Accounting Workbook For Dummies book cover

Accounting Workbook For Dummies

Published: September 7, 2022

Overview

Number nightmares in accounting? No more!

The numbers are clear: the need for accountants is not only strong, but on the rise. With job growth projected to increase by 7% over the next 10 years, there’s no time like the present to join this growing—and profitable—profession. Accounting Workbook For Dummies, 2nd Edition gives you the hands-on instruction you need to understand complicated concepts through demonstration problems, practice worksheets. and spreadsheets.

  • Understand the role of accountants versus bookkeepers
  • Develop knowledge to establish and maintain high quality accounting systems
  • Dip your toes into accounting in the digital age
  • Learn to properly interpret financial statements and reports
  • Generate income statements, balance sheets, and cash flow statements
  • Expand your knowledge on sources of business capital
  • Learn how to improve profits and manage costs

Understanding the intricacies of accounting has never been easier as in today’s rapid-fire global economy, accountants have never been more important—it’s all in your hands with this plain-English workbook!

Number nightmares in accounting? No more!

The numbers are clear: the need for accountants is not only strong, but on the rise. With job growth projected to increase by 7% over the next 10 years, there’s no time like the present to join this growing—and profitable—profession. Accounting Workbook For Dummies, 2nd Edition gives you the hands-on instruction you need to understand complicated concepts through demonstration problems, practice worksheets. and spreadsheets.

  • Understand the role of accountants versus bookkeepers
  • Develop knowledge to establish
and maintain high quality accounting systems
  • Dip your toes into accounting in the digital age
  • Learn to properly interpret financial statements and reports
  • Generate income statements, balance sheets, and cash flow statements
  • Expand your knowledge on sources of business capital
  • Learn how to improve profits and manage costs
  • Understanding the intricacies of accounting has never been easier as in today’s rapid-fire global economy, accountants have never been more important—it’s all in your hands with this plain-English workbook!

    Accounting Workbook For Dummies Cheat Sheet

    As a business manager or owner, taking care of your company’s accounting needs is a top priority. Correctly preparing financial statements, financial analyses, and accounting reports involves knowing all the financial data and information that needs to appear in these items. Making a profit helps keep you in business, while maintaining a strong balance sheet ensures you can stay in business. So, make sure you understand the financial statements, record adjustments if needed, and follow some basic rules for presenting accounting information to your business’s managers, owners, investors, and creditors.

    Articles From The Book

    25 results

    General Accounting Articles

    Knowing Your Debits from Your Credits

    Accountants and bookkeepers record transactions as debits and credits while keeping the accounting equation constantly in balance. This process is called double-entry bookkeeping. Double-entry bookkeeping records both sides of a transaction — debits and credits — and the accounting equation remains in balance as transactions are recorded.

    For example, if a transaction decreases cash $25,000, then the other side of the transaction is a $25,000 increase in some other asset, or a $25,000 decrease in a liability, or a $25,000 increase in an expense (to cite three possibilities). This illustration summarizes the basic rules for debits and credits. By long-standing convention, debits are shown on the left and credits on the right. An increase in a liability, owners’ equity, revenue, and income account is recorded as a credit, so the increase side is on the right. The recording of all transactions follows these rules for debits and credits.
    Rules for debits and credits.
    Practically everyone has trouble with the rules of debits and credits. The rules aren’t very intuitive. Learning the rules for debits and credits is a rite of passage for bookkeepers and accountants. The only way to really understand the rules is to make accounting entries — over and over again. After a while, using the rules becomes like tying your shoes — you do it without even thinking about it.

    Notice the horizontal and vertical lines under the accounts in the illustration above. These lines form the letter “T.” Although the actual accounts maintained by a business don’t necessarily look like T accounts, accounts usually have one column for increases and another column for decreases. In other words, an account has a debit column and a credit column. Also an account may have a running balance column to continuously keep track of the account’s balance.

    General Accounting Articles

    Making Accounting Adjustments to Reach Profit Potential

    Having your business reach a profit is important; if it doesn’t, sooner or later the business will fail. As a business manager, you want to keep a close eye on the financial statements and make the necessary (and legal) accounting adjustments to your financial records as needed. These helpful tips can help you make the necessary adjustments to your business’s net income, eye two different profit analysis models, and communicate the reports to your managers.

    Adjustments to net income for determining sash flow from operating activities

    Accounts receivable, inventory, and prepaid expenses are operating assets used in the profit-making process.

    Accounts payable and accrued expenses payable are operating liabilities used in the profit-making process.

    • Operating asset increases and operating liability decreases are negative adjustments (decrease cash flow from operating activities)

    • Operating asset decreases and operating liability increases are positive adjustments (increase cash flow from operating activities)

    • Depreciation and amortization expenses are positive adjustments (increase cash flow from operating activities)

    Cardinal Rule: Make all cash flow adjustments to net income; do not simply add back depreciation and amortization, which could be seriously misleading.

    Two profit analysis models for management decision making

    Contribution margin minus fixed expenses model:

    Excess of sales over breakeven model:

    $3,000,000 annual fixed operating expenses ÷ $40 contribution margin per unit = 75,000 units breakeven point (volume)

    Guidelines for internal accounting reports to managers

    When you’re preparing financial information for your business’s managers, follow these tips:

    • Follow the organizational structure (responsibility accounting)

    • Orient your report based on whether organization unit is a profit center or a cost center

    • Know the mind of the manager

    • Highlight significant factors and deemphasize non-significant factors

    General Accounting Articles

    Formulas and Functions for Financial Statements

    As the business manager, you’re in control of your business’s accounting needs, so you need a strong understanding of the ins and outs of financial statements, including what goes on them and in what order. If you don’t prepare them correctly, they won’t reflect a true picture of your business’s financial status. Keep the following important rules and points in mind as you prepare and use your business’s financial statements.

    Accounting equation

    Assets = Liabilities + Owners’ Equity

    Liabilities and owners’ equity are the two basic types of claims on the assets of an entity. The two-sided nature of the accounting equation is the basis for double entry accounting that records both sides of the entity’s transactions — what is received and what is given in the economic exchange.

    Rules for debits and credits

    Use the following figure for credit and debit basics:

    Financial effects of revenues and expenses

    Revenue = Asset increase (debit) or Liability decrease (debit)
    Expense = Asset decrease (credit) or Liability increase (credit)

    Connections between income statement and balance sheet accounts

    Sales revenue → Cash and Accounts receivable

    Cost of goods sold expense ← Inventory

    Operating expenses → Cash

    Operating expenses ← Prepaid expenses

    Operating expenses → Accounts payable

    Operating expenses → Accrued expenses payable

    Depreciation expense ← Fixed assets

    Interest expense → Accrued expenses payable

    Income tax expense → Accrued expenses payable

    Bookkeeping cycle

    Transactions (and certain other events) → Original Entries in Journals → Postings in General Ledger Chart of Accounts → End-of-Period Adjusting Entries → Preparation of Financial Statements, Tax Returns, and Internal Accounting Reports → Closing Entries at End of Year