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If you are new to small business accounting or need a refresher, this course is for you. From terminology to reading reports, small business accounting can sometimes be confusing. During this 3 hour Accounting video training course, our expert instructor will teach you about different types of accounts (asset, liability, equity, income and expense), payroll, financial statements and much more.
This accounting tutorial covers the same material as our classroom training and was designed to provide a solid foundation in accounting. We have incorporated years of classroom training experience and teaching techniques to develop an easy-to-use course that you can customize to meet your personal learning needs. Simply launch a video lesson or open one of the manuals and you’re on your way to mastering accounting.
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|Section 1: Course Introduction|
|Welcome to Mastering Accounting Made Easy, a presentation of TeachUcomp, Inc. This course will examine basic accounting methods and their use in business. By the end of this course, you should understand basic accounting terminology, the application of those concepts, and how to make management decisions using ratios and formulas. Learn this and more during this lecture.|
|Section 2: What is Accounting?|
|Accounting is an information system that records, identifies, and communicates the economic events of an organization or business to interested users. Accounting is very important for a business to stay organized, and for managers to make decisions. The ultimate purpose of financial information is to provide data to users for decision making. Learn this and more during this lecture.|
|There are many different forms and financial statements that can be used to record economic events in a business. There are also ratios and formulas that can be used to check the financial health and the current status of a business or organization. We will discuss these ratios and formulas in later lessons in this tutorial. However you should be aware of some basic terminology. Learn this and more during this lecture.|
|In recent years, many financial scandals have come to light in the media. Companies such as Enron, WorldCom, and AIG have experienced significant scandals due to unethical and sometimes illegal accounting practices. It is important for companies to prepare financial statements correctly and legally to avoid punishment, but also to have an honest relationship with customers and stockholders. Accurate accounting plays a vital role in business. Throughout this tutorial, we will discuss the correct accounting practices and methods. Learn this and more during this lecture.|
|There are multiple ways to communicate with users through financial statements. It is important to pick the correct statement in order to best communicate with the appropriate user. Learn this and more during this lecture.|
|It’s also important to understand some of the key terms when it comes to business activities. All businesses and organizations participate in the three types of business activities: financing, investing, and operating. Financing is a critical part of the initial set up of a business. There are two ways organizations typically fund their business: borrowing money and issuing shares of stock. Groups that the business owes money to are called creditors. Amounts owed to creditors are called liabilities. Different types of liabilities have different names, depending on their source. Some examples include notes payable, bonds payable, and common stock. Learn this and more during this lecture.|
|Each country has its own set of rules and practices when it comes to accounting. Companies in the United States follow a set of accounting standards called “GAAP”. GAAP stands for generally accepted accounting principles. GAAP uses two different measurement principles. The first is the cost principle. This requires companies to record assets at their cost. This stays true for the asset over time. For example, if a piece of land was purchased for $60,000 but over time the value increased to $70,000, the cost would still be $60,000. Learn this and more during this lecture.|
|The Sarbanes-Oxley Act (also known as SOX) was passed by Congress in 2002 to try to reduce unethical corporate behavior. This act established accounting regulations and industry norms that most large businesses follow. Also as a result of this act, top management must certify the accuracy of financial information. Also, this act made penalties for fraud much more severe. Learn this and more during this lecture.|
|There are two types of accounting: accrual and cash. Accrual basis accounting means that companies record transactions in the periods in which the events occur, even if no cash was exchanged. In this system, companies record revenues when earned, and recognize expenses when incurred. Learn this and more during this lecture.|
|Section 3: Financial Statements|
|In this section, we will discuss the contents of financial statements in a broad sense. Further information on each component will be discussed in later sections. Learn this and more during this lecture.|
|Accounting transactions are events that require recording in financial statements. If an economic event causes a change in assets, liabilities, or stockholder’s equity, then the accounting transaction must be recorded in a financial statement. Learn this and more during this lecture.|
|In accounting, T-accounts are used to track economic activity within the business. A T-account is an individual record of an increase/decrease in an asset, liability, stockholder’s equity, revenue, or expense. Each T-account consists of three parts: the title of the account, a debit, and a credit. A debit is the left side of the account. A credit is the right side of the account. Learn this and more during this lecture.|
|In the last lecture, we learned that T-accounts are important to track economic events within a business. We also learned that those accounts are the fundamental building blocks of accounting. However, transactions are typically recorded in chronological order in journals before they are transferred into accounts (and then ultimately financial statements). This act is called journalizing. The entire record of journal entries is called a general journal, or general ledger. Learn this and more during this lecture.|
|After journal entries are made, the financial information can then be presented into different financial statements. The balance sheet shows lists of transactions, grouped together by similar assets and similar liabilities. Just like the accounting equation and journal entries, the sheet must balance (meaning assets will equal liabilities + stockholder’s equity). Learn this and more during this lecture.|
|The income statement shows a company’s successes and failures stemming from operating procedures over a period of time. This will also show if the company’s operations are profitable. Learn this and more during this lecture.|
|Recall that retained earnings is the net income retained in a company for future use. The retained earnings statement shows the amounts and changes in retained earnings during an accounting period (picked by the user). This statement is typically used to evaluate and understand dividend practices. Investors look to these statements to make decisions on which company to invest in. Learn this and more during this lecture.|
|The statement of cash flows provides financial information about the cash receipts and cash payments of a business during an accounting period (picked by the user). The primary interested users in these statements are investors, creditors, and other interested in the company’s cash position. The statement will report the cash effects of a company’s operating, investing and financing activities. Cash is one of the most important resources in a company. Learn this and more during this lecture.|
|Section 4: Assets|
|In this section, we will further explore assets owned by a business, how to record economic events dealing with assets, and how these events affect a business. Learn this and more during this lecture.|
|Current assets are cash and other resources that the company expects to use up within one year, or the operating cycle. Examples include office supplies, yearly insurance, and inventory. Learn this and more during this lecture.|
|Most assets that have relatively long useful lives can be broken down into three categories: property, plant, and equipment. This category of assets includes land, buildings, vehicles, furniture, etc. Most of these items are subject to depreciation. Learn this and more during this lecture.|
|Long term investments are investments that will be held for longer than a year. Learn this and more during this lecture.|
|Intangible Assets are assets that are valuable to the company, but have no physical state. Examples include customer lists, brands, trademarks, rights, and goodwill. Sometimes these assets are recorded specifically, other times companies list them under “Other Assets”. Learn this and more during this lecture.|
|Most companies own assets that have long useful lives. These can take the form of buildings, equipment, and vehicles. As explained in previous lessons, companies must follow the cost principle of GAAP (recording assets at cost). In order to allocate the cost of using the asset over a length of time, companies use depreciation. Depreciation is the process of allocating the cost of an asset to expense over its useful life. However, depreciation in terms of accounting, does not show the actual value of the asset. This is simply a way to allocate its cost. Learn this and more during this lecture.|
|Section 5: Liabilites|
|In this section, we will further explore liabilities. Recall that liabilities are creditors’ claims on total assets, or existing debts and obligations a company has. Companies must pay these obligations and debts back at some point in the future, using assets or services. Just like assets, some liabilities are current and some are long-term. In this chapter, we will discuss how to classify a liability, which account to post it to, and how to create journal entries using liabilities and real world examples. Learn this and more during this lecture.|
|Current liabilities are debts that a company expects to pay back within one year or the operating cycle and that the company expects to pay from existing current assets, or through the creation of other current liabilities. Debts that do not meet these two criteria are considered long-term liabilities. Learn this and more during this lecture.|
|Notes payable are written records of obligations a company has to its lenders. Most of these notes are interest bearing. Also, those notes payable that are due for payment within one year of the balance sheet date are classified as current liabilities. Learn this and more during this lecture.|
|Most types of retail products are subject to sales tax. When a company sells a product, they must collect a percentage of the revenue and then remit it to the appropriate government. For example, if a company sells a product for $100 and the sales tax rate is %6, the company will collect an additional $6 from the customer and then transmit the $6 to the state government. Learn this and more during this lecture.|
|Some companies receive advances in payments before actual services are performed. In accounting, this is called unearned revenue. Unearned revenue must be reported in order for companies to comply with GAAP principles. Learn this and more during this lecture.|
|Payroll payable is the amount of payroll that a company pays its employees during a given period. Some periods can be weekly, biweekly, or monthly. Because of the different taxes and withholding options that come with payroll, accounting must be done carefully. Learn this and more during this lecture.|
|Long-term liabilities are debts that a company expects to pay off more than a year in the future. Long-term liabilities can take the form of bonds, bank loans, and mortgages. Bank loans are the most common. Long-term liabilities can be classified as Notes Payable, Lease Liabilities, and Bonds. Learn this and more during this lecture.|
|Section 6: Other Accounting Transactions|
|A trial balance lists accounts and the balances associated with those accounts at a given time. A company usually will prepare a trial balance at the end of a specific accounting period. Similar to a journal entry, debits are listed on the left side and credits on the right. The trial balance proves the mathematical equality of these debits and credits. A trial balance may uncover errors in journalizing and posting. Also, a trial balance is useful in the preparation of financial statements. Learn this and more during this lecture.|
|Sometimes, when businesses record journal entries, the information made need to be adjusted later on. Using adjusting entries ensures that the revenue recognition and expense recognition principles of GAAP are followed. The revenue recognition principle requires that companies recognize revenue in the accounting period in which it was earned. The expense recognition principle means that expenses must be matched with revenues. Learn this and more during this lecture.|
|Most of the accounts we have looked at throughout this tutorial have been considered temporary accounts. Temporary accounts are revenue, expense, and dividend accounts who balances will be later transferred into a financial statement- specifically, the retained earnings statement. (We will discuss dividends in future lessons.) This is because these accounts are used to record information for a specific accounting period. Learn this and more during this lecture.|
|Other important financial information includes sales revenues and gross profits. We will now discuss these terms in detail. Learn this and more during this lecture.|
|Section 7: Inventory|
|The way a company classifies its inventory is critical to the accounting process. How a company classifies its inventory depends on the type of company. In a merchandising company, inventory can be made up of many different items. For example, a grocery store may have thousands of different types of products. Because of this, it makes more sense for a merchandising company to classify all inventory as merchandise inventory. Learn this and more during this lecture.|
|All companies need to determine their inventory amounts. Companies take physical inventory of all goods at the end of an accounting period. This is important to keep accurate accounting records and also to help eliminate waste and employee theft. This involves counting, weighing, and measuring each kind of inventory on hand. Because this is such an enormous task for large companies, most businesses take inventory when the company is closed or when business is slow. Learn this and more during this lecture.|
|Understanding cost of goods sold is important when accounting for inventory in a business. Cost of goods sold is the total cost of merchandise sold during the period. This expense is directly related to the revenue gained from the sale of the goods. For large companies, keeping track of the cost of each individual product is impractical. Instead, companies make assumptions called cash flow assumptions about the units of goods sold. There are three assumed cost flow methods: FIFO, LIFO, and Average-cost. These cash flow methods allow companies to account for inventory and inventory costs without having to measure each item individually. Learn this and more during this lecture.|
|When companies have large amounts of inventory, it’s important for them to account for it properly. FIFO and LIFO are systems of accounting for the value of inventory within a company. FIFO stands for First In, First Out. LIFO stands for Last In, First Out. It is important that a company understands which system is best for their company and also how to correctly use each system. Incorrect use of a system can severely hurt the company or make it difficult for users to understand the inventory accounting and inventory costs. Learn this and more during this lecture.|
|The average-cost method allocates the cost of goods available for sale on the basis of the weighted-average unit cost that a company incurs. This method is simpler than FIFO and LIFO. The equation for finding the average cost is: Cost of goods available for sale / Total Units Available for Sale = Weighted Average Unit Cost. Learn this and more during this lecture.|
|Section 8: Stockholder's Equity|
|In this section, we will discuss stockholder’s equity. However, it’s important to first understand the differences between a small business or individually owned business and a C corporation. This is because finances are treated differently between the two. Also, it’s important to note that some of the concepts in this chapter only apply to large businesses and corporations. Learn this and more during this lecture.|
|Understanding stock and its value to a corporation is important when it comes to accounting and accounting for stockholder’s equity. In this section, we will discuss a few terms related to stock within an organization and how they affect financial statements. Learn this and more during this lecture.|
|Treasury Stock is a corporation’s own stock that has been reacquired by the corporation. Most corporations will hold treasury stock for future use. Learn this and more during this lecture.|
|Besides common stock, companies may issue another class of stock, called preferred stock. Preferred stock has contractual provisions that give it priority over common stock. Preferred stock may have either a par value or a no-par value. Typically, preferred stockholders have a priority in relation to dividends and assets in the event of a liquidation, however they may not have voting rights. Learn this and more during this lecture.|
|Dividends are distributions by corporations to its stockholders. Dividends can take the form of cash, property, promissory notes, or stock. In financial statements, dividends are generally reported quarterly as a dollar amount per share. A cash dividend is a distribution of cash to stockholders that is proportional to ownership. Learn this and more during this lecture.|
|Section 9: Managerial Accounting|
|While financial accounting focuses on presenting information for a variety of users, managerial accounting focuses on providing information for managers (and other internal users) to make decisions. In this chapter, we will focus on the basics of managerial accounting and how to use financial information to make important business decisions. Learn this and more during this lecture.|
|As discussed in a previous section, ethics in accounting is very important for businesses. It is also important in managerial accounting. This goes further than simply filling out correct, ethical financial statements. Managers must also create proper incentives for the company and set high ethical standards for all employees. Learn this and more during this lecture.|
|In order for managers to plan, direct, and control effectively, they need good financial information to make informed decisions. One of the most important concepts is understanding cost. Learn this and more during this lecture.|
|There are other managerial concepts that are important when it comes to managerial accounting even though they do not deal directly with financial data. They are: the value chain, changing technologies, and the theory of constraints. Learn this and more during this lecture.|
|Section 10: Cost Accounting Systems|
|Cost accounting involves the measuring, recording, and reporting of product costs. This is important for managers because controlling costs is essential to a business’ survival. If a manager knows where costs are coming from, they can more adequately control them. A cost accounting system consists of accounts for the various manufacturing costs. There are two basic types of cost accounting systems: the job order cost system and the process cost system. The purpose of these systems is to provide unit cost information for product pricing, inventory valuation, and financial statement presentation. Learn this and more during this lecture.|
|The flow of costs in job order costing parallels the physical flow of the materials as they are converted into finished goods. Companies assign manufacturing costs to the Work in Process Inventory account. When a job is completed, the cost is transferred to the Finished Goods Inventory. Learn this and more during this lecture.|
|In this section, we will discuss how to report in a journal entry each type of cost in job order costing. The costs include raw materials, factory labor, and manufacturing overhead. Learn this and more during this lecture.|
|Companies can use the process cost system to account for costs for similar products that are mass-produced in a continuous fashion. Examples include companies that manufacture computer products, soft drinks, and chemicals. This process involved taking the costs from direct materials, direct labor, and manufacturing overhead, the different works in process, and inventory to determine the cost of goods sold. This process is outlined with this chart. Learn this and more during this lecture.|
|It’s important to understand the concept that products consume activities and activities consume resources. Companies always must be aware of this idea in order to allocate costs and ultimately control them. Learn this and more during this lecture.|
|Section 11: Behavior of Costs and Expenses|
|Cost behavior analysis is the study of how certain costs behave in a business. Understanding cost behavior is crucial for managers so they can control costs effectively. The first step in analyzing costs is understanding and measuring key business activities. Activity levels are expressed in financial terms and can be in sales dollars, miles driven, classes taught, etc. The activity level should be correlated with changes in costs. The activity index identifies the activity that causes changes in the behavior of costs. This allows managers to make decisions to further control costs. There are three types of costs: variable, fixed, and mixed. Learn this and more during this lecture.|
|Besides cost behavior in general, managers should be aware of the effect of costs on profits. Cost-volume-profit analysis is the study of the effects of changes in costs and volume on a company’s profits. CVP analysis is important for cost controlling and also for profit planning and budgeting. It can also be used when making decisions with selling prices, determining product mix, and maximizing use of production facilities. Learn this and more during this lecture.|
|The margin of safety is another tool that is useful in dealing with cost-volume- profit analysis. Margin of safety is the difference between actual or expected sales and sales at the break-even point. This relationship measures the “cushion” management has when dealing with costs. It allows the company to break-even instead of losing money if sales are not up to the expected amount. Learn this and more during this lecture.|
|Section 12: Cost Controlling|
|As stated in previous lessons, management’s top responsibility is to control operations of a company. A large part of this is having financial control. This is where budgets can be a very useful tool for managers. The use of budgets in controlling operations is known as budgetary control. While planning is important, budgets offer continuous monitoring of a company’s finances and helps managers to stay on track and keep making progress. From different financial reports available, management can analyze the differences between planned and actual results to determine their causes. From there, management can take corrective action to make sure the company is on track. Learn this and more during this lecture.|
|As stated in previous lessons, one of management’s major functions is to control company operations. The use of budgets in controlling operations is essential to financial health. There are two types of budgets: static and flexible. When sued in budgetary control, each budget included in the master budget is considered to be static. A static budget is a projection of budget data at one activity level. These types of reports will not show data for different levels of activity. Companies use these to compare actual results with budget data at the activity level that was used in developing the master budget. Learn this and more during this lecture.|
|Responsibility accounting is an important concept when it comes to cost controlling. Responsibility accounting involves reporting costs and relevant revenues by the manager who has responsibility to make the day-to-day decisions about the items. Under responsibility accounting, a manager’s performance is evaluated on the basis of items over which they have direct control. Also, employees can be held responsible for the costs and revenues at the level at which they are associated in the business. Learn this and more during this lecture.|
|Standards are common in business. Standards established internally by a company may consist of codes of ethics, quality control standards for products, and standard costs. Standard costs are predetermined costs per unit which companies use as a measure of performance. Learn this and more during this lecture.|
|In general, a variance is a deviation from a norm or a set point. In managerial accounting, variances are the differences between total actual costs and total standard costs. Variances are important so that managers can control costs and also make decisions. When actual costs exceed standard costs, the variance is considered unfavorable. When actual costs are less than standard costs, the variance is favorable. In financial statements, total values will be listed with a U or an F next to them to show “favorable” variances or “unfavorable” variances. Learn this and more during this lecture.|
|Section 13: Profit and Budget Planning|
|As discussed in previous lessons, a large part of a manager’s job is planning. Budgeting is the main tool manager’s use for planning and for having financial control. A budget is defined as a formal written statement of a manager’s plans for a time period in financial terms. Budgeting has many benefits for an organization. Learn this and more during this lecture.|
|When it comes to preparing budgets, preparing the operating budgets is usually the first step. In this section, we will explore the different components of the operating budgets. Learn this and more during this lecture.|
|Preparing the financial budgets is also an important step when creating budgets for the period. In this section, we will examine the different components of the financial budgets. Learn this and more during this lecture.|
|Section 14: Management Decision Making|
|In this section, we will cover other management decision making tools. This section will include ratios, formulas, and other types of data that can be useful in managerial accounting. Learn this and more during this lecture.|
|Most decisions that need to be made involve a choice among alternative courses of action. The process used to identify the financial data that changes under alternative courses of action is called incremental analysis. Incremental analysis usually involves outlining specific alternative courses of action so that management can make decisions. Different formulas, ratios, and financial statements can be used as resources for this process. Learn this and more during this lecture.|
|Capital expenditures are items the company buys that are considered capital assets. Capital assets are assets that are not easily purchased and sold regularly during the business. Most capital assets are investments and are considered useful in expanding the business. Examples of capital assets include resources for new projects, land, and large building expansion. Capital budgeting is the process of making capital expenditure decisions within a business. Capital budgeting is important for businesses in that large expenditures require time, planning, and resource management. Capital budgeting is a great tool in this way. Learn this and more during this lecture.|
|Now that we have covered how to make decisions within a company, we will include some other tools for financial analysis and decision making. While this is not a comprehensive list, these are some of the more important formulas and ratios. Learn this and more during this lecture.|
|Section 15: Course Conclusion|
|This concludes the video portion of TeachUcomp Inc.’s Mastering Accounting Made Easy. Please take some time to review the video lectures—it may be helpful to replay the lectures which contained a lot of information or complicated concepts.|
|Section 16: Instructional and Testing Materials|
|Lecture 70||3 pages|
|This contains a detailed outline of course topics and study guide materials.|
|Lecture 71||74 pages|
|This is the course transcript and be can printed and used to take notes during the video lectures.|
Founded in 2001, TeachUcomp, Inc. began as a licensed software training center in Holt, Michigan - providing instructor-led, classroom-style instruction in over 85 different classes, including Microsoft Office, QuickBooks, Peachtree and web design, teaching staff at organizations such as the American Red Cross, Public School Systems and the Small Business Association.
At TeachUcomp, Inc., we realize that small business software can be confusing, to say the least. However, finding quality training can be a challenge. TeachUcomp, Inc. has changed all that. As the industry leader in training small business software, TeachUcomp, Inc. has revolutionized computer training and will teach you the skills to become a powerful and proficient user.
In 2002, responding to the demand for high-quality training materials that provide more flexibility than classroom training, TeachUcomp, Inc. launched our first product - Mastering QuickBooks Made Easy. The enormous success of our first tutorial led to an ever-expanding product line. TeachUcomp, Inc. now proudly serves customers in over 80 different countries world-wide including individuals, small businesses, non-profits and many others. Clients include the Transportation Security Administration, NASA, Smithsonian Institution, University of Michigan, Merrill Lynch, Sprint, U.S. Army, Oracle Corporation, Hewlett-Packard and the U.S. Senate.
Our full-time staff of software training professionals have developed a product line that is the perfect solution for busy individuals. Our comprehensive tutorials cover all of the same material as our classroom trainings. Broken into individual lessons, you can target your training to meet your needs - choosing just the lessons you want (and having the option to watch them all if you like). Our tutorials are also incredibly easy to use.
You will listen and watch as our expert instructors walk you through each lesson step-by-step. Our tutorials also feature the same instruction manuals (in PDF) that our classroom students receive - and include practice exercises and keyboard shortcuts. You will see each function performed just as if the instructor were at your computer. After the lesson has finished, you then "toggle" into the application and practice what you've learned - making it the most effective interactive training solution to learn on your own.