SPEAKER 1: Hi, once more. We'' re continuing chapter one.
That would be the deal to document.
Now always believe, what are the 2 accounts that I need.
There is always an. When you increase, for instance,.
$ 100,000 money from providing supplies, that indicates we'' re going. to have two accounts, cash money account as well as typical stock. Cash is a possession. Ordinary shares is.
shareholders' ' equity.
Cash is going to. increase by'$ 100,000. Remember it ' s the firm'' s cash.
It ' s not the owner ' s cash money. It ' s the firm ' s money.
We, as accounting professionals in that.
So under the properties, we.
understand that money is a property.
We will claim cash money plus$ 100,000. Boosts by$ 100,000.
Constantly remember something. super, super vital. That the equation has.
to continue to be equal for life. Despite the amount of purchases. we ' re going to have
, regardless of how old the. business is, the formula is always going to be equivalent. after tape-recording any purchase.
Now we have enough cash money. The next step we', let ' s state, we ' re. And allow ' s state that we ' re.
mosting likely to pay cash for it, OK? The two accounts that.
we ' re mosting likely to need below are tools, which is.
going to enhance by $20,000. The other account is the cash money, which. is mosting likely to reduce by $20,000. Due to the fact that we ' re
mosting likely to spend. the cash money and get devices. To videotape that we ' re. mosting likely to state cash reduction. It ' s a, which is. a minus by$ 20,000 and afterwards tools. rise by $20,000. Now the question is, the.
equation still equivalent? Well, it is, since.
under the properties side you can plainly see that you. have a decrease of$ 20,000, along with a rise of.$ 20,000 under the assets.
That complete properties.
is not altering. It ' s still$ 100,000. And afterwards I still have
$ 100,000 on. the opposite of the formula, which keeps us balanced.OK, let ' s record one. extra purchase.
Let ' s claim that we ' re mosting likely to buy.
materials, which is another asset. This time we ' re not.
mosting likely to pay cash money for it.
We ' re going to get. Now when we state on account or on.
It suggests that we will pay in future. Now bear in mind, if you ' re going. to pay something in future for an amount that is currently. owed by you to someone, that comes to be accounts payable,'which.
Keep in mind, we ' re going to have 2. Products, which is an asset.And let ' s say the. Simply an example.
We ' re going to have a responsibility.
account, which is accounts payable.
A slash B, accounts payable
. That is likewise going to. Since when payable goes up by.
Obligation goes up
by$ 1,000. Now if you look at.
We just included the $1,000. Under obligation we simply. The formula is still equivalent.
This time let ' s say that. Remember, if I ' m. going to obtain cash.So let ' s claim it was. Under the possessions, we will.
My money was raised by$ 4,000. I will state that profits,. Revenue, it ' s not categorized generally.
For currently, you simply need to know. It ' s worth $4,000. It ' s considered a revenue.
$ 4,000 in cash rises by$ 4,000. The formula is still equivalent.
Now let ' s do one more transaction. We ' re going to end up.
So it ' s going to be officially. a profits, a service profits.
We can not boost the cash money. since we did not get cash money yet. Instead we will certainly utilize. receivables, A reduce R suggests balance dues. And keep in mind, accounts. receivable is just one of our assets
, because there is some cash money.
At the very least from our.
It ' s not yet cash.Now let'' s chat regarding costs. Let ' s have, let'' s have. Let ' s say that we have to.
purchase, allow ' s pay for marketing.
We ' re going to promote. It ' s a new organization, we.
need to market it. And afterwards let ' s state. that we offered, so'we were supplied an advertising event.
or possibly it was an advertisement on a magazine for allow ' s claim$ 500.
Which we paid cash. for it promptly. So we ' re mosting likely to have.
an expenditure account. We ' re mosting likely to call that cost.
And also then we paid money, so our.
will lower by $500. And afterwards my expense,.
which is additionally mosting likely to assess stockholders '.
equity similar to incomes. But bear in mind that costs. normally reflect adversely on' the shareholders ' equity.
That means whenever. we have a cost, the investors '.
equity will lower. It'' s not going to increase. It will certainly decrease.
So advertising cost,.' although it ' s raising, however what I ' m attempting to show below on. the formula on how is that expense is going to review the equity. I will just say that it.
will show adversely. It'' s going
to be minus$ 500. My equation ' s still equal.
I have $500 decline. under the assets as well as then I have
one more.$ 500 reduction of equity beyond of the equation. So that'' s exactly how we reflect.
deals on the formula. You'' re always going.
to have 2 accounts. Those 2 accounts could be not two.
various places in the equation. They may be in the very same.
location of the equation. If you look back in.
the possessions, as an example, allow'' s return to that devices.
that we bought for cash.The 2 accounts that we utilized
,. the cash as well as the equipment, they were both assets. Yet among them was going up,.
the various other one was decreasing. So although they are both on.
the one side of the formula, yet the total possessions did not change. Because we obtained a plus $20,000.
and also we obtained a minus $20,000, which is not mosting likely to.
change the overall properties, which will maintain the equation equal. And after that you observe that.
in some purchases we had two accounts boosting.
or more accounts reducing or 2 accounts, one.
of them is boosting, the various other one is lowering. And afterwards eventually, after.
you tape-record transactions, we'' re mosting likely to tape purchases.
every day within a duration, within the accounting period, which.
is typically a month or a year. And afterwards ultimately at.
the end of that period we'' re mosting likely to determine.
the ending equilibriums of every one of those accounts.The ending equilibrium
it ' s. really the outcome of
all the pluses as well as minuses. we had for all those
accounts. For example, if we. go back to the money, we began with. increasing it by
$ 100,000. And after that we lowered it by$ 20,000. And afterwards we increased it by$ 4,000. and after that we lowered it by$ 500. So after that you can. calculate the amount of cash
therefore you do $100,000, plus,. minus $20,000 that '
s $80,000. $80,000 plus $4,000.
that'' s $84,000 minus $500. That makes it $83,500. My finishing equilibrium.
for money is $83,500. And then you do the same.
thing for equipment, supplies, accounts.
receivable, accounts payable.Each and every
account that you have, that you have actually made use of.
during that duration. And afterwards what we.
will certainly discuss next is just how to take care of.
those ending equilibriums. What is the next action after you.
compute the ending equilibriums for each and every as well as every account? That will certainly remain in the next video.