XACC/280 Financial Accounting Concepts and Principles
July 16, 2013
Each of the PhxKlips offers a unique perspective to the area of accounting which many people may not be aware of. The interactive tutorials offer the reader active participation and immediate results that can be put into a deeper understanding of the basic concepts.
In the “accounting equation”, the term ALOE was introduced; Assets = Liabilities & Owners Equity. Ordinarily I always perceived assets as physical materials or properties that were tangible or had substance. This area informed me that liabilities are considered as an asset because of the value they hold and not just an obligation to re-pay bank notes. Borrowed money is considered both an asset and liability.
The section on “Debits and Credits” really opened a new world of bookkeeping. This area introduced the “T-account” method. Debits are recorded on the left side and refer to any type of expenses. Because of this I can easily understand that debits are money owed, yet not necessarily paid and can be considered an asset. Credits are recorded on the right side of the “T” account and represent income or proof of payments.
The “Financial Statements” segment depicted four statements that accounting uses to represent different areas or reasons for reporting any financial events. Income statement, balance sheet, retained earnings and cash flow statement help provide a complete picture of how well a company may or may not be performing financially. Each of these statements contain subtopics that represent areas of where money is spent or obtained to make for better understanding and easily identifiable sources and less information to sort through.
Finally the “Income Statement” segment introduces two methods for businesses to calculate gross profits. The single step approach is more commonly used by small businesses with less details and makes for easy calculations of money...