1.5. Double-entry bookkeeping

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來自 Moscow Institute of Physics and Technology 的課程

Core Concepts of Accounting – Numbers and People

3 個評分

Moscow Institute of Physics and Technology

Core Concepts of Accounting – Numbers and People

3 個評分

課程 3（共 5 門，Specialization Understanding Modern Finance）

Whenever the word “accounting” is pronounced, it is immediately associated with the need to memorize endless boring numbers. However, it is the common financial statements that contain important information that provides inputs for valuation of investment projects. The only challenge is how to properly extract them. Accounting and finance are indeed intertwined. Sometimes people that are not experienced in the area even mix them up. But most often emphasis in accounting is on numbers. Still, the deep understanding of key accounting concepts helps reveal the interests and actions of people behind these numbers. And the human dimension of accounting adds invaluable insight in the potential of successful project implementation. This Course discusses core ideas and concepts of both financial and managerial accounting. It by no means pretends to be comprehensive to any extent. But, being rather an accounting overview, it focuses on the issues that are most relevant and important for effective valuation of investment projects. The learners will gain insight into the essence of accounting. They will be able to use the obtained knowledge and skills to successfully advance in their career at a financial institution, as well as in the area of financial management at non-financial businesses. To pursue a career in accounting, a more detailed study is strongly recommended.

從本節課中

Financial Accounting – Basic Principles. Transaction Analysis. Income Recognition. Accounting for Current Assets

In Week 1 we discuss the scope of accounting and its two major areas – financial and managerial accounting. In the first part of the Course – Weeks 1 through 3 – we talk about financial accounting (FA). First, the key financial statements – the Balance Sheet (BS), the Income Statement (IS), and the Statement of Cash Flows (SCF) – are introduced, and the accounting equation is analyzed. Then we move on to the basic accounting principles, standards, and approaches – from double-entry bookkeeping to GAAP. Equipped with the general understanding of the financial accounting approach, we apply accounting procedures to transaction analysis. Then we study revenue and expense recognition, and focus on accounts receivable and bad debts. Finally, you will learn how financial accounting deals with inventories.

1.1. Why study accounting?11:17

1.2. What is accounting? Financial vs. managerial accounting11:41

1.3. Key financial statements – BS, IS, SCF17:49

1.4. Accounting principles. GAAP14:10

1.5. Double-entry bookkeeping6:57

1.6. Transaction analysis – an example15:51

1.7. Revenue and expense recognition16:34

1.8. Cash and accounts receivable14:04

1.9. Accounting for inventories (1) – cost travel13:27

1.10. Accounting for inventories (2) – cost of goods sold9:39

1.11. Accounting for inventories (3) – FIFO, LIFO, LCM9:39

與講師見面

Konstantin Kontor
Director and Professor of Finance and Strategy
American Institute of Business and Economics (AIBEc)

I'd like to say a few words about a very important principle or,

let's say, approach in accounting that's called double-entry bookkeeping.

Well, it goes back to the Italian mathematician,

Luca Pacioli, that lived at the end of the 15th and the beginning of the 16th century.

And at that time,

there were no negative numbers.

So accounting was created in

such a way that instead of having something positive or negative,

we had something that goes in one place and some balancing thing in the other.

So that resulted in the approach that

is called double-entry bookkeeping.

This deals with the famous debit and credit idea.

So the T-account for any asset liability or

piece of equity consists of two parts.

The left side is called debit and the right side is called credit.

And the balance is in changes.

They are depicted with respect as debit and credit,

but it depends upon what kind of an asset or liability we are studying.

So the next table shows us basically positive balances in assets,

then asset growth, and then liability.

When they go down,

all that is debit.

However, on the credit side,

we can see that this is positive balances.

Here, I have two positive balances in liabilities net worth.

Well, net worth must always be positive in accounting.

Even for a zombie organization, normally, it's positive.

And then if liabilities go up,

this is also on the credit side.

And if assets go down,

this is on the credit side.

Now, to some extent,

you may argue, "Well. Wait a minute.

Why the hell do we have to worry about these things because they

clearly deal with certain processes

that don't seem to be very directly linked to the ideal valuation in finance?

Well, yes and no.

And the main idea here is that when we have a transaction,

so something happens, we can say that first of all,

this transaction of that

deals with two or more T-accounts.

So, for example, if you spend cash,

you cannot say that your cash has been diminished.

You have to find what other asset or

liability has changed as a result of that.

Why is that so?

Because double-entry bookkeeping is closely linked to the accounting equation.

So we can see that the accounting equation is sort of

a conservation of energy law in accounting and finance.

So you cannot say that some asset has disappeared or some liability

has grown as a result of nothing.

So this is the key story because otherwise,

we can make a segment of mistakes.

So we can say that, but in all transactions,

delta of assets is always equal to delta of liabilities and net worth.

So the left side should always be equal to the right side.

It's like two sides of the same coin.

Again, I perfectly understand that sometimes I sound

trivial or offensively or even stupidly simple, if you will.

But this is important because as always,

I focus on something that is key in accounting and key in finance.

Because if you are not only comfortable with that,

but if you always remember that this is in the core,

then you are much more likely to avoid committing mistakes.

Now to give you an example,

a very simplistic example of how this works,

let's say that you purchase inventory and this

is worth $50 and you pay $20 in

cash and $30 credit.

So how this transaction is being recorded,

so you say that this is the inventory.

This is the asset T-account.

So here comes $50.

Now, that also affects another asset account,

which is cash, and here on the credit side, this is $20.

And also, there is the accounts payable and here come $30.

So that is how it's actually being recorded.

And again, although that's extremely trivial,

but in order to keep this in mind,

what we'll do in the next episode,

we'll go over a certain period of a company that will engage in 15 transactions in a row.

So we will first look at all these transactions and then we will record them properly.

Well, we will not use that many T-accounts.

We will record that in easy debit or credit way.

And then with the use of this information,

we'll be able to quickly and nicely come up with

both the income statement and the balance sheet.

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