Menu
Here are the direct links to the pages that will tell you everything you need to understand financial accounting. Debits and credits. Balance sheets and income statements. Accrual vs. Cash Basis accounting. All lessons are clear and mercifully brief. Some lessons have videos that you will also find useful. The lessons are organized sequentially from the most basic to the more advanced topics.
The Fundamental Accounting Equation
A Simple Balance Sheet and Income Statement
Debits and Credit Transaction Posting Rules
8b. Another Cash Transaction Posting Example
Accounts Payable and Wage Withholding
Prepaid Expenses and Deferred Revenue
Inventory and Cost of Goods Sold
The Lower of Cost or Market Rule
Financial Statement Preparation
16. The Reliability of Financial Statements
Relative Measures of Economic Performance
View Lectures Michael Sack Elmaleh , CPA, CVA The aim of accounting is to provide useful and reliable information about businesses and non-profits. Financial accounting seeks to determine a firm’s economic performance and its condition. So, we want to ask “Did the firm make a profit or loss last year? Also, “What assets and liabilities […]
Read More...View Lectures Michael Sack Elmaleh , CPA, CVA “Imprecise accounting” sounds like an oxymoron. But the reality is that accounting is anything but precise. Financial accounting strives to answer two basic questions: how did the business do last year, and what did the business own and owe at the end of the year? The answers […]
Read More...View Lectures Lesson 2: The World According To GAAP Michael Sack Elmaleh , CPA, CVA Video: What Are Generally Accepted Accounting Principles? Financial accounting consists of the rules and procedures used to measure the economic performance and condition of a business firm. The most widely used rules are Generally Accepted Accounting Principles (GAAP). Generally Accepted […]
Read More...View Lectures Michael Sack Elmaleh , CPA, CVA Video: The Fundamental Accounting Equation Businesses usually own assets. Assets are things that can be used to generate revenue through the sale of goods and services. Assets include cash, inventory, furniture and equipment, and accounts receivable. A business may also own intangible assets such as patents, trademarks […]
Read More...View Lectures Lesson 4: Balance Sheet Accounts: Sub-Categorical Imperatives It is useful to sub-categorize assets, liabilities and equity into balance sheet accounts. Here are some typical accounts by category. Assets Cash: The balance of coins and currency on hand and funds held in checking, savings and money market accounts. Accounts Receivable: Customers’ promises to pay […]
Read More...View Lectures Michael Sack Elmaleh , CPA, CVA Revenue and Expense Video Revenue and expense are reflected as changes in equity. In fact, most changes in equity occur through earning revenue and incurring expenses. Less frequently changes in equity occur when the owner contributes to or draws money from the business. A business generates revenue […]
Read More...View Lectures Lesson 5a: Revenue And Expense Accounts Michael Sack Elmaleh , CPA, CVA As the table below shows revenue and expense accounts are sub-categories of equity. There are numerous types of revenue and expense accounts. The collection of all asset, liability, equity, revenue and expense accounts is called the general ledger accounts. Some of […]
Read More...View Lectures Michael Sack Elmaleh , CPA, CVA This page contains an example of a simple balance sheet and income statement. Mort Thanatopolis, a licensed mortician, has decided to open a funeral home specializing in very low cost funerals. The business will be called “Can U Dig It?” Here is a list of his first […]
Read More...View Lectures Michael Sack Elmaleh , CPA, CVA Debit and Credit Video This article explains the logic of utilizing debits and credits in the recording of transactions. Accounting ends with score keeping but begins with record keeping. The first task of accounting is to accurately record transactions. Transactions are events that change the composition of […]
Read More...View Lectures Michael Sack Elmaleh , CPA, CVA Here is some general guidance on analyzing transactions using the debits and credits. Analyzing Transactions: Revenue And Expenses The most common transactions involve revenue and expense accounts. When a firm sells products or provides services it earns revenue, so a revenue account must be increased. This means […]
Read More...View Lectures Michael Sack Elmaleh , CPA, CVA Here is an example of some common transactions postings. Transaction 1. Jim Morrisin, a licensed pilot, starts an air transport company called Joint Ventures. The company specializes in delivering agricultural products between Central America and the southern United States via small planes. His business will be organized […]
Read More...View Lectures Lesson 8a: Cash Disbursements Journal Michael Sack Elmaleh , CPA, CVA A cash disbursements journal is designed to capture all the important elements of each cash disbursement. Below is an example of a cash disbursements journal. The first column indicates the date of the payment. The second column indicates the check number issued. […]
Read More...View Lectures Lesson 8b: Another Example Of Cash Transactions Postings Michael Sack Elmaleh , CPA, CVA Here is another example of some cash transactions postings. On 1/3/05 Hamlet, an MSW, decides to open a psychotherapy clinic. He contributes $5,000 to the business. The $5,000 is an increase in cash to the business, so cash must […]
Read More...View Lectures Michael Sack Elmaleh , CPA, CVA Video: Bases of Accounting This article discusses different bases of accounting. Is it possible to accurately assess how a business performed if only cash transactions are recorded in the general ledger? The answer, to a certain extent, depends upon the nature of the business, but generally recording […]
Read More...View Lectures Michael Sack Elmaleh , CPA, CVA Video: Accounts Receivable This article describes Accounts Receivable. In accrual accounting, revenue is recorded when earned, and expenses recorded when incurred. A customer’s obligation to pay for goods and services provided is called accounts receivable(A/R). From the firm’s point of view, A/R are assets. Accounts Receivable(A/R) When […]
Read More...View Lectures Michael Sack Elmaleh , CPA, CVA This article discusses a widely used method to valuing accounts receivable. Sometimes customers fail to make good on what they owe. This failure to pay may be willful, but often it is not. Usually, customers intend to pay for the goods and services they acquire, but due […]
Read More...View Lectures Michael Sack Elmaleh , CPA, CVA Video: Accounts Payable and Wage Withholding This article describes how to record accounts payable and wage withholdings. Accounts Payable Just as a business extends credit to its customers, other firms may extend credit to it. When a business receives goods or services but does not pay immediately, […]
Read More...View Lectures Michael Sack Elmaleh , CPA, CVA Video: Prepaid Expenses and Deferred Revenue This article discusses prepaids and deferrals. A business that provides goods or services before it collects cash recognizes accounts receivable. Some businesses are in the fortunate position to be able to demand cash payments in advance of providing goods or services. […]
Read More...View Lectures Michael Sack Elmaleh , CPA, CVA Video: Inventory and Cost of Goods Sold This article describes the relationship between inventory and the costs of goods sold. Goods sold to customers are assets called inventory. Inventory measurements can be surprisingly difficult. Different inventory measurement approaches can lead to wide variations in reported profits or […]
Read More...View Lectures Michael Sack Elmaleh , CPA, CVA There are two different bookkeeping methods for inventories: the perpetual and periodic methods. Both methods lead to the same results, so the choice mainly depends on the sophistication of the firm’s accounting system. The Perpetual Method Of Inventory Accounting In the perpetual method, all inventory acquisitions are […]
Read More...View Lectures Michael Sack Elmaleh , CPA, CVA This article describes the lower of cost or market rule. Ending inventory is recorded and reported at its cost to the firm. This means that inventory reported on the balance sheet does not reflect its retail value. Does the failure to reflect the current retail value of […]
Read More...View Lectures Michael Sack Elmaleh , CPA, CVA Video: Fixed Assets and Depreciation This article describes the GAAP treatment of fixed assets and depreciation. The matching principle dictates that the cost of fixed assets such as machinery, furniture, and real estate ought to be spread over the number of periods that they will help generate […]
Read More...View Lectures Michael Sack Elmaleh , CPA, CVA Video: The Accounting Cycle This article discusses the accounting cycle. Account balances sitting in general ledger “T” accounts do not provide a very useful format for accessing accounting information. Periodically, accountants need to compile the information in the general ledger into the basic financial statements: the balance […]
Read More...View Lectures Michael Sack Elmaleh , CPA, CVA Video: Financial Statement Preparation This article describes financial statement preparation. After all adjustments are made, the final trial balance can be used to prepare the balance sheet and income statement. GAAP also requires the preparation of two other financial statements: the Statement of Cash Flow and the […]
Read More...View Lectures Lesson 16: The Reliability And Accuracy Of Financial Statements Michael Sack Elmaleh , CPA, CVA Video: The Reliability and Accuracy of Financial Statements Financial statements cannot be useful if they are based on unreliable and inaccurate recordings of transactions. There is no greater example of the garbage in, garbage out principle than financial […]
Read More...View Lectures Michael Sack Elmaleh , CPA, CVA Video: Using Percentage Conversions This article discusses relative measures of economic performance derived from the raw numbers on an income statement. It often can be very difficult to measure a firm’s economic performance in any absolute sense. Financial statements are in general much better at reflecting relative […]
Read More...View Lectures Michael Sack Elmaleh , CPA, CVA Video: Liquidity and Collateral The balance sheet can be useful in assessing a firm’s liquidity and collateral. Many businesses find it necessary at some point to borrow funds. Lenders need to assess the credit worthiness of borrowers. Two determinants of credit worthiness are the existence and extent […]
Read More...View Lectures Michael Sack Elmaleh , CPA, CVA Video: Profit vs. Compensation Often small business income statements misrepresent profit as compensation expense or misrepresent compensation expense as profit. Distinguishing between profit and compensation expense can be problematic. Economic Profit Versus Compensation In many, if not most, small firms the owners are actively engaged in operating […]
Read More...View Lectures Michael Sack Elmaleh , CPA, CVA This article discusses tax incentives in the classification of payments to owners. The decision to classify cash payments to owners as wages versus profit is often affected by tax considerations. The tax code recognizes two forms of corporation, a C Corporation and an S Corporation. When a […]
Read More...View Lectures Michael Sack Elmaleh , CPA, CVA Video: Goodwill and Going Concern Value This article discusses goodwill, an intangible asset usually not reflected on a balance sheet. One of the most basic questions for any business owner is “What is my business worth?” Because the balance sheet lists assets, liabilities, and equity, it should […]
Read More...Subscribe to our email and get updates right in your inbox
Copyright Epiphany Communications and Michael Sack Elmaleh 2006-2020