Bookkeeping All-In-One For Dummies. Dummies Consumer
Чтение книги онлайн.

Читать онлайн книгу Bookkeeping All-In-One For Dummies - Dummies Consumer страница 8

Название: Bookkeeping All-In-One For Dummies

Автор: Dummies Consumer

Издательство: Автор

Жанр: Зарубежная образовательная литература

Серия: For Dummies

isbn: 9781119093954

isbn:

СКАЧАТЬ such as buildings, furniture, and equipment

      ✔ Current Liabilities: Includes all 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: Includes all 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: Includes all accounts that track the owners of the company and their claims against the company’s assets, which include 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: Includes all accounts that track sales of goods and services as well as revenue generated for the company by other means

      ✔ Cost of Goods Sold: Includes all accounts that track the direct costs involved in selling the company’s goods or services

      ✔ Expenses: Includes all 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 the Asset accounts, the Liability accounts, the Equity accounts, the Revenue accounts, and finally, the Expense accounts. All these accounts come from two places: the balance sheet and the income statement.

      

This chapter reviews the key account types found in most businesses, but this list isn’t cast in stone. You should develop an account list that makes the most sense for how you operate your business and the financial information you want to track. As you explore the accounts that make up the Chart of Accounts, you’ll see how the structure may differ for different businesses.

      

The Chart of Accounts is a money management tool that helps you track your business transactions, so set it up in a way that provides you with the financial information you need to make smart business decisions. You’ll probably tweak the accounts in your chart annually and, if necessary, you may add accounts during the year if you find something for which you want more detailed tracking. You can add accounts during the year, but it’s best not to delete accounts until the end of a 12-month reporting period. Book IV Chapter 6 discusses adding and deleting accounts from your books.

      Starting with the Balance Sheet Accounts

      The first part of the Chart of Accounts is made up of balance sheet accounts, which break down into the following three categories:

      ✔ Asset: These accounts are used to track what the business owns. Assets include cash on hand, furniture, buildings, vehicles, and so on.

      ✔ Liability: These accounts track what the business owes, or, more specifically, claims that lenders have against the business’s assets. For example, mortgages on buildings and lines of credit are two common types of liabilities.

      ✔ Equity: These accounts track what the owners put into the business and the claims owners have against assets. For example, stockholders are company owners that have claims against the business’s assets.

      The balance sheet accounts, and the financial report they make up, are so-called because they have to balance out. The value of the assets must be equal to the claims made against those assets. (Remember, these claims are liabilities made by lenders and equity made by owners.)

      Book II Chapter 4 discusses the balance sheet in greater detail, including how it’s prepared and used. This section, however, examines the basic components of the balance sheet, as reflected in the Chart of Accounts.

Tackling assets

      First on the chart are always the accounts that track what the company owns – its assets: current assets and long-term assets.

       Current assets

      Current assets are the key assets that your business uses up during a 12-month period and will likely not be there the next year. The accounts that reflect current assets on the Chart of Accounts are as follows:

      ✔ Cash in Checking: Any company’s primary account is the checking account used for operating activities. This is the account used to deposit revenues and pay expenses. Some companies have more than one operating account in this category; for example, a company with many divisions may have an operating account for each division.

      ✔ Cash in Savings: This account is used for surplus cash. Any cash for which there is no immediate plan is deposited in an interest-earning savings account so that it can at least earn interest while the company decides what to do with it.

      ✔ Cash on Hand: This account is used to track any cash kept at retail stores or in the office. In retail stores, cash must be kept in registers in order to provide change to customers. In the office, petty cash is often kept around for immediate cash needs that pop up from time to time. This account helps you keep track of the cash held outside a financial institution.

      ✔ Accounts Receivable: If you offer your products or services to customers on store credit (meaning your store credit system), then you need this account to track the customers who buy on your dime.

      

Accounts Receivable isn’t used to track purchases made on other types of credit cards because your business gets paid directly by banks, not customers, when other credit cards are used. Head to Book III Chapter 2 to read more about this scenario and the corresponding type of account.

      ✔ Inventory: This account tracks the products on hand to sell to your customers. The value of the assets in this account varies depending on how you decide to track the flow of inventory in and out of the business. Book III Chapter 1 discusses inventory valuation and tracking in greater detail.

      ✔ Prepaid Insurance: This account tracks insurance you pay in advance that’s credited as it’s used up each month. For example, if you own a building and prepay one year in advance, each month you reduce the amount that you prepaid by 1/12 as the prepayment is used up.

      Depending upon the type of business you’re setting up, you may have other current asset accounts that you decide to track. For example, if you’re starting a service business in consulting, you’re likely to have a Consulting account for tracking cash collected for those services. If you run a business in which you barter assets (such as trading your services for paper goods), you may add a Barter account for business-to-business barter.

       Long-term assets

      Long-term assets are assets that you anticipate your business will use for more than 12 months. This section lists some of the most common long-term assets, starting with the key accounts related to buildings and factories owned by the company:

      ✔ Land: This account tracks the land owned by the company. The value of the land СКАЧАТЬ