Accounting 1: Program #2 – “Basic Accounting Concepts”

Hey there, I wish everybody'' s semester is beginning
out well. This is the initial official lecture of Audit 01. Now, everyone ought to have
had a previous session where we discussed course policies. For you encounter to facers we
did that last time we didn'' t movie that, and for you people in the house I did a different recording
as well as taping of undergoing the class plans for you, so please make certain those folks at
residence are taking this as an on the internet course that you see that put on'' t just skip it'thinking it ' s not going to be necessary'. It ' s extremely essential to succeed in this class I desire you to know exactly how we'' re going to do things so, for the individuals viewing in the house on You-Tube or on DVDs, or on that cable television channel never ever avoid the talks ok, view them in sequence watch the entire thing.If you try

to faster way it you'' ll do on your own hurt so, at this point everybody knows the class plans and procedures and also every little thing we'' re mosting likely to proceed, and begin the subject of accountancy now, I always like to state at the extremely starting some individuals need to take this class, and also it'' s like “oh I want I didn ' t need to take this, but I have to it'' s needed” some individuals wish to take it. Truth be informed out of the fifteen of you right here there'' s maybe just one or 2 who wish to be a full time accounting professional someday so in some cases the concern turns up “” why do we have to take accounting””, and also I'' ll inform

you.Several factors, yet one of them is statistically discussing fifty percent of you are mosting likely to possess, or co-own a service at some point in your life. Now it might not be your single source of making cash, but it might be simply a secondary earnings, but you will co-own an organization or possess. Currently I'' ve spoke to some of you, and a great deal of my pupils they intend to be business owners, they want to have an organization one day. Well if you do that you require to know audit a minimum of at some degree, and also you may state “” well I'' ll just hire somebody to do my audit””, however what'' s the trouble with that said? Anyone know? It sets you back money, as well as what'' s the other one? you might obtain ripped off. You can take a look at business section, and see what takes place when an entrepreneur provides all of their audit responsibilities to someone else. It'' s “like “will we rely on that individual?”” I can inform you horror story after horror story from my days as a Financial declaration Auditor of small companies that someone tore them off, since that person didn'' t understand accounting at all.So, perhaps you won'' t do all the publication keeping, however you
at least at some degree demand to recognize accounting. Bookkeeping is the language of organization, plus, any place you all finish up working there'' s going to be a lower line'.
There ' s going to be a. web revenue that you need to satisfy, right', I suggest JCCC isn ' t out for revenue, yet we concentrate. We have to stay afloat don'' t we?
scenarios right? The language of company is accounting, it'' s really vital to recognize,. I understand there are a lot of reasons for being in this course, but I desire you to bear in mind.
that there'' s fundamental concepts of service, and exactly how essential it is to use to bookkeeping. The first thing I wish to do is look at and you ought to have the PowerPoint slides for.
you individuals here in the face to face.I handed these out to you, and also for you individuals at house,.
I have these on ANGEL under the lessons tab. I thinks it'' s really advantageous to have these.
You don'' t have to replicate every little thing down that'' s on the display, as well as you can just take. Let ' s go ahead and go with the really. I invest a great deal of time on this slide so put on'' t think that every slide we'do we ' ll invest this.
who'' s going to give you an examination question that claims “” compose out the interpretation of accounting””,.
And it most likely would be a little since fact be told you can locate an additional text-book.
various, however this has a great deal of excellent aspects, and I want to focus on that.
a little bit.It states bookkeeping is a system that recognizes, records, and connects.
information that matters, dependable, as well as equivalent to aid users make much better choices. Let'' s go off the PowerPoint, and come back and I intend to tip away from that for a second,.
as well as take you to a various instance I think will aid expand that meaning. Let me.
write something down right here that has definitely nothing to do with accountancy, and also tell me.
if any person knows what I'' m doing? I ' ll give you a clue it has to do with'sports.
I ' m sure. Anyone want to make a.
guessThink You'' ve enjoyed basketball.
It'' s when a player gets fouled
they go to.( I love basketball still do ), yet I couldn ' t make the basketball team at my high institution. Allow ' s. go back to this do you see exactly how this applies to free-throws.
twelve obtained fouled, and he mosted likely to the line for two free-throws he missed the first one,.
I didn'' t color in that bubble, and also he made the second so I colored that in, you with.
me? Okay after that gamer seventeen obtained fouled for two shots he made both of them so I colored.
in the bubbles. Number nine player obtained fouled, as well as that looks a little various doesn'' t. it? Any person intend to venture an assumption what that is? Not a technological – do you know what a one.
as well as one is? Specific kinds if you get fouled you put on'' t obtain two free-throws, but if you.
make the first one you obtain a 2nd attempt. Does that make sense? So I would certainly attract that.
kind-of like a little cherry. So, this man obtained fouled as well as he made the very first one, so he.
Obtained a second effort? If he wouldn'' t have made the very first one it would have simply.

looked like that.This one has just one bubble, what does that imply? Any person want to presume? He made the shot, but he got a free-throw so, if you obtain fouled while making a shot.
you make the basket, you get one free-throw. Now, why do I show you this, due to the fact that this.
has nothing to do with audit? Well this is just one of the important things as a basketball statistician.
that I kept track of for the instructors. Now, the following day when I would certainly come to college do.
you assume the coach desired me to hand him this record, with the bubbles? Return to.
the display do you assume that this is what they wanted? What did they desire? They desired.
a condensed record, and also I constructed out simply an example record ok, this is kind-of what they.
wanted.This is a free-throw record for Northwest vs. Southeast on October 20, 2011. This is. the gamer Jones. This is the free-throws tried 8, and also he made 4 free-throws,. so he shot fifty percent.
Smith mosted likely to the line, as well as attempted 10 free-throws only made. 8, and shot eighty percent, do you see what I ' m stating? This was the report I offered. the trainer.
Currently, why would certainly the instructor respect having this information? To know who the ideal.
free-throw shooters are may exist'' s a technical during the game, as well as that would you desire to.
You'' d want to understand who needs. To function on free-throws, that'' s obtaining better, that ' s getting even worse. Let ' s go back to the PowerPoint definition, and also let'' s apply this to the basketball.
document something, deal with? It recognized that somebody was going to most likely to the line, and also.
I required to videotape it with that little bubble approach, and there'' s absolutely nothing wonderful around.
that little bubble technique. I didn'' t make it up as an usual method to keep track of free-throws. At some point I would require to communicate that to my coach, right.Now, I would interact. it so it would aid him make far better decisions. However, for it to be able to aid him to.
make a much better choice, it needed to be pertinent, trustworthy, and equivalent, what does that mean? Allow'' s speak about that, what does it indicate to be relevant? To be pertinent suggests it needs.
To be in relates to, to the game that he'' s concerned regarding? Suppose I were to offer him the.
free-throw stats for the 1972 Olympic Games between Russia and also U.S.A., is that relevant? Is that mosting likely to assist him make a much better decision? No.So, it has to be relevant, it needs to be.
It has to be trustworthy. What if I put on'' t understand what. I ' m doing as a statistician- is it going to aid him “make far better decisions?
the third quarter … don'' t know how trustworthy it is. Is it going to assist him in any way?
No,. and I did not consume as a secondary school trainee. If my mom is enjoying, keep in mind that. The third.
one – it needs to be comparable, what does that suggest? What that implies is there has to be a.
constant method that we are utilizing to monitor this stuff, there has to be guidelines. We always count a free-throw made if it goes through the hoop? What.
if I stated “” I transformed the policies I began to count the free-throws even if it simply hit.
the edge and even if it didn'' t undergo, well I altered the guidelines.”” Is that the method.
we'' ve been doing it?

No.Ok so it'' s no more equivalent to previous video games. Is it going.
to aid him make a better decision? No. Return to that a person even more time this was a system.
that determined, videotaped, and also communicated, and if it mattered, dependable, and also similar.
it would certainly aid him make far better decisions. Accounting coincides means; currently let'' s remain on this for. a second. We recognized points that required to be recorded these will certainly be deals.
that requirement to be tape-recorded such as, buying office products, or offering services to a customer,.
or paying our employees, or getting a loan from the bank.We document that details,. and eventually we ' re going to communicate it via a report, with a summation like. you were claiming.
And also if that information matters, and also if it is trusted, as well as if it. is similar we ' re following the rules,'it will certainly aid our individuals make much better decisions. What type of decisions would you see in business world that would certainly be aided by monetary. information provided to them in a report
? Do I intend to purchase this firm? Possibly,. Do I wish to expand credit scores, or make a car loan to this company? How ' s the business doing? Are'we going to have enough money to pay incomes following month? If you have a company. you intend to have precise economic info, economic records- that ' s what accounting.
is about.Does that flesh that out a bit for you? Allow'' s carry on a bit, I.
like to have our lectures be a combination of me chatting, and also then maybe relaxing.
as well as doing some exercises and after that discussing those. I wear'' t like it just to be me chatting,. however like I always have to state this initial lecture is a great deal of me chatting, due to the fact that we actually.
haven'' t done anything yet. Please put on'' t be concerned if you ' re going “gosh … are.
No, we'' ll. There will be a lot of times where we take breaks, as well as you'' ll work on it for a while,.
however this lecture is type of me jumping around and also giving a lot of standard service ideas,.
We can begin to develop our foundation.Alright let ' s go

on, there are'2 collections of customers of.
accounting details. There are external customers, and there are internal customers. Exterior.
individuals are those that do not function at the business. They work outside of the firm such as,.
loan providers, or financial institutions, or credit history unions, or share holders, or supply owners, or prospective share.
owners and stock owners, the government, customer teams, clients, external auditors. Do you recognize what an audit is? An audit is when you enter and you check out the documents.
of a firm, and you confirm it. In some cases people think about an IRS audit. All of those.
They wear'' t job there,'they'' re simply they ' re. Currently, outside user ' s economic accountancy is the audit that. Now, there are also internal individuals,.
these are individuals that work at the firm such as, supervisors, or the sales personnel, or.
the internal auditors. Some business are so large for circumstances; Sprint, they have their.
Now, the kind of accountancy that is generally. Does any person already understand they ' re going to have to take supervisory accounting? Alright, allowed ' s. go to the following slide just like there are guidelines of basketball that need to be adhered to there.
in some cases we abbreviate that GAAP (G double A P) these are the regulations that have actually been placed. right into area that we need to comply with for accountancy. We ' ll start discovering a few of those. Now, that. collections those policies? Those are established by what is called the Financial Accounting Requirement Board,. as well as we abbreviate that occasionally the FASB. This is the private group that sets the regulations. of accounting.Now, they take input from a great deal of various groups such as the SEC the. Security and also Exchange Commission, have you heard of that group? They ' re the government.

body that has the reporting regulations for business that trade stock, and issue stock to the general public. they absolutely have input to the FASB on what GAAP is. There ' s also something
called the. International Accountancy Criteria Board, and also they take care of worldwide requirements. Ok, so they absolutely have input to the FASB. Currently, one point concerning global. standards is that we ' re ending up being a much smaller sized globe in some methods, aren ' t we? Have any of. you mosting likely to these courses, have any of you ever before Skyped, do you know what Skyping is? Have'you ever before Skyped to somebody overseas? Have you ever before acquired something over the.
web overseas? , if I were to ask this in an accountancy course twenty years ago I probably.. would certainly get actions such as this- initially of all you would say: what is Skype, 2nd point.
you wouldn ' t consider buying something from someone in Germany for instance, since. it ' s simply not possible.But with technology, with interactions we ' re coming to be a smaller sized.
world aren ' t we? It ' s always fascinating with these accounting talks getting on YouTube'. I ' ll obtain emails

from individuals in Poland, Saudi Arabia, London, all over the world that in some way.
Perhaps they ' re. Well, since of that we have to start having some.
simply the United'States, however various other nations too. You might listen to of something called.
IFRS that means International Financial Coverage Criteria, as well as they identify the.
favored audit for firms ok. We won ' t obtain as well much in this, however I want you. to be familiar with it that IFRS is a growing number of concerned every year with just how are we going. to make the accountancy operations in London equivalent with the ones in Georgia ok.How. are we going to do that, we wish to look for a common collection of rules, and also that ' s what. , ifrs is.. Ok, I desire you to review next currently were right into a different subject, and also I want. you to review this in your books

Currently,'I ' m not going to go via every facet of this,. I want to strike some high factors, it ' s on web page eleven and twelve in your book. And there ' s. 3 primary methods you can set up that service.
different sub-ways under every one of those, however, for the functions of this class we ' re going. to kind-of concentrate simply on those 3 ways.Now, there is a nice graph in your book.
I ' m not mosting likely to discuss every little row and also column on below, however I want you to read. regarding this and to understand this. Allow ' s highlight a few of those alright proprietorship versus a. collaboration versus a firm ok. Currently let ' s come off the slides for a second, as well as it ' s. Jake right? Let ' s say you began a landscape design business Jake you can establish it up as a sole.
proprietorship where you are the only proprietor, and you put on ' t incorporate anything you ' re.
simply a single proprietorship, right? Or what you can do is allow ' s claim there are 2 proprietors
,. and it ' s Jake as well as Matt allowed ' s claim there were mosting likely to be two owners, and
you ' re not going. to include but you ' re mosting likely to be a collaboration'you
can establish it up by doing this, or the other point. you can do is include now returning to the previous slide recalling at it real. quick.You might believe single proprietorship implies one proprietor, partnership simply a couple of, and also.
company suggests a whole lot of'proprietors that move kind-of shows that, yet that ' s not completely.
true, because going back to you Jake even if you were the only proprietor you might incorporate.
what it

suggests to integrate is you establish your organization up as a different legal entity, a. different legal entity if you ' re a company. Not so much a service provider,'but like Sprint.
is a different lawful entity yet also your landscape design organization you can be a separate legal entity. and establish that up completely different from you as a human you as a person.As a matter of. Truth if you pass away the firm is still to life? Or if you ' re a partnership you can. integrate so I put on ' t want you to think firm constantly indicate thousands of thousands of owners,. because there ' s really a whole lot of companies with simply a couple of
owners. A firm. methods you have experienced the paperwork, as well as charges, as well as treatments to establish it up as a. different legal entity, does that make sense? Alright going back to this slide despite how. you established your organization you ' re going to be a different service entity which suggests you ' re. mosting likely to maintain your company books separate from your personal publications. You wear ' t wish to.
Jake you put on ' t desire to maintain track of your landscaping service. Currently the good thing about a corporation is that a firm. A proprietorship and a collaboration have endless liability.Jake has a tragic lawn cutting event? He did it and they ' re taking my properties
Well that ' s a disappointment concerning being
a corporation firm great fantastic regarding corporation company that it has limited liability the bummer downer that a corporation firm taxed. Currently, allow ' s discuss this real fast allow ' s say you are a single proprietorship does that mean. Very same thing with a collaboration the collaboration.
Sprint has a pile of cash, after that they have to pay taxes, and also that heap of money is currently. They pay returns to their owners, or their shareholders do the individual.
That ' s. called double taxes that ' s a disappointment isn '

t it? It doesn ' t appear reasonable does it? Firm.'pays taxes, and'then they disperse money to their proprietors, and also the proprietors have to pay. tax obligations again that ' s the large drag about being a company.
Do they need to pay like pay-roll. taxes? Yes that ' s a great remark I ' m not speaking about payroll tax obligation or sales tax I'' m. discussing'earnings tax obligation ok? Great inquiry. Is one owner permitted like I claimed yes you can. have a one proprietor corporation, proprietorship is simply one proprietor, if you are a collaboration. you can ' t have one proprietor you need to have two or even more. Now, there is something called. a Minimal Liability Firm an LLC, have you ever before became aware of that? That ' s a great way. to begin a business, since let ' s say the 2 of you begin as a LLC you would certainly have the. advantages of restricted responsibility that ' s great, as well as you likewise would certainly not pay
tax obligations at the organization. level only at'the individual level.The question may be “why doesn ' t everybody be an
LLC,. why doesn ' t Sprint be an LLC?” Sprint would love to be “an LLC, yet'there are guidelines that.
you can just be such a certain dimension or much less to be an LLC as soon as you have a particular amount.
of owners you have to include essentially. If you were going to start a service. I would bet you that your lawyer would encourage it to be an LLC, but you ' d have to speak to.
him or her. I had a business I was an LLC, because I wanted the restricted liability, and.
I did not want to pay taxes at the business level cool. Alright, we ' re going to speak regarding. The accounting formula is properties equivalent obligations plus.
When you first find out something you ' re mosting likely to have somebody like me that ' s mosting likely to teach. you something, as well as you ' re going to have to trust me a bit best, like when
I instructed. my kid to play baseball when he was simply a genuine youngster I told him how to hold a baseball. bat right.Now he doesn ' t know he ' s simply reached trust me that that ' s the means you hold a. baseball bat if I wish to be mean I could reveal him so weird way currently, he wouldn ' t understand. would he? Currently I ' m not mosting likely to do that to you ok there are some things I ' m going to. instruct you in phase one, and also throughout this entire'program that you ' re not going to recognize.
the full implications of it, but I desire you to memorize it. Are you'with me? Trust me.
As well as the implications will come right into play as the term proceeds, yet going back to. the accounting equation for currently I want you to memorize that the accounting formula is.
possessions equates to obligations plus equity.Are you with me? Now, allow ' s flesh that out a little.
bit what are properties we ' ve heard the term

assets these are the resources you own or regulate,.
aren ' t they'? Such as, money that ' s a property that ' s a source if you have vehicles, or. Materials, land, or devices, or structures, materials those are properties?
Those are. properties that you possess. A number of these call for a bit more explanation such as accounts. receivable. Jake let ' s return to your business allowed ' s say you cut
my grass and also you bill fifty. bucks for a grass mowing, as well as I simply I ' m mosting likely to pay you later I ' ll pay you next week. ok and you state that ' s fine I trust you, you would certainly have an accountant receivable from me. the customer, because you ' re mosting likely to get money in the future.
That is an account receivable on your publications ok. No ok. Well I have a vehicle loan at Financial institution of America they have a note receivable from Dave Krug.
You ' re going to receive money in
. It ' s normally dated have you ever had a lending, pupil lending,. I owe I ' m going to have to payment cash money for.
Those are responsibilities okay. Currently, let ' s talk.
thing and also they go “oh what ' s equity” we ' ve listened to about it before, but it ' s not fairly,. it ' s difficult to get your arms around what equity is.I believe the most effective means to learn more about what.

equity is, is to speak about equity boosts, and equity reductions but this is the owner ' s. financial investment in the company.
I want you to know this so as a matter of truth for you deal with. to facers we are going to have a test at the very start of the next period, and it ' s. mosting likely to be best at nine-o-clock so if you ' re late you'' ll miss it, but the test is going.
to be primary what is the accounting equation, which is possessions equates to obligations plus.
proprietor'' s equity.The next question I'' m going to ask you is just how does proprietor'' s equity boost,. and how does owner ' s equity reduce? You individuals at home also though you can not take.
Means is investments of assets by the owner right into the service, investments of possessions. Going back to Jake and also your organization allowed ' s state that granny.
Let ' s state. You with me so, putting assets.
right into the business increases owner'' s equity. The second point that boosts owner '
s equity. is earnings, what is profits? You kind of understand what earnings is? When you claimed you were.
mosting likely to cut my yard, and I'' m going to provide you fifty bucks later on. That fifty bucks.
is income, and also you really wear'' t have to wait till I pay you that'' s earnings as quickly as.'you ' re done trimming the grass and also will certainly talk here in another lecture.If you go buy

a twenty.
dollar DVD at ideal buy after class today that'' s twenty dollars of profits for ideal buy. If.
you pay fifteen bucks to get a haircut that'' s fifteen dollars of income to the barber
appropriate,. right? We ' ll talk about that we'' re mosting likely to kind-of overlook taxes in the meantime, since the.
tax obligations that truly aren'' t that something you need to offer the government, but overlooking.
tax obligations if you pay fifteen bucks for a hairstyle that'' s fifteen dollars of profits for
the. barber right? Makes good sense if you go acquire a 5 buck dish at McDonalds that'' s five. bucks of revenue for McDonalds. These are the 2 things that create owner'' s equity. to enhance: investments of assets by the owner into business, and'income. Now,. I ' m informing you now deal with to facers this is the test this is the inquiry these are. the solutions. Sometimes people will offer me the answers that sound right, but there not.
No.The concerns as well as the answers to the test are on this slide here the two things that.
and earnings. It'' s simply that easy I recognize you don'' t understand the complete implications.
of this, however depend on me and also just memorize this for now. Now, allow'' s speak about two points'. concerning how proprietors ' equity reduction, and also this is mosting likely to be the flip side of what we just. reviewed. , if putting possessions raising taking possessions out of the business decreases equity.
Allow ' s say you require some cash to pay your apartment or condo rent or to get grocery stores that'' s. why you have a service? Well that'' s great that ' s expected when you take those possessions out of the business that. That'' s expected that ' s typical assets increases,.
properties out reductions. Marlin? Just how would that work for like a corporation like somebody.
taking properties out. What that would be is exactly how do possessions leave a company as well as go to the.
owners with returns largely ok. It'' s a bit different when you assume Jakes.
landscaping company versus Sprint. The principals still apply good inquiry. Alright.
now if incomes cause owners' ' equity to raise what do you assume reasons proprietor'' s equity to. decrease? Expenditures you ' re specifically right you have wage expense you have advertising and marketing expenditure.
you have gas cost expenditures create proprietor'' s equity to reduce.
I told what ' s on the.
of that inquiry if forgot currently oh does it become income? No. No revenue is when.
you give service or product to clients and also you can book that as income and also you will.
The chair'' s never ever going to pay you for anything it'' s not. There'' s the whole test what'' s ' the bookkeeping. What triggers proprietor'' s equity to reduce withdraws of properties by the proprietor out of the service,.
and also expenses. Would it still be a favorable thing for equity if it was a non earnings company? Indeed currently I desire you and also it'' s a wonderful inquiry you ' re inquiring about except earnings as well as you.
inquired about a company Marlin.These are outstanding questions; nevertheless, I ' m not going. to completely be able to answer them it ' s sort of like baseball its like if I was showing. my kid just how to play baseball as well as I would show him when you ' re on first base as well as they strike'. the ball you run. If he ' s 4 or five years of ages I ' m simply attempting to get'the ideas that. run in this manner around the bases run from initial base to second base not first to 3rd not.
to mommy in the stands, however from first to second currently for those people who recognize baseball you.
Know that there'' s a lot of other implications right on a fly round you go half means.
there'' s a great deal of various points but I'' m not going try to teach my 4 or 5 year.
old all those effects just yet. Companies except revenues they utilize these very same principles,.
In a somewhat various method I put on'' t desire to go down that road just yet it will kind.
of perplex us.As an issue of truth most of our class financial accounting that you.
take this semester is mosting likely to be in concerns to a sole proprietorship we'' ll speak a little. bit regarding companies we'' ll speak a little bit regarding except earnings trust me these ideas.
use but it'' s a bit different. So I assume it will be simpler to try think of Jake.
and his landscape design business as you discover these basic principle make feeling? Walk.
before you run. What I intend to do now is we have a few minutes and I desire to do.
in your publication and also I'' ll do this commonly. Is we'' ll service something in class for a couple of mins. For you individuals at house there going to play this trendy jazzy JCCC music and also I desire you.
to do these troubles also as well as I desire you to find back and also look at the answers, and.
And also play when we go over the responses if it takes you even more time individuals at home simply stop it.
when you'' re all set, but what I intend to do is discuss fast study one-three in your book.
that'' s on page thirty one and exercise one-three ok allowed ' s simply do those now fast research. one-three on page thirty-one and exercise one-three under of web page thirty 2. I'' ll provide you some time to do that for you folks below you can interact if you want.
you can share your solutions, however I'' ll provide you regarding four mins as well as after that will undergo.
the answers.So allow '

s do that today. (music 44:20 -48:15) ok I intended to give you a little.
bit more time face to facers, but were lacking time here so if you at home are not.
When you are done, done simply pause it begin it. But let'' s experience the solutions genuine fast. now firstly notification in your text publication there fast studies, there are exercises,.
and also further on there'' s issues. When I offer you research if I state to do fast research.
one factor 2 don'' t do work out one point two put on'' t do trouble one point two do quick.
Quick study one-three on the top of page thirty one outside or.
outside, the sales team is inner, the FBI and also the IRS are external, therefore are customer.
teams consumer groups are external, consumer teams are exterior, brokers like stock brokers.
exterior, providers are external, customers are exterior, the managers of a business interior,.
organization press like the Kansas city star or the Kansas city company journal are exterior,.
Testimonial of reports for SEC compliance is mostly financial bookkeeping, since it ' s for outside. That ' s more of an inner. Last thing I ' m going to do is offer you your homework please do this.

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