## About Fundamental Accounting Equation `ASSETS = LIABILITIES + EQUITY + REVENUES - EXPENSES` ![[2022-08-08-00-28-57.png]] --- general ledger, chart of accounts, (source) documents and financial statements structure ## Research - https://www.codeproject.com/Articles/5161230/Database-for-Financial-Accounting-Application-I-Ba - https://www.codeproject.com/Articles/5163401/Database-for-Financial-Accounting-Application-II - https://www.codeproject.com/Articles/5164951/Database-for-Financial-Accounting-Application-III - https://www.codeproject.com/Articles/5246001/Database-for-financial-accounting-application-IV-G - [[; 2022-09-05 Accounting|Accounting]] ## Terms ### GAAP Generally Accepted Accounting Principles ### Accrual Vs Cash Basis Accounting #### Accrual Basis Accounting - Transactions are recorded as soon as any debt is incurred regardless of whether cash has in fact changed hands. - Revenue is thus reported when the business forms a service or sells a product (regardless of when payment is received) - Expenses are recorded on the basis of when the expenses are incurred (regardless of when payment is made) - Example: - A sale for $1,500 of goods is made on a payment plan to the customer - you do not hold $1,500 of new monies - That sale and the whole $1,500 is recorded under that period as revenue - Just the same if $200 of supplies is purchases on a credit card those expenses are for the given period they were made in not when the payment is made #### Cash Basis Accounting - Based on actual physical flow of cash - $200 supplies expense will be recorded in later periods when the payment is made for them as that is when the cash changes hands. ### Asset Assets are everything that the company is an owner of: cash, accounts receivable, supplies, equipment, shares of other companies, etc. ### Chart of Accounts > Keeping an account of accounts for analysis is more easily performed ![[2022-08-08-00-32-13.png]] Major sections start with a single digit like Assets == 1 and their sub accounts tack on additional numbers like Equipment == 122 Bank accounts might be == 271 but if you have multiple bank accounts then they can enumerate into something like (27101, 27102, 27103, ...) ![[2022-08-09-00-17-33.png]] > <https://en.wikipedia.org/wiki/French_generally_accepted_accounting_principles> ### Equity Equity is everything that belongs to the company’s shareholders (owners, investors): company’s shares (not shares of other companies), investments into the company, retained earnings, etc. ### Liability Liabilities are everything that the company owns to other persons: notes payable, accounts payable, wages payable, taxes, etc. ### Net Income `revenues - expenses = Net Income` ### Debits and Credits ![[2022-08-08-01-18-01.png]] > "Debit the receiver, and credit the giver"