Accounting Lecture 02 Part II - Transactions and Statements

Recording basic transactions and preparing financial statements. Conclusion of Lecture 02, this is Part II of two parts..

Category:

Education

Tags:

• Introduction
• to
• Financial
• Managerial
• Principles
• Accounting
• bookkeeping
• transactions
• record
• assets
• liabilities
• owner's
• stockholders'
• equity
• balance
• sheet
• income
• statement
• statements
• entries
• debit
• credit

[ramonesfreak2010]

I'm confused. In the previous episode, the cash balance matched the capital balance, but in this episode, the cash balance was $10,200 and the capital balance was $9,850. Why is that?

[AccountingTutor]

@ramonesfreak2010

Cash is only one of the asset accounts that make up total assets, and it is -total- assets that must equal total liabilities plus Capital. Initially (the first transaction in the first and in this video), we had only Cash and Capital. Once other transactions occurred, other asset accounts also held balances and we later had balances in the liability accounts.

[AccountingTutor]

The basic statements are: the income statement, the balance sheet, the statement of owner's equity (statement of stockholders' equity or retained earnings statement for a corporation), and the statement of cash flows. Those are the major statements that will be found in any annual report.

[AccountingTutor]

Only 4 things change owner's equity - investments, withdrawals, revenues and expenses. If revenue is earned on account, then Accts Receivable would increase and so would owner's equity. Later on, when the account is collected, Accts Receivable will fall and Cash will rise. Since the revenue was recorded earlier, the collection of the account doesn't affect owner's equity.

[moondragon05]

you guys are amazing, i learned more in these 30 mins than what my prof has been babbling about these past 2 months

[Bananensaft1993]

Thanks man :) see you on the next one!

[emrumpelstiltskin]

@jesuslovewu In accrual basis of accounting, you record revenues when they are earned so you have already recorded an increase in Accounts Receivable and an increase in Revenues at the time you rendered the service or delivered a product (Revenue is a part of Owner's Equity). When your customer pays you for the debt he owes, you received cash right? so you will record that as an increase in the Cash Account. Likewise, the amount he owes you decreased so you need to reduce the Accounts Receivable

[sxychks69]

Great video very informative, just one quick question is there many more financial reports like what are the most obvious that could be asked to be done in a first year uni accounting subject.

[xshoot2thrill]

Thankyou so much for creating these! These are so much more clear and concise than the lecture at my university!

[iquadroi]

Thank u, it is very helpful!