report Navigator provid...
FIGURE 5-3: A sample trial balance report produced by QuickBooks.
FIGURE 5-4: This sample worksheet shows the first step in developing a company’...
Book 4 Chapter 1
FIGURE 1-1: Example of multistep income statement format.
FIGURE 1-2: Example of single-step income statement format.
FIGURE 1-3: Changes in assets and liabilities caused by sales and expenses.
Book 4 Chapter 2
FIGURE 2-1: The asset section of a balance sheet.
Book 4 Chapter 3
FIGURE 3-1: The liability section of a balance sheet.
FIGURE 3-2: Inventory purchase on account and payment within discount period.
FIGURE 3-3: Recording accrued and actual warranty expense.
Book 4 Chapter 4
FIGURE 4-1: A statement of owner’s equity for a sole proprietorship.
FIGURE 4-2: A statement of partners’ equity.
FIGURE 4-3: Capital-stock balance sheet descriptions.
FIGURE 4-4: Showing EPS and diluted EPS on the income statement.
Book 4 Chapter 5
FIGURE 5-1: Connections between income statement and balance sheet accounts.
FIGURE 5-2: Income statement of a business for the year just ended.
FIGURE 5-3: Partial balance sheet with asset and liability balances.
FIGURE 5-4: A partial balance sheet that includes assets and liabilities.
FIGURE 5-5: Complete balance sheet of Company X.
Book 5 Chapter 1
FIGURE 1-1: Balance sheet for a company that uses straight-line depreciation.
FIGURE 1-2: Balance sheet for the same company, using accelerated depreciation....
Book 5 Chapter 2
FIGURE 2-1: A direct-method statement of cash flows.
FIGURE 2-2: An indirect-method statement of cash flows.
Book 5 Chapter 3
FIGURE 3-1: Typical comparative balance sheet for a product business at the end...
FIGURE 3-2: Summary of changes in assets, liabilities, and owners’ equity durin...
FIGURE 3-3: Income-statement horizontal analysis for 2017 and 2018.
FIGURE 3-4: Income-statement vertical analysis for 2017 and 2018.
Book 5 Chapter 5
FIGURE 5-1: Select financial information.
Book 6 Chapter 1
FIGURE 1-1: Abbreviated annual income statement for a C corporation.
FIGURE 1-2: Abbreviated annual income statement for an S corporation.
Book 6 Chapter 3
FIGURE 3-1: A simple SWOT analysis.
Book 6 Chapter 5
FIGURE 5-1: Skate’s static overhead budget.
FIGURE 5-2: Skate’s overhead budget report.
FIGURE 5-3: Flexing variable overhead costs.
FIGURE 5-4: Skate’s flexible overhead budget.
Book 6 Chapter 6
FIGURE 6-1: Journalizing a zero-rate-interest-bearing note payable.
FIGURE 6-2: Discount amortization schedule: zero-rate-interest-bearing note.
FIGURE 6-3: Recording discounted note payable.
FIGURE 6-4: Discount amortization schedule: interest-bearing note payable.
Book 7 Chapter 3
FIGURE 3-1: Multistep income statement.
FIGURE 3-2: Contribution margin income statement.
FIGURE 3-3: Cost-volume-profit graph.
FIGURE 3-4: Plotting the break-even point.
FIGURE 3-5: Graphing margin of safety.
FIGURE 3-6: How operating leverage increases risk.
Book 7 Chapter 4
FIGURE 4-1: Adding up direct materials standard price (SP).
FIGURE 4-2: Computing direct materials standard quantity (SQ) per unit.
FIGURE 4-3: Computing the direct labor standard rate (SR).
FIGURE 4-4: Computing direct labor standard hours (SH).
FIGURE 4-5: Summing up standard cost per unit.
FIGURE 4-6: Diagram of how price and quantity variances contribute to direct ma...
FIGURE 4-7: Computing direct materials variances by using a diagram.
FIGURE 4-8: How price and quantity variances add up to direct labor variance.
FIGURE 4-9: Computing the direct labor variances the easy way with a diagram.
FIGURE 4-10: Band Book’s variances.
Book 7 Chapter 5
FIGURE 5-1: Cost-plus pricing includes absorption cost of the product plus a ma...
FIGURE 5-2: Cost-plus pricing gone wild.
FIGURE 5-3: Comparing cost-plus (a) and variable-cost pricing (b).
FIGURE 5-4: In target costing, the market price determines the product’s cost.
Book 8 Chapter 1
FIGURE 1-1: Example of a depreciation schedule.
Book 8 Chapter 2
FIGURE 2-1: Fast Feet inventory analysis.
FIGURE 2-2: FIFO cost-flow assumption.
FIGURE 2-3: LIFO cost-flow assumption.
FIGURE 2-4: Partial inventory worksheet.
Book 8 Chapter 3
FIGURE 3-1: Computing cash payback period when net cash flows change each year....
FIGURE 3-2: Computing the present value of a series of cash flows.
FIGURE 3-3: Computing the NPV of Corporation X’s project.
FIGURE 3-4: Estimating the IRR of Corporation X’s project with a 10 percent int...
FIGURE 3-5: Estimating the IRR of Corporation X’s project with a 7 percent inte...
Book 9 Chapter 5
FIGURE 5-1: A sample of a client internal control questionnaire.
Guide
Cover
Title Page
Copyright
Table of Contents
Begin Reading
Index
About the Author
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Introduction
The process of accounting is often somewhat mysterious to the general public. Mentioning it may conjure thoughts of Bob Cratchit (from Charles Dickens’ A Christmas Carol) scribbling away in books, or perhaps something more exciting like the forensic accounting detectives featured in movies such as The Untouchables. Odds are good, though, that a person’s exposure to actual accountants has been something a bit more commonplace, such as getting taxes done or sitting through treasury reports at council meetings. In any of these cases, people are given just enough information to understand that accounting is something that they should probably learn more about while simultaneously being obscure and quantitative enough to discourage them from trying.
Accounting is much more than just keeping the books and completing tax returns. Sure, those tasks are a large part of the job, but in the business world, accounting also includes setting up an accounting system, preparing financial statements and reports, analyzing financial statements, planning and budgeting for a business, attracting and managing investment capital, securing loans, analyzing and managing costs, making purchase decisions, providing financial insight and advice to business owners and management, and preventing and detecting fraud.
Although no single book can help you master everything there is to know about all fields of accounting, this book provides the information you need to get started in the most common areas.
About This Book
Accounting All-In-One For Dummies, 3rd Edition, expands your understanding of what accounting is and provides you the information and guidance to master the skills you need in various areas of accounting. This book, which is nine books in one, covers everything from setting up an accounting system to preventing and detecting fraud:
Book 1
: Accounting for Financial Systems
Book 2
: Recording Transactions
Book 3
: Adjusting and Closing Entries
Book 4
: Preparing Income Statements and Balance Sheets
Book 5
: Reporting Your Statements
Book 6
: Planning and Budgeting for Your Business
Book 7
: Making Savvy Business Decisions
Book 8
: Handling Cash and Making Purchase Decisions
Book 9
: Auditing for Financial Fraud
Foolish Assumptions
To narrow the scope of this book and present information and guidance that’s most useful for you, the reader, we had to make a few foolish assumptions about who you are:
You’re an accountant, accountant wannabe, a businessperson who needs to know about some aspect of business accounting, or an investor who needs to know how to make sense of financial statements.
This book doesn’t cover how to budget for groceries or complete your 1040 tax return. In other words, this book is strictly business. Some chapters are geared more toward accountants; others primarily address business owners and managers.
You’re compelled to or genuinely want to find out more about accounting.
If you’re not motivated by a need or desire to acquire the knowledge and skills required to perform fundamental accounting tasks, you probably need to hire an accountant instead trying to do this stuff on your own.
You can do the math.
You don’t need to know trigonometry or calculus, but you do need to be able to crunch numbers by using addition, subtraction, multiplication, and division. As for that higher-level math, that’s why we have accounting software.
Icons Used in This Book
Throughout this book, icons in the margins cue you in on different types of information that call out for your attention. Here are the icons you’ll see and a brief description of each.
These items are your “walking-away points” — the things you really should keep in your brain.
Tips provide insider insight. When you’re looking for a better, faster way to do something, check out these tips.
There are real consequences to making decisions with money. The Warning icon lets you know that you may want to get a professional opinion on something before you put your money where your mouth is.
Technical Stuff items are things you don’t necessarily need to know if you’re an average business student, but they add context for those who will be managing money.
Beyond the Book
In addition to the abundance of information and guidance on accounting that’s provided in this book, you’re entitled to some online material:
Quizzes: Each of the nine books that comprise this book has an online quiz you can use to self-evaluate the knowledge and skills you acquired or at least see how much of the information you can recall. After completing each book, test your knowledge with the corresponding quiz.
To gain access to the quizzes and videos, all you have to do is register. Just follow these simple steps:
Go to
www.dummies.com/go/getaccess
to register your book.
Choose your product from the drop-down list on that page.
Follow the prompts to validate your product.
Check your email for a confirmation message that includes your personal identification number (PIN) and instructions for logging in.
If you don’t receive this email within two hours, please check your spam folder before contacting us through http://support.wiley.com or by phone at (877) 762-2974.
Now you’re ready to go! You can come back to the practice material as often as you want; simply log on with the username and password you created during your initial login. You don’t need to enter the access code a second time. Your registration is good for one year from the day you activate your PIN.
Video presentations:
Ken Boyd, former CPA, current online accounting trainer, and one of the many authors who contributed to this mini accounting library, has contributed several videos on various accounting topics covered in this book. To view these engaging and educational videos, go to
http://www.dummies.com/go/accountingaiovids3e
.
You can also access a free Cheat Sheet at www.dummies.com (enter Accounting All-in-One For Dummies Cheat Sheet in the search box). The Cheat Sheet features key accounting terms, tips for controlling cash, essential formulas for cost accounting, and definitions of key financial accounting terms. It also explains the relationship between cash flow and profit.
Where to Go from Here
Although you’re certainly welcome to read Accounting All-In-One For Dummies, 3rd Edition, from start to finish (probably not at a single sitting), feel free to skip and dip, focusing on whichever area of accounting and whichever topic is most relevant to your current needs and interests. If you’re getting started, books 1 to 3 may be just what you’re looking for. If you’re facing the daunting challenge of preparing financial statements for a business, consult books 4 and 5. If you own or manage a business, check out books 6 to 8 for information and guidance on managerial accounting. And if you’re in charge of preventing and detecting incidents of fraud, or if you just want to know more about accounting fraud so that you can do your part to prevent it, check out the chapters in Book 9.
Wherever you go, you’ll find the information and guidance you need in an engaging, easily accessible format.
Book 1
Accounting for Financial Systems
Contents at a Glance
Chapter 1: Accounting for the Basics
Knowing What Bookkeeping and Accounting Are All About
Wrapping Your Brain around the Accounting Cycle
Working the Fundamental Accounting Equation
Chapter 2: Charting Your Accounts
Navigating the Chart of Accounts
Setting Up Your Chart of Accounts
Giving Credit (Or Is It Debit?)
Understanding Double-Entry Accounting
Chapter 3: Using Journal Entries and Ledgers
Keeping a Journal
Bringing It All Together in the Ledger
Putting Accounting Software to Work for You
Chapter 4: Choosing an Accounting Method
Choosing Your Method
Sorting through Standards for Other Types of Accounting
Chapter 5: Setting the Standards
Exploring the Origins of Accounting Standards
Recognizing the Role of the American Institute of Certified Public Accountants
Checking Out the U.S. Securities and Exchange Commission
Getting to Know the Financial Accounting Standards Board
Grasping Accounting Standards Around the Globe
Chapter 2
Charting Your Accounts
IN THIS CHAPTER
Warming up with balance sheet and chart of accounts
Creating your own chart of accounts
Grasping the basics of debits and credits
Getting schooled in double-entry accounting
Accessing your chart of accounts in easier than ever with the advent of online banking. Most banks provide you with quick and convenient access to your full transaction history made by card, check, or direct transfers. Some even have tools to let you categorize, analyze, and graphically represent trends and patters in your transactions. If you don't have online banking, then you'll be managing your own chart of accounts and transaction history as you keep a written record of these for yourself.
Keeping the books of a business can be a lot more difficult than maintaining a personal checkbook. You have to record each business transaction carefully to make sure that it goes into the right account. This careful bookkeeping gives you an effective tool for figuring out how well the business is doing financially. You need a road map — a chart of accounts — to determine where to record all those transactions.
This chapter introduces you to the chart of accounts and explains how to set up your chart of accounts. It also spells out the differences between debits and credits, and orients you to the fine art of double-entry accounting.
Navigating the Chart of Accounts
The chart of accounts is the road map that a business creates to organize its financial transactions. After all, you can’t record a transaction until you know where to put it! Essentially, this chart is a list of all the accounts a business has, organized in a specific order; each account has a description that includes the type of account and the types of transactions that should be entered into that account. Every business creates its own chart of accounts based on the nature of the business and its operations, so you’re unlikely to find two businesses with exactly the same chart.
Some basic organizational and structural characteristics are common to all charts of accounts. The organization and structure are designed around two key financial reports:
The
balance sheet
shows what your business owns (assets) and who has claims on those assets (liabilities and equity).
The
income statement
shows how much money your business took in from sales and how much money it spent to generate those sales.
You can find out more about income statements and balance sheets in books 4 and 5. The following lists present a common order for these accounts within each of their groups, based on how they appear on the financial statements.
The chart of accounts starts with the balance sheet accounts, which include
Current assets:
Accounts that track what the company owns and expects to use in the next 12 months, such as cash,
accounts receivable
(money collected from customers), and inventory
Long-term assets:
Accounts that track what assets the company owns that have a life span of more than 12 months, such as buildings, furniture, and equipment
Current liabilities:
Accounts that track debts the company must pay over the next 12 months, such as
accounts payable
(bills from vendors, contractors, and consultants), interest payable, and credit cards payable
Long-term liabilities:
Accounts that track debts the company must pay over a period of time longer than the next 12 months, such as mortgages payable and bonds payable
Equity:
Accounts that track the owners’ claims against the company’s net assets, which includes any money invested in the company, any money taken out of the company, and any earnings that have been reinvested in the company
The rest of the chart is filled with income statement accounts, which include
Revenue:
Accounts that track sales of goods and services as well as revenue generated for the company by other means
Cost of goods sold:
Accounts that track the direct costs involved in selling the company’s goods or services
Expenses:
Accounts that track expenses related to running the business that aren’t directly tied to the sale of individual products or services
When developing the chart of accounts, you start by listing all asset, liability, equity, revenue, and expense accounts. All these accounts come from two places: the balance sheet and the income statement.
