Why we use Debits and Credits (Balance Sheet) скачать в хорошем качестве

Why we use Debits and Credits (Balance Sheet)

ZACH DE GREGORIO, CPA www.WolvesAndFinance.com This video explains why we use Debits and Credits. It starts with the Balance Sheet. There are two sides: Assets and the other side is Liabilities & Owner's Equity, which follows the equation A=L+O.E. Each side always balances the other side out. It is common sense that you want to track a company's assets. This includes all the property in the company. But accountants go a step further. They also track the other side of the Balance Sheet, which includes assets and liabilities. One side of the Balance Sheet is the Assets, the other side is the claims against those Assets. In the big picture, when you first set up a company, there is only a business entity. Then different parties put Assets into the business. In order to manage a business, you need to be able to track who has claims against those assets. This is the whole point of double entry bookkeeping, because you are always tracking two different things. In single entry bookkeeping you would only keep track of your assets. It gets even more complicated, because the equation is actually longer. The full equation is Assets = Liabilities + Owner's Equity + (Revenue - Expenses). Because during day to day operations, you are always either generating a profit or loss and that effects your assets and your claims against your assets. Every journal entry flows through this equation, to the trial balance, and eventually to your balance sheet. The video ends by walking through several journal entries. 1) Purchase inventory 2) Pay Expense with Cash 3) Take out a bank loan 4) Make a sale 5) Purchase equipment with cash Neither Zach De Gregorio or Wolves and Finance Inc. shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.