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DENVER BUSINESS ACADEMY LLC

ACCOUNTING 101: EASY BOOKKEEPING & ACCOUNTING FOR BEGINNERS

Self-help Basic Accounting for beginners, high-school, college students and new
learners




AN ESSENTIAL GUIDE FOR NEW STUDENTS & LEARNERS: ACCOUNTING 101 BOOK AND RELATED
YOUTUBE VIDEOS, A SUCCESSFUL COMBINATION IN LEARNING BASIC ACCOUNTING &
BOOKKEEPING. AVAILABLE ON AMAZON.COM


ACCT101: INTRODUCTION TO ACCOUNTING 101: EASY ACCOUNTING AND BOOKKEEPING




The material in the book is based on a simple framework for teaching and
learning accounting and bookkeeping using activities related to the elements of
a Simple Combined Chart of Accounting and Trial Balance shown on the following
page and throughout the book. Beginners tend to get overwhelmed at the number of
concepts and theories contained in the chapters in accounting textbooks, that
they lose sight of the main reasons for studying each chapter. I hope that by
including “What is the purpose of this chapter?” in the first few lines of each
chapter, the reader will see its purpose....

Learning the many concepts of bookkeeping and accounting can be made easier by
reviewing free videos created, owned, and published by professional instructors,
including Dr. Denver Pettigrew, and made available on YouTube.


A WINNING COMBINATION: ACCOUNTING 101 & FREE BOOKKEEPING AND ACCOUNTING VIDEOS
AVAILABLE ONLINE ON YOUTUBE ETC.


Learning the many accounting and bookkeeping concepts in this book can be
enhanced and supplemented by watching related free videos created and published
online by Dr. Denver Pettigrew and other publishing organizations and 
individuals on YouTube.com. Indeed, new learners can learn office software
products offered by Microsoft Corporation and Intuit online, and other free
online resources to supplement their accounting and related computer skills.


ACCOUNTING 101: EASY BOOKKEEPING AND ACCOUNTING FOR BEGINNERS, "THE RED BOOK"


ACCOUNTING 101 E-BOOK LINK




THE ZEN OF BOOKKEEPING AND ACCOUNTING: BASIC ACCOUNTING FOR PRE-COLLEGE AND NEW
LEARNERS, "THE YELLOW BOOK"

THE ZEN OF BOOKKEEPING AND ACCOUNTING E-BOOK LINK




ACCT101:

CHAPTER 1: MUST READ OVERVIEW OF ACCOUNTING AND BOOKKEEPING




Question: What is the purpose of this chapter?

Answer: To introduce you to the objectives of an accounting and bookkeeping
system and important fundamental concepts and tools.

Before we can start recording the financial activities of the firm, we must
define what accounting and bookkeeping is about. Because accounting and
bookkeeping activities are inter-related and sometimes used interchangeably for
simplification of explanations we will use the terms interchangeably although
technically they are different. Accountants must know bookkeeping and attain a
much higher level, and variety, of education and certification, to provide
operating and strategic expertise to different levels of managers in firms....

THREE MAIN SETS OF BOOKKEEPING/ACCOUNTING ACTIVITIES

A. RECORDING AND POSTING Business or Economic Transactions in a Timely and
Accurate manner Based on a Specific Chart of Accounting (COA).

B. CLASSIFYING the Transactions Posted in Item (A) Into Five Groups of
Accounting Types: (1) Assets, (2) Liabilities, (3) Equity, (4) Revenue, (5)
Expenses.

C. SUMMARIZING AND REPORTING the Classified Groups in (B) for Reporting the
Results to Owners, Investors, Government Agencies and Other Parties in the Form
of Financial Statements (Balance Sheet, Income Statement etc.) and Special
Reports.

Note: Most Accounting Software are Programmed to Automatically Complete Items
(B) and (C) Once Transactions in (A) are Correctly Completed Using the Chart of
Accounts (COA) and Saved.

ACCT101: CHAPTER 2: BUSINESS TRANSACTIONS, CHART OF ACCOUNTS, AND GENERAL LEDGER



Question: What is the purpose of this chapter?

Answer: To demonstrate how business transactions are recorded and posted in a
typical accounting system.

Business transactions are activities performed on behalf of a firm that are
measured or valued by money. Business transactions are expenditures (or
expenses) or receipts for goods or services for cash, or contractual obligations
to be paid or received at a later date—on terms. These business transactions are
recorded by the accountant in the books of the business on journal entries
guided by the chart of accounts. Business transactions are usually supported
(evidenced) by documents such as invoices, bills, receipts, notes, cash,
contracts and written agreements, shipping documents, receiving reports, and
paper or digital (computer) statements etc.

It is important to distinguish between personal transactions of the owners, and
business transactions on behalf of or by the business as an independent
organization (entity) separate from the owners. The business is treated as a
separate, non-organic, person in the eyes of the law and referred to as a
business entity....

EIGHT FUNDAMENTAL SETS OF BOOKKEEPING/ACCOUNTING CONCEPTS TO KNOW

1. CHART OF ACCOUNTS: A Preset List of A Firm’s General Ledger Account Numbers
and Their Related Titles Used by a Firm to Record Transactions Incurred on
Behalf of the Firm in a Consistent and Systematic Manner and is the Building
Block of all Bookkeeping and Accounting Systems. The Creation of a Chart of
Accounts (COA) is Generally the First Major Activity Completed by Senior
Management Upon Starting a Business. Most Accounting Software Contains One or
More Industry-Based Chart of Accounts That can be Customized to Fit the
Operating Activities of Different Firms/Businesses.

2. JOURNAL & GENERAL LEDGER: Journals are Used to Initially Record Business
Transactions Prior to Posting Them to the General Ledger Accounts Shown in the
Chart of Accounts (COA).

3. DOUBLE-ENTRY ACCOUNTING (DRs & CRs: Every Economic/Business Transaction
Requires Recording Amounts to Two or More General Ledger Accounts to Indicate
the Movement or Transfer of the Related Values Into (DR) and From (CR) One or
More Ledger Accounts Based on the Chart of Accounts (COA).

4. DEBITS (DR) & CREDITS (CR): Accounting Language Used to Record/Post
Transactions Amounts on the Left (DR) or Right (CR) Amount Columns of the
Journal or General Ledger Accounts (See Items 2 & 3) and Based on the Chart of
Accounts and Supported by Evidence Such as Receipts, Invoices, Statements etc.

5. JOURNALIZE: (See Item 4) Accounting Language Used as verb to Indicate
Recording of Transactions in the Accounting Journal (Item 2) Using the Chart of
Accounts (COA).

6. ASSETS, LIABILITIES, & EQUITY ACCOUNTS: Listed in the Chart of Accounts
(COA), They Indicate (a) Tangible and Intangible Resources and Items Owned
(Assets) by the Firm, (b) Owed by the Firm to Others (Liabilities—Debt), and (c)
Owed to/by Investors and Owners of a Firm (Equity). Put Another Way, Assets are
Financed by Liabilities/Debt by Third Parties and/or Equity by Owner Investors.
See Accounting Equation below.

7. REVENUES & EXPENSES: Amounts Recorded in Accordance With the Accounts Listed
in the Chart of Accounts (COA). They Indicate Income Earned from Sales,
Services, Commissions, Interest etc. by the Firm (Revenues—CR) and Costs
(Expenses—DR) Incurred by the Firm in its Operations.

Note: These are Summarized and Displayed in the Income Statement, and the Net
Resulting Difference Between Total Revenues and Total Expenses, the Net Income
(CR) or Net Expenses (DR) is Combined With the Total Equity Amount Each
Financial Period Shown in the Balance Sheet.

8. THE ACCOUNTING EQUATION, A = L + E: Is Considered the Most Important Concept
in Bookkeeping and Accounting. It Summarizes the Concepts of Double-Entry
Accounting (Items 3 & 4) and Indicates that Total Assets of the Firm is Financed
by Debt to Third Parties (Liabilities) and Equity Investments by Owners of the
Firm (ITEM 6). The Amounts must Balance as Indicated in the Accounting Equation.
This Relationship is Summarized and Displayed in the Firm’s Balance Sheet.
Continued below...


GENERAL LEDGER AND TRIAL BALANCE



Question: What is the purpose of this chapter?

Answer: Provide an overview of the makeup of a typical accounting system using
general ledger accounts.

The general ledger contains all the firm’s ledger accounts listed on the chart
of accounts (COA). Business transactions are posted to the individual ledger
accounts from the entries recorded in the journal on the same sides as recorded
in the journal, and the balances in the ledger accounts updated immediately.
This type of immediate updating of the general ledger account balances are
called perpetual updating, as shown in the tables below.

Journal entries relating to general ledger accounts are sometimes totaled and
posted periodically (weekly or monthly) as one entry in the account instead of
individually....

“I read to learn; I read more to learn more." Dr. Denver G. Pettigrew, PhD, CPA,
MBA

“Collaborative Learning: Superior learners seek at least two to six additional
sources of information.” Dr. Denver G. Pettigrew, PhD, CPA

"If you can read, write, use a simple calculator to add, subtract, multiply, and
divide, you too can learn basic accounting and bookkeeping.” Dr. Denver G.
Pettigrew, PhD, CPA, MBA

An exciting new approach learning introductory Bookkeeping and Accounting
specially written for high-school seniors, new college students and new
learners 

The material in the book is based on a simple framework for teaching and
learning accounting and bookkeeping using activities related to sections of a
Simple Combined Chart of Accounting and Trial Balance shown throughout the book.
Beginners are overwhelmed at the number of concepts and theories contained in
the chapters in regular accounting textbooks and lose sight of the main purpose
of each chapter. The first section in each chapter begins with What is the
purpose of this chapter? so readers can see its main purpose.

Accountants and bookkeepers use a step-by-step set of activities to record,
update, and report on the financial transactions of an organization maintained
in three main sets of financial records: (1) Journals (JEs), to initially record
financial or economic business transactions; (2) General Ledger accounts (GL),
to post the journal entries to the appropriate accounts; and (3) Financial
statements including the balance sheet, income statement, statement of retained
earnings, statement of changes in the owners’ equity account, and statement of
cash flows, to summarize the GL account balances and report on the operations
and financial health of the organization. The terms firm, company, and
organization is used interchangeably throughout the book.

As the famous far-eastern saying goes “a picture is worth ten thousand words,” I
have used many examples, diagrams, and figures to demonstrate simple accounting
and bookkeeping concepts and practices used in the accounting and bookkeeping
profession in the real world (Barnard, 1927).





An easy step-by-step guide filled with examples ideal for beginners, including
high-school seniors, new college students and other learners. Illustrations
including:

 * The Chart of Accounts; General Journals; Special Journals; General Ledger
   Accounts; Trial Balance
 * Income Statement; Statement of Retained Earnings; Balance Sheet; Statement of
   Changes in Owner's Equity
 * Payroll & Payroll Accounting, including publicly available IRS payroll forms
   from IRS.gov website
 * Cash Flows Statements; Bank Reconciliation; Financial Ratios and Trend
   Analyses
 * Can be used as a supplemental resource to introductory college accounting
   textbooks

Accounting 101: Easy Accounting and Bookkeeping for Beginners and The Zen of
Bookkeeping and Accounting: Basic Accounting For Pre-College and New Learners
are published on Amazon.com


Copyright © 2017, 2018 Denver G. Pettigrew, Ph.D., CPA, MBA

All rights reserved. Parts of this book may not be reproduced in any form
without the written permission from the author with the exceptions of the
following quotations: “If you can read, write, use a simple calculator to add,
subtract, multiply, and divide, you too, can learn basic accounting and
bookkeeping;” “I read to learn; I read more to learn more;” and “Collaborative
Learning: Superior learners seek at least two to six additional sources of
information.”

Sections of information in this book were previously written and published in
The Zen of Bookkeeping and Accounting: Basic Accounting for Pre-College and New
Learners by the author. Continued below....



FINANCIAL BALANCE SHEET BASIC ELEMENTS AND STRUCTURE YOUTUBE VIDEO


GIANT THINKER ON BUSINESS & COMPETITIVE STRATEGIES, MICHAEL PORTER. PROLIFIC
WRITER ON ATTAINING AND MAINTAINING COMPETITIVE ADVANTAGE IN BUSINESS INCLUDING:
COMPETITIVE STRATEGIES, COMPETITIVE ADVANTAGE OF NATIONS, COMPETITION IN GLOBAL
INDUSTRIES, FIVE-FORCES, VALUE CHAIN, AMONG OTHERS.


SUMMARY OF SIX STEPS IN THE ACCOUNTING PROCESS



 * Step 1: Analyze Transactions
   
 * Step 2: Record Journal Entries
   
 * Step 3: Post to General Ledger
   
 * Step 4: Prepare Trial Balance
   
 * Step 5: End-of Period Adj. Entries
   
 * Step 6: Compile Financial Statements

Please see chapters in the book for detailed information on each step.

THE DOUBLE-ENTRY CONCEPT OF ACCOUNTING

The double-entry concept states that every business transaction involves an
equal exchange of value between the two sides of every transaction: a receiver
and a giver. Business transactions are therefore referred to as give-get
activities because when value is given, the same value must be received by
someone on the other side of the transaction. In accounting, the give-get
transactions are recorded in the journal and posted in representing general
ledger accounts. The account receiving the value is debited and the account
giving the value is credited for an equal amount. Accountants look at the chart
of accounts to identify the general ledger accounts in which to record
transactions—debiting one or more accounts receiving value and simultaneously
crediting one or more accounts giving up the value.

THE DOUBLE-ENTRY SYSTEM OF ACCOUNTING: DEBITS MUST EQUAL CREDITS

DEBIT DR

CREDIT CR

DEBITS (LEFT) MUST EQUAL (BALANCE) CREDITS (RIGHT)

GET MUST EQUAL (BALANCE) GIVE

RECEIVE MUST EQUAL (BALANCE) SOURCE

IN MUST EQUAL (BALANCE) OUT

TO MUST EQUAL (BALANCE) FROM

Please see chapter 1 in the book for more detailed information. You can also
find helpful videos on YouTube to assist you in learning the concepts in the
book. Continued below...


GIANT THINKER ON BUSINESS MANAGEMENT, PETER F. DRUCKER. FAMOUS FOR HIS WORK IN
BUSINESS MANAGEMENT INCLUDING: MANAGING FOR RESULTS, PEOPLE AND PERFORMANCE,
MANAGEMENT CHALLENGES FOR THE 21ST. CENTURY, THE PRACTICE OF MANAGEMENT, PEOPLE
AND PERFORMANCE, POST-CAPITALIST SOCIETY, THE CHANGING WORLD OF THE EXECUTIVE
ETC.

THE ACCOUNTING EQUATION



The accounting equation concept, Assets = Liabilities (debts) + Owners’ Equity,
demonstrates the relationship between groups of items and their values owned by
the firm for use in the business—assets, and the sources of financing for the
assets—liabilities plus owners’ equity. Ledger accounts for assets usually have
debit balances, and the ledger accounts for liabilities (debts) and owners’
equity (capital) normally have credit balances. It is called an equation
because, if you recall the double-entry system of accounting concept discussed
in the previous section, the total of the accounts with debit balances must
equal the total of the accounts with credit balances.

The Accounting Equation

ASSETS = LIABILITIES + EQUITY

LIABILITIES = ASSETS - EQUITY

EQUITY = ASSETS - LIABILITIES

Please see chapter 1 in the book for more detailed information. You can also
find helpful videos on YouTube to assist you in learning the concepts in the
book. Continued below...


GIANT FORWARD THINKER ON GLOBAL ECONOMIC AND SOCIAL TRENDS, JOHN NAISBITT.
BETTER KNOWN FOR HIS WRITINGS ON MEGATRENDS


THE CHART OF ACCOUNTS (COA)


let us look at the structure of the combined chart of accounts (COA) and trial
balance at the end of chapter 1 and imagine moving money (financial
transactions) out of (credit) one general ledger account and simultaneously into
(debit) another general ledger account. A COA is a list of general ledger
accounts set up and used in business firms to identify, record, and post
financial transactions conducted on behalf of the organization. Creating and
setting up the COA is usually among the first set of activities done by the
accountant along with setting up a new bank account for the business.

The general ledger accounts are numbered and classified in the COA:

• The Balance Sheet (BS) section of the COA contains subcategories listing Asset
account numbers beginning with the number 1; Liabilities account numbers
starting with the number 2; and Equity account numbers starting with the number
3. The ledger accounts in the balance sheet section are called permanent
accounts because their balances are carried over from one financial period to
the next.

• The Income Statement (IS) section of the COA shows subcategories listing
Revenue account numbers beginning with the number 4; and Expense account numbers
starting with the number 5. The ledger accounts in the income statement section
are called nominal or temporary accounts because their balances are closed out
to zero by transferring their totals to an income summary account at the end of
each financial period. The next financial period begins with zero amounts in
these accounts. Continued below...


Please see chapter 2 in the book for more detailed information.

STEP 1 ANALYZE FINANCIAL TRANSACTIONS



Using the Chart of Accounts, analyze financial transactions to determine which
accounts to debit and which to credit as indicated in the sections on the
Double-entry Concept and Chart of Accounts (COA). Business transactions are
activities performed on behalf of a firm that are measured or valued by money.
Business transactions are expenditures (or expenses) or receipts for goods or
services for cash, or debt to be paid or received in the future—on terms. These
business transactions are recorded by the accountant in the books of the
business on journal entries using the COA. Transactions are usually supported by
documents such as invoices, bills, receipts, notes, cash, contracts etc., and
are generally between six main pairs of give/get categories of accounts of a
business organization: (1) Assets/Assets (A/ A), (2) Assets/Liabilities (A/ L),
(3) Assets/Expenses (A/E), (4) Assets/Revenues (A/R), (5) Liabilities/Expenses
(L/E), (6) Assets/Owners’ Equity (A/OE), or a combination of them.

Please see chapter 2 in the book for more detailed information. Continued
below...


GIANT THINKERS ON GLOBAL CULTURE AND ECONOMICS, BUSINESS, AND INTERNATIONAL
BUSINESS RELATIONSHIPS BY GEERT HOFSTEDE, HAMEL AND PRAHALAD, THOMAS FRIEDMAN,
AND DR. YADONG LUO


STEP 2 RECORD TRANSACTIONS ON JOURNAL ENTRIES


The chart of accounts (COA) is used to analyze and record business transactions
in the journal (see Step 1). The general journal is often called the book of
first or prime entry because this is where the business transactions are usually
first recorded in the books of the firm. Accountants use the COA to aid in
analyzing business transactions, to identify the give-get relationship of the
transaction, and determine which general ledger is receiving the value (debit)
and its source--where the value is coming from (credit). Journalizing a
transaction is the accounting jargon used to record entries in the journal and
involves debiting—recording values in the debit section, and crediting—recording
values in the credit section of the journal. It is important to remember the
double-entry concept to ensure the journal balances.

Please see chapter 2 in the book for more detailed information. Continued
below...


STEP 3 POST THE JOURNAL ENTRIES TO GENERAL LEDGER ACCOUNTS





The general ledger contains all the firm’s ledger accounts listed on the chart
of accounts (COA). Business transactions are posted to the individual ledger
accounts from the entries recorded in the journal on the same sides as recorded
in the journal in Step 2, and the balances in the ledger accounts updated
immediately.

Please see chapter 3 in the book for more detailed information. Continued below


STEP 4 PREPARE A TRIAL BALANCE OF ALL BALANCES IN THE GENERAL LEDGER



A Trial Balance (TB) is a tool used by accountants to verify that the total
general ledger accounts with debit balances are equal in total to the accounts
with credit balances; accounts with zero balances are generally not shown on a
TB (see Step 3). The TB does not verify the accuracy of the postings or amounts;
only that the total debits equal the total credits of the accounts in the
general ledger.

Please see chapter 3 in the book for more detailed information. Continued
below...


STEP 5 MAKE END-OF-PERIOD ADJUSTING ENTRIES FOR OTHER TRANSACTIONS



At the end of an operating period, accountants make adjusting journal entries
for unrecorded revenue and expenses to determine the true operating results for
the period. This is necessary because payment for some resources used by the
firm might not have been made or paid in advance, or transfers from unearned
revenues to recognize actual revenues earned, might need to be recorded to
determine the true profit or loss for the period. Examples of such adjustments
include: payments made in advance for insurance and rent, called prepaid expense
(technically prepaid assets); accruals for unpaid wages and salaries of
employees; depreciation expense, estimate for bad debts; interest accrued on
long-term debts; reclass from unearned revenue to revenue; and inventory
adjustments and cost of sales.

Please see chapter 6 in the book for more detailed information. Continued
below...


GIANT THINKER ON BUSINESS & COMPETITIVE STRATEGIES, PANKAJ GHEMAWAT. AUTHOR ON
BUSINESS AND COMPETITIVE ADVANTAGE INCLUDING: REDEFINING GLOBAL STRATEGY,
STRATEGY AND THE BUSINESS LANDSCAPE, WORLD 3.0, AND COMMITMENT, ETC.

STEP 6 PREPARE POST-ADJUSTED TB AND CREATE END OF PERIOD FINANCIAL STATEMENTS


After the adjusting entries are completed and posted to the general ledger
accounts (see Step 5), a post-adjustment trial balance is prepared, and the
debit and credit columns totaled to check that they are equal in accordance with
the double-entry accounting concept discussed earlier. A review of the
Post-Adjustment Chart of Accounts and Trial Balance on the next page shows the
totals of the Debit and Credit columns are equal (also referred to as footing
the TB). After the accountant has reviewed the TB and is satisfied that it is in
order, he or she proceeds to the next phase of the systematic steps: closing the
books and creating financial statements, Income Statement, Balance Sheet etc.,
from the closing end-of-period General Ledger Balances.

Please see chapters 4, 5, 6 and 7 in the book for more detailed information.

 * HOME
 * ACCOUNTING 101:EASY BOOKKEEPING
 * INCOME STATEMENT
 * PAYROLL AND PAYROLL EXPENSES
 * CASH FLOWS & BANK RECONCILIATION
 * LOVE REVOLUTION 2020: LOVE REVOLUTION
 * CONTACTS
 * ABOUT

© 2019 Denver Business Academy LLC P.O Box 8305 Sebring Fl. 33872 USA Tel.
863-991-3114






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