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Introduction to Accounting

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William Setterlund
William Setterlund

The document provides an introduction to accounting. It defines accounting as a systematic process of recording, measuring, and communicating financial information. It discusses the accounting equation and balance sheet, which show that assets must equal liabilities plus equity. Assets represent what is owned, and liabilities and equity represent who owns the assets. Debits and credits are used to keep the accounting equation and balance sheet in balance. The document also outlines accounting standards, functions, history, and some common myths.

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INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. 1
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. An Overview of Accounting You will learn what accounting is, its various definitions, the information it provides, how it is standardized, its many functions, its history, and some accounting myths. Accounting Equation and Balance Sheet You will understand the accounting equation and balance sheet and the two fundamentally important pieces of information they provide. Introduction to Debits and Credits You will also begin to understand how the accounting equation and the balance sheet use debits and credits to keep the system in balance. 2 Learning Objectives
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. •Simply put, it is a way to communicate the financial health of an organization to interested parties. •It is a systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting, and communicating financial information. What is Accounting? 3
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. Activities that provide Information for decision- making, planning, controlling resources and operations, evaluating performance, and financial reporting to investors, creditors, regulatory authorities, and to the public. The MIT Press-Second Edition Dictionary Definition 4 The art of recording, classifying, and summarizing - in a significant manner, and in terms of money – transactions and events which are of a financial character, and interpreting the results thereof. American Institute of CPAs The action or process of keeping financial accounts; organizing, maintaining, and auditing of financial records; the system of recording and summarizing business and financial transactions. Various Dictionaries CPA/Auditor Definition CFO/Academia Definition Various Accounting Definitions
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. The RESOURCES available to a business or organization. Accounting Provides Important Financial Information The MEANS by which to finance those resources. The net RESULTS achieved through the use of resources. 5
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. • Accounting operates under a standard set of principles or concepts. • These principles and concepts are called Generally Accepted Accounting Principles or GAAP. • They apply to every size and type of organization. • They create unity and consistency in the financial reporting for all organizations. Accounting is Standardized Administered by the 6
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. The Many Functions of Accounting •Sales Accounts Receivable: customer invoicing for products sold and/or services performed. •Purchasing Accounts Payable: recording of vendor invoices for items and services acquired. •Cash Receipts Bank Accounts: maintain control over cash received from customers and all other sources. 7 •Payroll Employees: maintain employee information and process payrolls and payroll deductions and taxes. •Cash Disbursements Bank Accounts: maintain control over cash payments to vendors and all other payees. •Other Transactions Accountant valuations, corrections, adjustments, and other usual transactions.
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. •Accountants are math whizzes Most are not expert mathematicians working in the world of complex math. They are, however, good at basic math. •Every accountant prepares income tax returns The majority of accountants are not qualified to do taxes or offer tax advice. There are accountants, auditors, and tax accountants, all having specialized skills. •Technology will replace accountants While technology fuels complexity, it actually increases the demand for people in the accounting field. Some Accounting Myths (Fallacies) •Accounting is a male dominated field 60% of all accountants and auditors in the US are female and the percentages are even higher in the bookkeeping field. •A business doesn’t need an accountant Ask any failed business owner. Accountants organize finances in a timely fashion, allowing owners to make good financial decisions based on valuable accounting information and reporting. •Accounting was discovered by a nerdy guy with a pocket protector It was actually invented by an Italian Monk in the 15th Century. 8
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. • It began over 500 years ago in Italy. • Signor Luca de Pacioli (1447-1517), an Italian monk and mathematician, is considered the father of accounting. • Pacioli invented the Accounting Equation in 1494. • The Accounting Equation uses a double- entry system of debits and credits to record transactions into journals and ledgers. When and Where did Accounting Begin? 9
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. • An equation simply says that two things are equal. • A statement that says the values of two mathematical expressions are equal (indicated by the sign =). • The thing or things that are on the left side of the equal sign are equal to the things on the right side of the equal sign. What is An Equation? 10 Common Business Equations Time = Money Product Price – Cost = Markup/Margin Sales – Expenses = Profit Wages - Deductions = Net Pay
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. Similar to all equations, the Accounting Equation has both a left side and a right side. The left side and the right side of the Accounting Equation must always equal. What is the Accounting Equation? 11 - - -ASSETS LIABILITIES EQUITY The ‘KEY’ to understanding the foundation of accounting. The value of everything the organization OWNS. Total debt OWED to creditors and others. The NET ASSETS or NET WORTH of the organization. Left-Side Right-Side
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. • Moving the Liabilities to the right side of the equation results in a Balance Sheet form of equation. • Both the left side and right side must still equal. • The left side of the Balance Sheet lists the value of everything the organization owns…its ASSETS. • The right side of the Balance Sheet tells us ‘who owns’ the assets. 12 Accounting Equation: Rearranged to Form the Balance Sheet ASSETS LIABILITIES EQUITY The value of everything organization OWNS Total debt OWED to creditors NET ASSETS NET WORTH of the organization. BALANCE SHEET Assets = Liabilities + Equity
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. 13 BALANCE SHEET ASSETS LIABILITIES EQUITY The value of everything organization OWNS Total debt OWED to creditors NET ASSETS NET WORTH of the organization The Accounting Equation and the Balance Sheet answer two fundamentally important questions: One: What is the business worth…what is its value? Two: Who really ‘owns’ the business…the creditors or the owners? Liabilities represent the creditor’s rights or ‘ownership’ of the assets. Owner’s Equity represent the owner’s rights or ownership of the assets. The Purpose of the Accounting Equation and Balance Sheet
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING 14 The value of everything owned by a person or organization. The various categories of items that constitute the total value of an organization. What are Assets? What do they do? They provide the resources for the organization to prosper. Their primary purpose is to generate income and create wealth to the owners. The Asset (Left-Side) of the Balance Sheet
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. Assets may consist of the following: Cash and Savings $ 25,000 Accounts Receivable 75,000 Inventory 45,000 Prepaid Expenses 5,000 Land and Buildings 250,000 Machinery and Equipment 100,000 Furniture and Fixtures 60,000 Vehicles and Other 40,000 Total Assets $600,000 The Asset (Left Side) of the Balance Sheet - Continued Over time, the value of the business will grow and expand if it operates at a PROFIT. Conversely, the value of the business will decrease and shrink if it generates LOSSES. 15
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING 16 The creditors’ rights to the assets of the organization. What are Liabilities? What is Equity? LIABILITIES The owner’s rights to the assets of the organization. The Liability & Equity (Right-Side) of the Balance Sheet EQUITY (Net Assets) Debts and obligations owed to vendors, employees, government, banks, and other creditors. Capital investments by the owner, less draws, plus or minus accumulated net income or losses.
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. It reveals ‘who has rights’ or ‘who actually owns’ an organization’s ASSETS. A business has two groups ‘who owns’ or ‘has rights’ to the assets: Creditors $300,000 Owners $300,000________________ Total Assets $600,000 In the above example, each group ‘owns’ or ‘has rights to half or 50% of the organization’s assets. The Liability/Equity (Right Side) of the Balance Sheet Over time, if the business operates at a PROFIT, the owner’s percentage increases. Conversely, if it generates LOSSES, the creditors’ percentage increases. 17
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. 18 BALANCE SHEET ASSETS LIABILITIES EQUITY • The entrepreneur's goal is to grow the business, keep liabilities to a minimum, and increase equity (wealth). • Business owners strive to increase both asset and equity values while keeping liabilities to a minimum. • In this example, the Asset value is $500,000. The creditors ‘own’ 20% and the owners ‘own’ 80%. The creditors’ own 20% of the assets. The owners own 80% of the assets. $500,000 $100,000 $400,000 As a rough rule-of-thumb, small businesses tend to get in trouble when liabilities exceed 50% of assets. What the Balance Sheet Reveals
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. 19 BALANCE SHEET ASSETS LIABILITIES EQUITY If a business generates profits over time, the Balance Sheet reflects the following three positive results: 1. The ASSET values increase. 2. The LIABILITIES decrease. 3. EQUITY increases. The creditors’ own 10% of the assets. The owners own 90% of the assets. $1,000,000 $100,000 $900,000 What the Balance Sheet Reveals - Continued
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. 20 BALANCE SHEET ASSETS LIABILITIES EQUITY If a business generates losses over time, the Balance Sheet reflects the following three negative results: 1. ASSET values decrease. 2. LIABILITIES increase. 3. EQUITY decreases. The creditors’ own 67% of the assets. The owners own 33% of the assets. $300,000 $200,000 $100,000 What the Balance Sheet Reveals - Continued
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. 21 BALANCE SHEET ASSETS LIABILITIES EQUITY (Deficit) If a business continues to generate losses over time, the Balance Sheet reflects the following three very dismal negative results: 1. The value of the business drops below outstanding LIABILITIES. 2. The creditors are owed more than the business is worth. 3. Owner’s have negative EQUITY: called a DEFICIT. The creditors’ own 150% of the assets. The owner’s deficit: 50% of the assets. $200,000 $300,000 $(100,000) What the Balance Sheet Reveals - Continued
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. 22 BALANCE SHEET ASSETS LIABILITIES EQUITY The Accounting Equation + Double-Entry Accounting Uses a System of DEBITS and CREDITS to Stay in Balance Asset accounts are defined as Debit accounts. Debits are defined as the Left side of the Accounting Equation. DEBIT ACCOUNTS CREDIT ACCOUNTS CREDIT ACCOUNTS Liability and Equity accounts are defined as Credit accounts. Credits are defined as the RIGHT SIDE of the Accounting Equation. The Equation is always in balance: DEBITS must always equal CREDITS.
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. 23 BALANCE SHEET ASSETS LIABILITIES EQUITY The Accounting Equation + Double-Entry Accounting - Continued Uses a System of DEBITS and CREDITS to Stay in Balance Debit amounts added to a Debit account increases Asset values. Credit amounts added to a Debit account decreases Asset values. DEBIT ACCOUNTS CREDIT ACCOUNTS CREDIT ACCOUNTS The Balance Sheet is always in balance: DEBITS must always equal CREDITS. Credit amounts added to a Credit account increases Liability and Equity. Debit amounts added to a Credit account decreases Liability and Equity.
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. 24 Double-entry, debit and credit, accrual-based accounting will be covered in great depth in subsequent sessions. END OF SESSION

More Related Content

Introduction to Accounting

  • 1. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. 1
  • 2. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. An Overview of Accounting You will learn what accounting is, its various definitions, the information it provides, how it is standardized, its many functions, its history, and some accounting myths. Accounting Equation and Balance Sheet You will understand the accounting equation and balance sheet and the two fundamentally important pieces of information they provide. Introduction to Debits and Credits You will also begin to understand how the accounting equation and the balance sheet use debits and credits to keep the system in balance. 2 Learning Objectives
  • 3. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. •Simply put, it is a way to communicate the financial health of an organization to interested parties. •It is a systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting, and communicating financial information. What is Accounting? 3
  • 4. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. Activities that provide Information for decision- making, planning, controlling resources and operations, evaluating performance, and financial reporting to investors, creditors, regulatory authorities, and to the public. The MIT Press-Second Edition Dictionary Definition 4 The art of recording, classifying, and summarizing - in a significant manner, and in terms of money – transactions and events which are of a financial character, and interpreting the results thereof. American Institute of CPAs The action or process of keeping financial accounts; organizing, maintaining, and auditing of financial records; the system of recording and summarizing business and financial transactions. Various Dictionaries CPA/Auditor Definition CFO/Academia Definition Various Accounting Definitions
  • 5. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. The RESOURCES available to a business or organization. Accounting Provides Important Financial Information The MEANS by which to finance those resources. The net RESULTS achieved through the use of resources. 5
  • 6. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. • Accounting operates under a standard set of principles or concepts. • These principles and concepts are called Generally Accepted Accounting Principles or GAAP. • They apply to every size and type of organization. • They create unity and consistency in the financial reporting for all organizations. Accounting is Standardized Administered by the 6
  • 7. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. The Many Functions of Accounting •Sales Accounts Receivable: customer invoicing for products sold and/or services performed. •Purchasing Accounts Payable: recording of vendor invoices for items and services acquired. •Cash Receipts Bank Accounts: maintain control over cash received from customers and all other sources. 7 •Payroll Employees: maintain employee information and process payrolls and payroll deductions and taxes. •Cash Disbursements Bank Accounts: maintain control over cash payments to vendors and all other payees. •Other Transactions Accountant valuations, corrections, adjustments, and other usual transactions.
  • 8. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. •Accountants are math whizzes Most are not expert mathematicians working in the world of complex math. They are, however, good at basic math. •Every accountant prepares income tax returns The majority of accountants are not qualified to do taxes or offer tax advice. There are accountants, auditors, and tax accountants, all having specialized skills. •Technology will replace accountants While technology fuels complexity, it actually increases the demand for people in the accounting field. Some Accounting Myths (Fallacies) •Accounting is a male dominated field 60% of all accountants and auditors in the US are female and the percentages are even higher in the bookkeeping field. •A business doesn’t need an accountant Ask any failed business owner. Accountants organize finances in a timely fashion, allowing owners to make good financial decisions based on valuable accounting information and reporting. •Accounting was discovered by a nerdy guy with a pocket protector It was actually invented by an Italian Monk in the 15th Century. 8
  • 9. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. • It began over 500 years ago in Italy. • Signor Luca de Pacioli (1447-1517), an Italian monk and mathematician, is considered the father of accounting. • Pacioli invented the Accounting Equation in 1494. • The Accounting Equation uses a double- entry system of debits and credits to record transactions into journals and ledgers. When and Where did Accounting Begin? 9
  • 10. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. • An equation simply says that two things are equal. • A statement that says the values of two mathematical expressions are equal (indicated by the sign =). • The thing or things that are on the left side of the equal sign are equal to the things on the right side of the equal sign. What is An Equation? 10 Common Business Equations Time = Money Product Price – Cost = Markup/Margin Sales – Expenses = Profit Wages - Deductions = Net Pay
  • 11. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. Similar to all equations, the Accounting Equation has both a left side and a right side. The left side and the right side of the Accounting Equation must always equal. What is the Accounting Equation? 11 - - -ASSETS LIABILITIES EQUITY The ‘KEY’ to understanding the foundation of accounting. The value of everything the organization OWNS. Total debt OWED to creditors and others. The NET ASSETS or NET WORTH of the organization. Left-Side Right-Side
  • 12. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. • Moving the Liabilities to the right side of the equation results in a Balance Sheet form of equation. • Both the left side and right side must still equal. • The left side of the Balance Sheet lists the value of everything the organization owns…its ASSETS. • The right side of the Balance Sheet tells us ‘who owns’ the assets. 12 Accounting Equation: Rearranged to Form the Balance Sheet ASSETS LIABILITIES EQUITY The value of everything organization OWNS Total debt OWED to creditors NET ASSETS NET WORTH of the organization. BALANCE SHEET Assets = Liabilities + Equity
  • 13. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. 13 BALANCE SHEET ASSETS LIABILITIES EQUITY The value of everything organization OWNS Total debt OWED to creditors NET ASSETS NET WORTH of the organization The Accounting Equation and the Balance Sheet answer two fundamentally important questions: One: What is the business worth…what is its value? Two: Who really ‘owns’ the business…the creditors or the owners? Liabilities represent the creditor’s rights or ‘ownership’ of the assets. Owner’s Equity represent the owner’s rights or ownership of the assets. The Purpose of the Accounting Equation and Balance Sheet
  • 14. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING 14 The value of everything owned by a person or organization. The various categories of items that constitute the total value of an organization. What are Assets? What do they do? They provide the resources for the organization to prosper. Their primary purpose is to generate income and create wealth to the owners. The Asset (Left-Side) of the Balance Sheet
  • 15. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. Assets may consist of the following: Cash and Savings $ 25,000 Accounts Receivable 75,000 Inventory 45,000 Prepaid Expenses 5,000 Land and Buildings 250,000 Machinery and Equipment 100,000 Furniture and Fixtures 60,000 Vehicles and Other 40,000 Total Assets $600,000 The Asset (Left Side) of the Balance Sheet - Continued Over time, the value of the business will grow and expand if it operates at a PROFIT. Conversely, the value of the business will decrease and shrink if it generates LOSSES. 15
  • 16. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING 16 The creditors’ rights to the assets of the organization. What are Liabilities? What is Equity? LIABILITIES The owner’s rights to the assets of the organization. The Liability & Equity (Right-Side) of the Balance Sheet EQUITY (Net Assets) Debts and obligations owed to vendors, employees, government, banks, and other creditors. Capital investments by the owner, less draws, plus or minus accumulated net income or losses.
  • 17. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. It reveals ‘who has rights’ or ‘who actually owns’ an organization’s ASSETS. A business has two groups ‘who owns’ or ‘has rights’ to the assets: Creditors $300,000 Owners $300,000________________ Total Assets $600,000 In the above example, each group ‘owns’ or ‘has rights to half or 50% of the organization’s assets. The Liability/Equity (Right Side) of the Balance Sheet Over time, if the business operates at a PROFIT, the owner’s percentage increases. Conversely, if it generates LOSSES, the creditors’ percentage increases. 17
  • 18. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. 18 BALANCE SHEET ASSETS LIABILITIES EQUITY • The entrepreneur's goal is to grow the business, keep liabilities to a minimum, and increase equity (wealth). • Business owners strive to increase both asset and equity values while keeping liabilities to a minimum. • In this example, the Asset value is $500,000. The creditors ‘own’ 20% and the owners ‘own’ 80%. The creditors’ own 20% of the assets. The owners own 80% of the assets. $500,000 $100,000 $400,000 As a rough rule-of-thumb, small businesses tend to get in trouble when liabilities exceed 50% of assets. What the Balance Sheet Reveals
  • 19. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. 19 BALANCE SHEET ASSETS LIABILITIES EQUITY If a business generates profits over time, the Balance Sheet reflects the following three positive results: 1. The ASSET values increase. 2. The LIABILITIES decrease. 3. EQUITY increases. The creditors’ own 10% of the assets. The owners own 90% of the assets. $1,000,000 $100,000 $900,000 What the Balance Sheet Reveals - Continued
  • 20. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. 20 BALANCE SHEET ASSETS LIABILITIES EQUITY If a business generates losses over time, the Balance Sheet reflects the following three negative results: 1. ASSET values decrease. 2. LIABILITIES increase. 3. EQUITY decreases. The creditors’ own 67% of the assets. The owners own 33% of the assets. $300,000 $200,000 $100,000 What the Balance Sheet Reveals - Continued
  • 21. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. 21 BALANCE SHEET ASSETS LIABILITIES EQUITY (Deficit) If a business continues to generate losses over time, the Balance Sheet reflects the following three very dismal negative results: 1. The value of the business drops below outstanding LIABILITIES. 2. The creditors are owed more than the business is worth. 3. Owner’s have negative EQUITY: called a DEFICIT. The creditors’ own 150% of the assets. The owner’s deficit: 50% of the assets. $200,000 $300,000 $(100,000) What the Balance Sheet Reveals - Continued
  • 22. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. 22 BALANCE SHEET ASSETS LIABILITIES EQUITY The Accounting Equation + Double-Entry Accounting Uses a System of DEBITS and CREDITS to Stay in Balance Asset accounts are defined as Debit accounts. Debits are defined as the Left side of the Accounting Equation. DEBIT ACCOUNTS CREDIT ACCOUNTS CREDIT ACCOUNTS Liability and Equity accounts are defined as Credit accounts. Credits are defined as the RIGHT SIDE of the Accounting Equation. The Equation is always in balance: DEBITS must always equal CREDITS.
  • 23. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. 23 BALANCE SHEET ASSETS LIABILITIES EQUITY The Accounting Equation + Double-Entry Accounting - Continued Uses a System of DEBITS and CREDITS to Stay in Balance Debit amounts added to a Debit account increases Asset values. Credit amounts added to a Debit account decreases Asset values. DEBIT ACCOUNTS CREDIT ACCOUNTS CREDIT ACCOUNTS The Balance Sheet is always in balance: DEBITS must always equal CREDITS. Credit amounts added to a Credit account increases Liability and Equity. Debit amounts added to a Credit account decreases Liability and Equity.
  • 24. INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING ©2017 American Business College, Inc. 24 Double-entry, debit and credit, accrual-based accounting will be covered in great depth in subsequent sessions. END OF SESSION