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

Hello, I really hope everybody'' s semester is beginning
out well. This is the initial official lecture of Bookkeeping 01. Currently, everybody needs to have
had a previous session where we spoke about course policies. For you deal with to facers we
did that last time we didn'' t movie that, and for you people in the house I did a separate shooting
and taping of experiencing the course plans for you, so please make certain those individuals at
Anybody understand? It costs cash, as well as what'' s the other one?
There ' s going to be a. web revenue that'you require to satisfy, right, I indicate JCCC isn ' t out for profit, however we concentrate. We have to stay afloat don ' t we? The language of business is accounting, it ' s really important to recognize,.
Let ' s go ahead as well as go through the really. I invest a lot of time on this slide so wear ' t think that every slide we do we ' ll spend this. Allow ' s go off the PowerPoint, and come back as well as I want to tip away from that for a second,.
The line, and also they fire totally free throws? Well, one of the points I performed in senior high school.
( I love basketball still do), yet I couldn ' t make the basketball team at my high college. What I did and this appears like a geeky future audit professor thing to do- I. kept statistics for the basketball team.Traveled around with them, and kept statistics. I didn ' t shade in that bubble, and also he made the second so I colored that in, you with.
Number nine gamer obtained fouled, and also that looks a little bit different doesn ' t. it? Anybody intend to venture an assumption what that is? Not a technological- do you'understand what a one. and one is? Certain kinds if you get fouled you wear ' t obtain two
free-throws, yet if you. make the first one you obtain a second attempt.
Does that make good sense? So I would certainly draw that. kind-of like a little cherry. So, this individual got fouled and he made the initial one, so he. got a 2nd attempt, right?
If he wouldn ' t have made the very first one it would certainly have simply. Any person want to presume? He made the shot, however he obtained a free-throw so, if you get fouled while making a shot.
has absolutely nothing to do with accounting? Well this is one of the things as a basketball statistician.
that I kept an eye on for the coaches. Currently, the next day when I would come to college do.
you believe the instructor wanted me to hand him this report, with the bubbles? Go back to.
the screen do you think that this is what they desired? What did they want? They wanted.
a condensed report, as well as I constructed just an example report ok, this is kind-of what they.
desired. This is a free-throw record for Northwest vs.Southeast on October 20, 2011. This is. the player Jones. This is the free-throws tried 8, and also he made 4 free-throws,. so he fired fifty percent.
Smith went to the line, as well as attempted 10 free-throws only made. This was the record I offered.
Now, why would certainly the trainer treatment concerning having this info? To recognize who the most effective.
free-throw shooters are might exist'' s a technical throughout the game, and also who would certainly you wish to.
You'' d want to recognize that requires. To work on free-throws, who'' s obtaining much better, who ' s obtaining even worse. Allow ' s go back to the PowerPoint interpretation, and let'' s apply this to the basketball.
document something, deal with? It determined that somebody was mosting likely to go to the line, and also.
I required to record it with that said little bubble method, as well as there'' s absolutely nothing magical about.
I didn'' t make it up as a common method to keep track of free-throws. Currently, I would certainly communicate.
it so it would certainly assist him make far better choices. However, for it to be able to help him to.
make a far better decision, it needed to be pertinent, reputable, and comparable, what does that indicate? Let'' s speak about that, what does it suggest to be relevant? To be relevant indicates it requires.
to be in concerns, to the game that he'' s worried about, right? If I were to provide him the, what.
free-throw data for the 1972 Olympic Gamings in between Russia as well as U.S.A., is that relevant? Is that going to help him make a much better decision? No.So, it has to be pertinent, it needs to be.
It has to be reliable. What if I don'' t know what. I ' m doing as a statistician- is it going to help him “make better choices?
the third quarter … don'' t recognize just how reliable it is.Is it mosting likely to help him whatsoever? No,.
and also I did not consume alcohol as a secondary school student. Note that if my mom is seeing. The 3rd.
What that indicates is there has actually to be a.
consistent regular approach we are using making use of keep maintain of this stuffThings there has to be rulesPolicies We always count a free-throw made if it goes with the hoop?
if I claimed “” I altered the policies I started to count the free-throws also if it just hit.
the edge and also even if it didn'' t experience, well I transformed the rules.”” Is that the way.
we'' ve been doing it?

No.Ok so it'' s no much longer similar to previous video games. Is it going.
to aid him make a much better choice? No. Go back to that more time this was a system.
that identified, tape-recorded, as well as communicated, and also if it was pertinent, reliable, and comparable.
Audit is the very same way; currently allow'' s remain on this for. We recognized points that needed to be videotaped these will be deals.
that demand to be videotaped such as, buying workplace products, or marketing services to a consumer,.
or paying our staff members, or obtaining a loan from the bank.We record that info,. as well as ultimately we ' re mosting likely to connect it via a report, via a summation like. you were claiming.
Do I desire to prolong credit score, or make a lending to this business? Exactly how ' s the organization doing? Are'we going to have adequate money to pay incomes following month?
is about. Does that flesh that out a bit for you? Let'' s carry on a bit, I.
like to have our lectures be a mixture of me chatting, and after that perhaps relaxing.
and doing some exercises and after that discussing those.I put on ' t like it just to be me speaking,. Like I always have to
say claim first initial is a lot of me talking, because we reallyActually sanctuary ' t done anything yet. So please don ' t be concerned if you ' re going “gosh … are. we'just going “to need to pay attention to this man every fifty minutes each time?” No, we ' ll. be doing things that ' s why I desire'you to bring your textbooks and also your calculator to course. There will be a great deal of times where we take breaks, and you'' ll work with it for a while,.
yet this lecture is kind of me jumping about and providing a great deal of fundamental service ideas,.
so we can start to construct our foundation.Alright let ' s go

on, there are'2 sets of individuals of.
accounting details. There are outside users, and there are inner users. External.
customers are those that do not operate at the company. They work beyond the business such as,.
lenders, or financial institutions, or cooperative credit union, or share holders, or stock owners, or potential share.
holders as well as supply holders, the federal government, consumer teams, consumers, exterior auditors. Do you understand what an audit is? When you go in as well as you look at the documents, an audit is.
of a firm, and you validate it. In some cases individuals believe of an IRS audit. Every one of those.
people are exterior to the firm, correct? They don'' t work there,'they'' re just they ' re.

outside the company.Now, outside user'' s monetary bookkeeping is the
accountancy that. offers exterior users primarily, and also that'' s this class. Now, there are likewise internal customers,.
these are the people that work at the company such as, managers, or the sales staff, or.
the inner auditors. Some firms are so large for example; Sprint, they have their.
There'' s also the controller,. The controller is the chief accountancy person.
she supervises of all the accounting – they'' re called the audit controller, but all.
of those people are inner to the firm. Currently, the type of accounting that is mainly.
concerned with internal users is managerial accountancy. Have you become aware of supervisory accountancy? Does anybody already know they'' re mosting likely to need to take managerial audit? A great deal. of people will certainly take monetary audit which is mostly concerned of the outside users,.
and after that they at some point take supervisory audit which is the inner users. Alright, let'' s. most likely to the next slide similar to there are policies of basketball that must be adhered to there.
are policies of accountancy that should be complied with, and also this will certainly assist guarantee that the info.
remains relevant, trusted, and comparable, and we know it has to be those 3 things.
for it to be useful.So, there are what ' s called typically accepted accounting principles. often we abbreviate that GAAP( G double A P) these are the policies that have been placed. right into location that we have to follow for accounting. We ' ll beginning finding out a few of those. Now, that. collections those regulations? Those are established by what is called the Financial Audit Requirement Board,. and also we abbreviate that often the
FASB. This is the exclusive group that establishes the guidelines. of audit. Currently, they take input from a great deal of various groups such as the SEC the. Safety as well as Exchange Commission, have you heard of that group? They ' re the federal government. body that has the reporting policies for firms that trade stock, and also issue supply to the public. they definitely have input to the FASB on what GAAP is. There ' s likewise something called the. International Audit Specification Board,
and they take care of international criteria. ok, so they certainly have input to the FASB as well.Now, one point about worldwide. requirements is that we ' re

becoming a much smaller world in
some ways, aren ' t we? Have any of. you mosting likely to these courses, have'any of you ever before Skyped, do you recognize what Skyping is? Have you ever before Skyped to someone overseas? Have you ever bought something over the. web overseas? , if I were to ask this
in an accounting accountancy twenty years ago I probably.Most likely would obtain actions like this- first off you would certainly say: what is Skype, second thing. you wouldn ' t consider acquiring something from somebody in Germany for instance, since. it ' s simply not possible.But with technology, with communications we ' re becoming a

smaller. world aren ' t we? It ' s constantly fascinating with these audit talks getting on YouTube. I ' ll get emails from individuals in Poland, Saudi Arabia, London, all over the world that somehow. they stumble upon these lectures, as well as somehow they watch them. Perhaps they ' re. taking a bookkeeping class and it type of assists them, however'it ' s kind of fun to hear from. those if somebody out there is enjoying it'shoot me an e-mail I ' d love
to speak with those. individuals, but it ' s a little globe isn ' t it? Well, due to that we have to start having some. worldwide requirements, since firms are coming to be worldwide with procedures not in. just the United States, however various other nations as well.So, you could come across something called.
IFRS that represents International Financial Coverage Requirements, and they determine the.
preferred accountancy for business ok. We won ' t get too much in this, however I desire you.
to be conscious of it that IFRS is much more and extra worried'yearly with just how are we going.
to make the bookkeeping operations in London similar with the ones in Georgia ok. How. are we going to do that, we desire to try to locate a typical set of guidelines, which ' s what. , ifrs is.. Ok, I want you to review next off now enjoyed'a different subject, as well as I want. you to review about this in your books. The Company Entity Forms
and this is on web page. eleven and twelve in your book.
Now, I ' m not going to go with every aspect of this,. I desire to strike some high factors, it ' s on web page eleven and also twelve in your book. And there ' s. 3 primary means you can establish up that service.
You can set it up as a sole proprietorship,. as a partnership, or as a corporation ok those are the three primary ways. Now there is kind-of. different sub-ways under each one of those, but also for the functions of
this class we ' re going. to kind-of concentrate simply on those three means. Now, there is'a great graph in your publication. I ' m not mosting likely to discuss every little row as well as column on right here, yet I'desire you to check out. concerning this and to know this.Let ' s highlight a few of those okay proprietorship versus a. partnership versus a company ok. Now let ' s come off the slides for a 2nd, and it ' s. Jake? Let ' s state you started a landscape design company Jake you can set'it up as a sole. proprietorship where you are the only proprietor, and you don ' t include anything you ' re. just a single proprietorship, right? Or what you'can
do is allow ' s claim there are two proprietors,. as well as it ' s Jake as well as Matt allowed ' s claim there were going to be 2 proprietors, and also you ' re not going. to include however you'' re going to be a partnership you can set it up by doing this, or the various other point. you can do is include currently returning to
the previous slide recalling at it real. fast. You may assume sole proprietorship implies one proprietor, collaboration just a couple of, as well as. corporation means a great deal
of proprietors that move kind-of shows that, however that ' s not absolutely. real, because returning to you Jake also if you were the only owner you can incorporate. what it suggests to include is you set your service up as a different lawful entity, a. separate legal entity if you ' re a corporation.Not a lot a contractor, yet like Sprint.

is a different legal entity but also your landscaping business you can be a different legal entity. and also establish that up entirely separate from you as a human you as a person. As a matter of. Truth if you die the firm is still alive? Or if you ' re a collaboration you'can. include so I wear ' t want you to'believe firm always imply numerous hundreds of proprietors,.
due to the fact that there'' s in fact a great deal of companies with just 1 or 2 owners. A firm.
methods you have experienced the paperwork, as well as fees, as well as treatments to set it up as a.
separate legal entity, does that make good sense? Alright going back to this slide despite exactly how.
You wear'' t desire to. Jake you don'' t want to maintain track of your landscape design company.
in the same check book and documents as you perform in your personal life, or if you have more.
Now the good thing concerning a corporation is that a company. A partnership and also a proprietorship have endless obligation.Limitless liability is a drag it'' s a bad point for example, let ' s claim Jake that you have a landscaping organization, and also you are established up as a sole proprietorship as well as allow ' s state that you have a grass cutting event and also you run over someone and they die, unfortunate, lawn cutting incident well considering that you have unlimited obligation proprietorship they can come and also sue you, and also take your personal properties your residence, your cost savings that granny left
you all that type of stuff. If you'' re a partnership, as well as you ' re not included as well as let'' s claim Jake has an unfortunate grass cutting occurrence? Well allow'' s claim Jake didn '
t have any type of cash, however Matts packed they could really come as well as take your assets you have limitless responsibility that'' s a disappointment isn ' t it? He did it and they ' re taking my assets
? Limitless Responsibility is a drag. You wish to have restricted obligation that ' s why you might include what that would imply is this is if you incorporate, which circumstance happens they can come attempt to take the possessions of the service, however they can'' t take your individual assets.It ' s kind of a guard often we call it a corporate shield, does that make good sense? That'' s why one individual could integrate or 2 individuals might incorporate ok, so, endless liability negative point, restricted responsibility good idea. The procedure of obtaining to be a corporation? Well to be If you want limited obligation you have to include in some, in this structure to be way which suggests that there'' s particular plans that you have to adhere to, paperwork that you
Well that ' s a bummer concerning being a corporation an excellent about a.
corporation company that it has limited restricted the bummer downer that a corporation company taxedStrained Now, let'' s explain this genuine fast allow ' s claim you are a sole proprietorship does that mean. Exact same point with a collaboration the collaboration.
is not strained, yet a company is strained. Allow me clarify that in actual primary terms,.
Sprint has a heap of money, after that they have to pay tax obligations, and that heap of money is currently.
much less right? They pay rewards to their owners, or their shareholders do the person.
proprietors and shareholders need to pay taxes once more on those returns. Yes they do. That'' s. called dual taxation that'' s a disappointment isn ' t it? It doesn ' t seem reasonable does it? Company. pays taxes, and after that they distribute cash to their proprietors, as well as the owners have to pay. tax obligations once more that ' s the large downer about being a corporation.Do they have to pay like payroll. taxes? Yes that ' s a fantastic remark I'' m not talking regarding pay-roll tax or sales tax I'' m. speaking about earnings tax ok? Excellent inquiry. Is one owner enabled like I claimed yes you can.
have a one proprietor corporation, proprietorship is simply one proprietor, if you are a partnership.
you can'' t have one owner you have to have 2 or more. Currently, there is something called. a Minimal Responsibility Firm an LLC, have you ever before became aware of that? That'' s a wonderful means. to begin a company, since let ' s state both of you start as a LLC you would certainly have the. benefits of minimal responsibility that ' s excellent, and you additionally would certainly not pay taxes at business. degree only at the personal degree. The inquiry could 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 policies that.
When you have a particular quantity, you can just be such a specific dimension or less to be an LLC.
of proprietors you need to incorporate basically.But if you were going

to start a service. I would certainly wager you that your lawyer would certainly suggest it to be an LLC, but you ' d need to speak with. him or her. I'had a business I was an
LLC, due to the fact that I wanted the limited liability, and. I did not intend to pay tax obligations at the business
level cool. Alright, we ' re mosting likely to speak about. a few even more things that ' s truly vital. This is your brand-new friend the accounting equation,. What is the accountancy formula? The audit equation is possessions equivalent liabilities plus. owners ' equity ok.
Now I want you to bear in mind something below come off the slides real fast. When you first learn something you ' re going to have someone like me who ' s going to educate. you something, as well as you ' re mosting likely to have to trust me a bit right, like when I educated.
my son to play baseball when he was simply an actual little youngster I informed him how to hold a baseball.
Bat. Currently he doesn'' t recognize he ' s just reached trust me that that ' s the method you hold a. baseball bat if I intend to be mean I might show him so weird means now, he wouldn'' t recognize. would he? Now I'' m not mosting likely to do that to you ok there are some things I ' m mosting likely to. educate you in chapter one, and throughout this whole course that you'' re not mosting likely to comprehend. the complete implications of it, yet I desire you to remember it.Are you with me? Believe me. And the ramifications will certainly enter into play as the term progresses, however going back to.
the audit equation for currently I desire you to memorize that the bookkeeping equation is.
possessions equates to liabilities plus equity. Are you with me? Now, let'' s flesh that out a little.
bit what are assets we'' ve heard the term possessions these are the sources you manage or have,.
Such as, money that'' s a property that ' s a source if you have cars, or. Products, land, or equipment, or buildings, materials those are assets?
possessions that you own. A number of these call for a little bit more explanation such as accounts.
receivable. Jake allowed'' s go back to your company let ' s say you mow my grass and also you bill fifty. dollars for a grass mowing', as well as I just I'' m mosting likely to pay you later on I ' ll pay you following week. ok as well as you say that ' s great I trust you, you'would have an accountant receivable from me.

the client, because you ' re mosting likely to get money in the future.Does that make good sense? That is an account receivable on your books ok. Any person right here function at a bank by coincidence? No ok. Well I have a vehicle loan at Financial institution of America they have a note receivable from Dave Krug. a note is comparable to a balance due, but a note is bit more official. It ' s. typically jotted down “hint notes receivable”, as well as there typically passion entailed, yet an. receivable or a notes receivable is a possession. You ' re mosting likely to receive money in. the future, does that make'sense? It ' s usually dated have you ever before had a financing, pupil car loan,.
vehicle loan, great for you maintain living that method ok. When I did my car funding though for those.
of you who have auto loan, or pupil loans did you need to sign, as well as day a lot of.
stuff did they say a rate of interest it was much more formal Than me just claiming “” hey you can.
just pay me following week”” you see what I'' m saying we ' re'not signing there ' s no interest that ' s. a balance due with a bank it ' s a note receivable, great question.Alright what about.
responsibilities, well sadly a lot of us understand about responsibilities, this financial debt this is.
things we'' re mosting likely to have to pay in the future ok. Returning to Jake you have an account. receivable for fifty bucks in your books from me well on my books I have an account.
Payable to you? That'' s a liability on my books. Bank of America has a notes receivable.
from Dave Krug for the vehicle funding, I have a note payable to Financial institution of America ok. There'' s. also things like tax obligations payable going back to the slide. Tax obligations payable are tax obligations that.
I owe I'' m mosting likely to need to payout cash for. Earnings payable or wages payable anything.
finishing in payable is I owe he or she, business, or whatever I'' m mosting likely to need to pay
them. in the future that'' s financial obligation right. Several of you have student finances payable. Anyone here very own.
a house, ok you have a home mortgage payable right? So, those are liabilities ok.Now, allowed'' s talk. regarding equity, what is equity? Now lots of people understand what possessions are, as well as lots of people. understand what responsibilities are typically speaking, yet after that they get to this equity.
thing and also they go “” oh what'' s equity” we'' ve listened to about it in the past, however it'' s not quite,. it ' s difficult to obtain your arms around what equity is. I believe the finest means to learn regarding what.
equity is, is to discuss equity increases, as well as equity reductions however this is the owner'' s. financial investment in the company.So I want you to understand this so actually for you encounter. to facers we are going to have a test at the very start of the following duration, and it ' s. mosting likely to be ideal at nine-o-clock so if you ' re late you'' ll miss it, yet the quiz is going.
to be top what is the accountancy equation, as well as that is possessions equals obligations plus.
proprietor'' s equity. The following inquiry'I ' m mosting likely to ask you is how does owner ' s equity rise,. as well as just how does proprietor ' s equity decrease? You individuals at residence even though you can not take.
this quiz I want you to imitate it'' s a quiz, since I have actually located via teaching this. course often times that this is a basic concept that I intend to enter into everybody'' s. head as well as I wish to make every little thing less complicated ok.So, know the audit equation put on'' t. just abbreviate either possessions equates to liabilities plus owner'' s equity, and now'allow ' s' speak concerning. just how owners ' equity Changes. Exactly how does owner ' s equity rise
will there ' s two means. The. Way is financial investments of assets by the proprietor right into the business, financial investments of properties. by the proprietor right into business. Going back to Jake as well as your business let ' s claim that grandma. passed away and left you ten-thousand dollars in her will certainly she gave it to you personally. As well as. you determine to take that ten-thousand dollars and you begin your organization with it well you.
are spending personal assets into business that enhance your proprietor'' s equity. Allow ' s state. you own a vehicle and you make a decision to take into business that ' s placing a different type. of asset into the company, and that raises proprietor'' s equity. You with me so, placing properties.
into the service increases proprietor'' s equity. The 2nd point that increases owner '
s equity. is revenue, what is revenue? You kind of understand what profits is? When you stated you were.
We ' ll talk about that we ' re going to kind-of ignore tax obligations for now, since the. It ' s simply that basic I know you don ' t understand the full implications. Now, let ' s speak about two things.
regarding exactly how proprietors ' equity decline, and also this is going to be the other hand of what we just.
talked about. , if placing properties boosting taking possessions out of the organization decreases equity.
that makes good sense doesn ' t it? Why might you take properties out of business Jake? Well.
let ' s say you require some money to pay your apartment or condo rent or to acquire grocery stores that ' s. why you have a service right? So you can take money every now as well as support yourself.
What that would certainly be is how do properties go and leave a corporation to the. It ' s a bit various when
you think Jakes. The principals still use excellent concern.
Expenses you' ' re precisely right you have wage expense you have advertising and marketing expenditure. I told what ' s on the. If you like locate a chair for your beauty salon would certainly that be an expenditure but as soon as.
No'excellent concern, and the there ' s a great deal of. No income is when. The chair ' s never going to pay you for anything it ' s not.
There ' s the entire test what ' s ' the accounting. What creates owner'' s equity to lower withdraws of possessions by the owner out of the service,.
and expenses.Would it still be

a positive thing for equity if it was a non earnings firm? Indeed now I desire you and it ' s a great question'you ' re inquiring about not for revenues and you. inquired about a firm Marlin. These are exceptional questions; however, I ' m not going. If I was educating, to fully be able to answer them it ' s kind of like baseball its like. When you ' re on first very first and as well as hit, my kid just how to play baseball as well as I would certainly show him
Strike the sphere you'run. If he ' s 4 or 5 years old I ' m just trying to get the ideas that. run this way around the bases run from first base to keystone not initially to 3rd not.
to mom in the stands, yet from very first to 2nd currently for those people that know baseball you.
Recognize that there'' s a great deal of other ramifications right on a fly round you go half means.
there'' s a great deal of different things yet I'' m not going try to instruct my 4 or 5 year.
Allow ' s go through the solutions genuine fast. Preparation deals to lessen taxes would certainly be tax accounting ok we didn ' t talk regarding. That ' s even more of an internal.
Last thing I ' m going to do is offer you your research please do this. I understand.

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