Quick Books ACCOUNTING 101 Accounts Used to track
Quick. Books ACCOUNTING 101
Accounts Used to track a company’s finances Separates income or expenses for individual totals Some are physical – bank accounts Some are “virtual” – income or expense accounts
Types of Accounts Asset Accounts – cash or things owned by company Liability Accounts – debts owed by the company Income Accounts – money the company has made Expense Accounts – money the company has spent
Assets, Liabilities, and Equity Assets – cash or things that can be converted to cash ◦ Current Assets – cash or cash equivalents ◦ Fixed Assets – land, buildings, machinery, etc. Liabilities – debts of the company ◦ Current Liabilities – paid off within one year ◦ Long-term Liabilities – mortgages, loans, etc. Equity – the net worth of the company
Assets, Liabilities, and Equity Assets - Liabilities = Equity Assets = Liabilities + Equity
Assets, Liabilities, and Equity: An Example Company A: Assets $1, 000 $750, 000 Equity Company then earns $100, 000: Assets $1, 100, 000 $750, 000 Equity Company then borrows $500, 000: Assets $1, 100, 000 $1, 250, 000 Equity Liabilities $250, 000 Liabilities $350, 000 Liabilities -$150, 000
Financial Reports Balance Sheet ◦ “Freezes” a company’s assets, liabilities, and equity at a point in time. Profit and Loss Statement ◦ Lists income and expenses for a specific time period.
Fiscal Years Calendar Year – Jan. 1 st through Dec. 31 st Fiscal Year – established by company ◦ May be mandated by law. ◦ Can be calendar year or another 12 month period. Tax Year - the 12 -month period for which taxes are due.
Cash vs. Accrual Accounting Cash accounting ◦ Income is recorded when the money is deposited in the bank. ◦ Expenses are counted when the check is written to pay for them. Accrual accounting ◦ Income is recorded when the invoice is created. ◦ Expenses are counted as of the date of the bill from the vendor.
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