Читать книгу QuickBooks 2022 All-in-One For Dummies - Nelson Stephen L., Stephen L. Nelson - Страница 39

Here’s the first thing to understand and internalize to use double-entry bookkeeping: Modern accounting uses an accounting model that says assets equal liabilities plus owner’s equity. The following formula expresses this in a more conventional, algebraic form:

assets = liabilities + owner's equity

If you think about this for a moment and flip back to Table 2-2, you see that this formula summarizes the organization of a business’s balance sheet. Conceptually, the formula says that a business owns stuff and that the money or the funds for that stuff comes either from creditors (such as the bank or some vendor) or the owners (either in the form of original contributed capital or perhaps in reinvested profits). If you understand the balance sheet shown in Table 2-2 and discussed here, you understand the first core principle of double-entry bookkeeping. This isn’t that tough so far, is it?

Here’s the second thing to understand about the basic accounting model: Revenue increases owner’s equity, and expenses decrease owner’s equity. Think about that for a minute. That makes intuitive sense. If you receive $1,000 in cash from a customer, you have $1,000 more in the business. If you write a $1,000 check to pay a bill, you have $1,000 less in the business.

Another way to say the same thing is that profits clearly add to owner’s equity. Profits get reinvested in the business and boost owner’s equity. Profits are calculated as the difference between revenue and expenses. If revenue exceeds expenses, profits exist.

Let me review where I am so far in this discussion about the basic accounting model. The basic model says that assets equal liabilities plus owner’s equity. In other words, the total assets of a firm equal the total of its liabilities and owner’s equity. Furthermore, revenue increases owner’s equity, and expenses decrease owner’s equity.

At this point, you don’t have to intuitively understand the logic of the accounting model and the way that revenue and expenses plug into the owner’s equity of the model. If you do get it, that’s great but not necessary. But you do need to memorize or remember (for at least the next few paragraphs) the manner in which the basic model works.

This point may seem to be redundant, but note that a balance sheet is constructed by using information about a firm’s assets, liabilities, and owner’s equity. Similarly, note that a firm’s income statement is constructed by using information about its revenue and its expenses. All this discussion — all this tediousness — is really about how you collect the information necessary to produce an income statement and a balance sheet.

Now I come to perhaps the most important point to understand to get double-entry bookkeeping. Every transaction and every economic event that occurs in the life of a firm produces two effects: an increase in some account shown in the balance sheet or income statement and a decrease in some account shown in the balance sheet or income statement. When something happens, economically speaking, that something affects at least two types of information shown in the financial statement. In the next few paragraphs, I give you some examples so that you can really understand this concept.

Suppose that in your business, you sell $1,000 worth of an item for $1,000 in cash. In the case of this transaction or economic event, two things occur from the perspective of your financial statements:

 Your cash increases by $1,000.

 Your sales revenue increases by $1,000.

Another way to say this same thing is that your $1,000 cash sale affects both your balance sheet (because cash increases) and your income statement (because sales revenue is earned).

See the duality? And just a paragraph ago, you were thinking that this topic might be too complicated for you, weren’t you?

Here’s another common example. Suppose that you buy $1,000 worth of inventory for cash. In this case, you decrease your cash balance by $1,000, but you increase your inventory balance by $1,000. Note that in this case, both effects of the transaction appear in sort of the same area of your financial statement: the list of assets. Nevertheless, this transaction also affects two accounts.

When I use the word account, I simply mean some value that appears in your income statement or on your balance sheet. If you look at Tables 2-1 and 2-2, for example, any value that appears in those financial statements that isn’t simply a calculation represents an account. In essence, an account tracks some group of assets, liabilities, owner’s equity, contributions, revenue, or expenses. I talk more about accounts in the next section, where I get to the actual mechanics of double-entry bookkeeping.

Here’s another example that shows this duality of effects in an economic event. Suppose that you spend $1,000 in cash on advertising. In this case, this economic event reduces cash by $1,000 and increases the advertising expense amount by $1,000. This economic event affects both the assets portion of the balance sheet and the operating expenses portion of the income statement.

And now — believe it or not — you’re ready to see how the mechanics of double-entry bookkeeping work.