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Accounts

Accounts. Chapter 2. Accounts. Records of the activities involving all financial statement items. Accounts. Account Balance: beginning balance plus net increases and decreases during a period . Accounts.

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Accounts

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  1. Accounts

    Chapter 2
  2. Accounts Records of the activities involving all financial statement items
  3. Accounts Account Balance: beginning balance plus net increases and decreases during a period
  4. Accounts Chart of Accounts: systematic listing of all financial statement items (pp. 13-15 packet) Assets Liabilities Equity (capital) Revenues Expenses Gains/losses
  5. Accounts A typical farmer does not maintain a formal chart of accounts If the farmer maintains one or more financial statements, the accounts are embedded in the statements
  6. Accounts Ledger: collection of all accounts with transactions, and possibly balances, for each A typical farmer does not maintain a ledger unless it is provided by an accounting software package
  7. Accounts Note: a chart of accounts and a ledger are not required to complete financial statements as described in the Guidelines for Agricultural Producers
  8. Accounts Assets: items purchased by the farm business that are expected to earn money for the farm Things that are resources owned by a company and which have future economic value that can be measured and can be expressed in dollars. Examples include cash, investments, accounts receivable, inventory, supplies, land, buildings, equipment, and vehicles (Accounting Coach)
  9. Accounts Liabilities: amounts of money owed to outside parties Obligations of a company or organization, including amounts owed to lenders and suppliers; liabilities also include amounts received in advance for a future sale or for a future service to be performed (unearned revenue) (Accounting Coach)
  10. Accounts Equity: the value of the farm operation to the owners An ownership interest in a business; sometimes used to indicate an owner’s interest in a personal asset (Accounting Coach)
  11. Accounts Farm Financial Standards Council Net worth vs. Owner equity
  12. Accounts Net worth: same as equity. The term is generally used only when presenting a statement of financial position (or balance sheet) for an individual person or a statement of financial position for a business enterprise which also includes information for an individual person.
  13. Accounts Owner equity: Same as equity. The term is generally used when presenting a statement of financial position for only a business enterprise and which statement does not include information for an individual person.
  14. Accounts Market value balance sheet (fixed or long-lived assets are represented by their market values as of the date of the statement) Costs basis owner equity = Initial investment plus capital contributions plus retained earnings (referred to as owner capital in text) Valuation equity
  15. Accounts Cost-basis balance sheet (fixed or long-lived assets are represented by their book values as of the date of the statement) Costs basis owner equity = Initial investment plus capital contributions plus retained earnings (referred to as owner capitalin text)
  16. Accounts Revenue: amount of money earned by the farm operation from the production or sale of farm products Fees earned from providing services and the amounts of merchandise sold. Under the accrual basis of accounting, revenues are recorded at the time of delivering the service or the merchandise, even if cash is not received at the time of delivery. Often the term income is used instead of revenues. (Accounting Coach)
  17. Accounts Expenses: records of the costs incurred by the farm for the year Costs that are matched with revenues on the income statement; under the accrual basis of accounting, the matching is NOT based on the date that the expenses are paid (Accounting Coach)
  18. Accounts Expenses The FFSC guidelines do notrequire that expenses be matched with revenue The guidelines do recommend the use ofaccrual accounting
  19. Recording Transactions Source document: written or electronic record that accompanies an accounting transaction (see list in Table 2-5 on page 33 in text) The original record containing the details to substantiate a transaction entered in an accounting system (Accounting Coach)
  20. Recording Transactions Single-entry accounting Each entry represents a single account, typically the cash balance Source of information for determining income tax payable when cash-basis reporting is utilized on Schedule F
  21. Recording Transactions Double-entry accounting Each entry represents at leasttwo accounts Debit = left Credit = right
  22. Recording Transactions Double-entry accounting Whether an entry for a given account is a debit (left side) entry or a credit (right side) entry depends upon: 1) the type of account, and 2) if the account item increased or decreased
  23. Recording Transactions Balance sheet equation A = L + OE Left side vs. right side of equation
  24. Recording Transactions Debit (entry on left hand side) E A D Credit (entry on right hand side) u R L S
  25. Recording Transactions Each type of account has a normal balance side that is associated with its increase side
  26. Recording Transactions Journal entries Chronological For each entry, total debits must equal total credits
  27. Recording Transactions Posting Information from each journal entry is posted (copied) to the ledger Recording an entry in an account in the general ledger or in a subsidiary ledger (Accounting Coach)
  28. Recording Transactions Posting Information in the ledger is grouped by account, and the accounts appear in the order in which they are presented in the chart of accounts The ledger has columns for debits and credits, and typically, running account balances
  29. Recording Transactions Trial balance A listing of the accounts with their respective debit or credit balances A listing of the accounts in the general ledger along with each account's balance in the appropriate debit or credit column. The total of the amounts in the debit column should equal the total of the amounts in the credit column (Accounting Coach)
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