Basics in Accounting Flashcards
What are the different accounting systems?
Financial Accounting, Tax Accounting, Management Accounting
What are the core questions of the different accounting systems?
FA: How much equity has the entity at a certain point in time? Did the entity earn profit or loss during the business year?
TA: How much tax expense does the company have to pay for the profit in the current period?
MA: What is the company´s performance and cost structure? How can internal reporting systems inform management planning and decision making?
What happens in double-entry bookkeeping?
- Every amount is recognized twice: debit side and credit side
- Each business case is recognized twice: chronologically in the journal and systematically in the ledger
- The Profit or Loss is calculated twice: By balance sheet comparison and by comparison of gains and expenses in the P/L Statement
How does an asset account look like (structure)?
DEBIT Side: Opening Balance + Increases = total debit
CREDIT Side: Decreases + Closing Balance = total credit
How does a liability account look like (structure)?
DEBIT Side: Decreases + Closing Balance = total debit
CREDIT Side: Opening Balance + Increases = total credit
Where is the opening balance retrieved from?
The opening balance is retrieved from the balance sheet at the beginning of the period.
What is the closing balance?
The closing balance is: Opening Balance + Increases - Decreases
The closing balance of the asset account or credit account will be presented in the balance sheet at the end of the period.
How does an Expense Account look like?
DEBIT Side: Increases = total debit
CREDIT Side: Decreases + Closing Balance = total credit
How does an Income Account look like?
DEBIT Side: Decreases + Closing Balance = total debit
CREDIT Side: Increases = total credit
Why do income and expense accounts not have an opening balance?
Income and expense accounts do not have an opening balance, because they measure changes in equity over one business year.
