Financial Statement Fundamentals (6 of 39): Accounting Equation скачать в хорошем качестве

Financial Statement Fundamentals (6 of 39): Accounting Equation

Get more in-depth lessons via Axel's Accofina books: (1) Financial Statement Basics https://www.amazon.com/Financial-Stat... (2) Ratio Analysis Fundamentals https://www.amazon.com/Ratio-Analysis... Financial Statement Fundamentals (6 of 39): Accounting Equation Time Markers: 1) The Accounting Equation and Double-Entry Accounting 0:20 2) Assets, Liabilities and Equity 1:00 3) Debits and Credits (Primer) 2:05 4) Example Transaction 'A' 3:42 5) Revenue and Expenses 4:30 6) Example Transaction 'B' 5:19 7) 'Quick-Check' 5:51 8) Historical Context of Double-Entry Accounting 9:19 Please help translate this video's Captions, Title and Description into your language; many thanks: http://www.youtube.com/timedtext_vide... FINANCIAL STATEMENT FUNDAMENTALS How to Understand the Story of Any Business at Any Time Lecture: The Accounting Equation THE ACCOUNTING EQUATION A = L + E Assets = Liabilities + Equity The Accounting Equation (above) is at the heart of Double Entry Accounting This Equation must ALWAYS balance Assets, Liabilities and Equity are the three components of The Balance Sheet These will be discussed later (in the Balance Sheet lectures) Discussed later, but just keep in mind...‘Assets’ represents a financial value (e.g. $100) ‘Liabilities’ represents a financial value (e.g. $30) ‘Equity’ represents a financial value (e.g. $70) Every transaction under the sun affects the Equation at LEAST TWICE ...hence “double entry” accounting And before & after every transaction (forever); The Accounting Equation MUST ALWAYS BALANCE While Debits [Dr] and Credits [Cr] are not covered in this course (at this stage) Every transaction: Impacts the equation at least twice, Through at least one Debit and at least one Credit AND the financial value of Debits MUST equal the value of Credits ...this equality always makes sure the Equation remains balanced Example: Emily’s Engineering Services buys an iPad with cash Dr. iPad (PPE Asset) $500 Cr. Cash (Asset) $500 So... if assets, liabilities and equity are all Balance Sheet components, Where do Profit & Loss (P&L) components fit into the accounting equation? After all, some transactions are just revenue and expenses (P&L)... ...Isn’t the accounting equation meant to capture ALL possible business transactions? Revenue and Expense transactions (and thus ‘accounts’) are part of Equity! Revenue increases Equity & Expenses reduce Equity Example: 5th Avenue Apple Store sells an iPad to Emily and is paid cash Dr. Cash (Asset) $500 Cr. Sales Revenue (Equity) $500 A = L + E ‘Quick Check!’ Can you tell a ‘story’ about the two businesses (Emily’s Engineering & Apple) Simply by those 2 super-basic example transactions??? How about this: Emily is an engineer who wants to invest in equipment (PPE) that will help her engineering service business earn income (thus the PPE is an asset). She decides that she needs an iPad for all the cool engineering apps. She is a very new business so she can’t get a credit card (a liability) from the bank to pay for the iPad. Instead she withdraws cash (an asset) from her business bank account, walks down to the Apple Store on 5th Avenue and pays for the iPad upfront. The $500 Emily paid for the iPad is regarded as ordinary sales revenue (Equity) by Apple and they record the transaction in the till which is electronically sent to the accounting system at head office in San Francisco ‘Quick Check!’ On Emily’s Engineering Services Financial Statements: The PPE Asset (iPad) will be shown in her Balance Sheet The Cash paid will be shown in the Balance Sheet too On Apple Inc’s Financial Statement The Cash received will be shown in the Balance Sheet The Sales Revenue will be shown in the Profit & Loss (aka Income Statement) and there will effects with Apple Inc’s Inventory (Balance Sheet) & COGS (Profit & Loss) [but this bit comes later in course] AND THAT IS FROM ONE, SINGLE IPAD PURCHASE!... ...Imagine the story development from millions or billions of transactions being Summarised in Financial Statements Historical Context of Double Entry Accounting: Double entry accounting is hundreds of years old It dates back to the year 1494. It was developed by an Italian Franciscan friar, it was meant to reduce events (‘stories’) to numerical abstractions and be accessible to “each and every man.” ...and today double entry accounting just powers QuickBooks, Xero & every other financial accounting software package you can think of...HA! Subscribe: https://goo.gl/84Sfeg Or just check out the Channel: https://goo.gl/yTj9Bs Most Popular YouTube Video: https://goo.gl/Jbv685 Latest YouTube Upload: https://goo.gl/wDM83Y http://www.accofina.com http://www.amazon.com/author/axeltracy #Accounting #FinancialEducation #FinancialStatementFundamentals