Alpha Teach Yourself Accounting in 24 Hours

358 Pages·2001·3.66 MB·English

by  Carol Costa

Carol Costa and C. Wesley Addison, CPA
Alpha
Teach Yourself
Accounting
24
in
hours
A Pearson Education Company
Alpha Teach Yourself Accounting in ACQUISITIONSEDITOR
Mike Sanders
24 Hours
DEVELOPMENTEDITOR
Copyright2001 by Carol Costa and C. Wesley Addison, CPA Nancy D. Warner
All rights reserved. No part of this book shall be reproduced,
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tronic, mechanical, photocopying, recording, or otherwise, with- Billy Fields
out written permission from the publisher. No patent liability is
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assumed with respect to the use of the information contained
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herein. Although every precaution has been taken in the prepara-
tion of this book, the publisher and authors assume no responsibil-
INDEXER
ity for errors or omissions. Neither is any liability assumed for
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damages resulting from the use of information contained herein.
For information, address Pearson Education, Inc., 201 West 103rd PRODUCTION
Street, Indianapolis, IN 46290.
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International Standard Book Number: 0-02-864158-2 John Etchison
Library of Congress Catalog Card Number: 2001088753 Mary Hunt
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Printed in the United States of America
First printing: 2001 COVERDESIGNER
Alan Clements
03 02 01 00 4 3 2 1
BOOKDESIGNER
Note:This publication contains the opinions and ideas of its
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authors. It is intended to provide helpful and informative material
on the subject matter covered. It is sold with the understanding PUBLISHER
that the authors and publisher are not engaged in rendering pro-
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fessional services in the book. If the reader requires personal assis-
tance or advice, a competent professional should be consulted. PRODUCTMANAGER
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incurred as a consequence, directly or indirectly, of the use and
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Overview
Introduction xiii
PART I The Chart of Accounts, How it Relates to the
General Ledger and the Financial Statements 1
HOUR 1 The Chart of Accounts/Balance Sheet Accounts 3
HOUR 2 Profit and Loss Statement Accounts 15
HOUR 3 Chart of Accounts Becomes the General Ledger 25
HOUR 4 Depreciable Assets, Prepaid Expenses, and Other
Accounts 39
HOUR 5 Organization and Proper Accounting Procedures 51
PART II Daily Business Transactions 63
HOUR 6 Daily Sales Transactions 65
HOUR 7 Cost of Sales or Services 79
HOUR 8 Discounts, Allowances, and Other Adjustments 93
HOUR 9 Cash Disbursements 107
HOUR 10 The Importance of Work Papers, Receipts,
and Other Records 121
PART III Employees and Payroll 133
HOUR 11 Salary and Wages 135
HOUR 12 Payroll Taxes: Employee/Employer 145
HOUR 13 Posting Payroll, Computing Taxes, and Conforming
to Federal and State Rules and Regulations 157
HOUR 14 Payroll Tax Reports 167
PART IV End-of-the-Month Accounting Tasks
and Procedures 179
HOUR 15 Cash Receipts Journal 181
HOUR 16 Cash Disbursements Journal 199
HOUR 17 Payroll Journal and Employee Expense Accounts 211
HOUR 18 Reconciling the Bank Accounts and General
Journal Entries 221
HOUR 19 The Trial Balance 233
PART V Financial Statements 243
HOUR 20 The Monthly Balance Sheet 245
HOUR 21 The Monthly Profit and Loss Statement 253
HOUR 22 End-of-the-Year Payroll Reports and Other Tax Reports 261
HOUR 23 Closing the Books at the End of the Year 271
HOUR 24 Accounting Software Programs 279
Appendixes
APPENDIX A TWENTY-MINUTE RECAP 287
APPENDIX B SAMPLE FORMS 293
APPENDIX C ACCOUNTING TERMS, RESOURCES; AND FURTHER READING 325
APPENDIX D ANSWERS TO “HOURS UP QUIZZES” 329
Index 333
Contents
Introduction ix
Part I The Chart of Accounts, How it Relates to the
General Ledger and the Financial Statements 1
HOUR 1 The Chart of Accounts/Balance Sheet Accounts 3
Introduction to the General Ledger ..................................................4
The Balance Sheet Accounts..............................................................5
Assets ..................................................................................................6
Liabilities..............................................................................................9
Equity Accounts................................................................................11
Hour’s Up!..........................................................................................13
HOUR 2 Profit and Loss Statement Accounts 15
Income Accounts..............................................................................16
Cost of Sales Accounts......................................................................17
Expense Accounts..............................................................................18
Hour’s Up!..........................................................................................23
HOUR 3 Chart of Accounts Becomes the General Ledger 25
Accounting Periods ..........................................................................26
Opening Entries ................................................................................27
Debit and Credit Accounts ..............................................................28
Posting to the General Ledger..........................................................30
Hour’s Up!..........................................................................................36
HOUR 4 Depreciable Assets, Prepaid Expenses, and Other Accounts 39
Depreciating Assets ..........................................................................39
Prepaid Expenses................................................................................43
Adding Other Accounts to the General Ledger..............................45
Eliminating Accounts from the General Ledger..............................47
Hour’s Up!..........................................................................................48
HOUR 5 Organization and Proper Accounting Procedures 51
Establishing and Managing an Operating Account..........................51
Supplies..............................................................................................54
vi Alpha Teach Yourself Accounting in 24 Hours
Organizing Accounting Files ............................................................56
Managing Files and Documents........................................................58
Hour’s Up!..........................................................................................60
PART II Daily Business Transactions 63
HOUR 6 Daily Sales Transactions 65
Cash Sales..........................................................................................65
Credit Sales........................................................................................70
Combining Cash and Credit Sales....................................................72
Combining Cash and Credit Sales in Accounts Receivable............74
Hour’s Up!..........................................................................................76
HOUR 7 Cost of Sales or Services 79
Purchases............................................................................................79
Inventory Additions/Subtractions....................................................80
Accounts Payable..............................................................................86
Hour’s Up!..........................................................................................90
HOUR 8 Discounts, Allowances, and Other Adjustments 93
Sales Discounts..................................................................................93
Sales Returns and Allowances..........................................................95
Purchase Discounts ..........................................................................98
Purchase Refunds and Allowances....................................................99
Interest Calculations and Adjustments............................................99
Other Miscellaneous Adjustments..................................................102
Hour’s Up!........................................................................................104
HOUR 9 Cash Disbursements 107
Business Checking Account............................................................107
Accounts Payable............................................................................110
General Expenses............................................................................113
Posting Disbursements to the General Ledger................................115
Hour’s Up!........................................................................................118
HOUR 10 The Importance of Work Papers, Receipts, and Other Records 121
The Records to Keep ......................................................................121
Storing Records..........................................................................123
How Long Should Records Be Retained?..................................123
Reconciling and Paying Vendor Accounts ....................................124
Completing Sales Tax Reports and Paying the Taxes....................126
Hour’s Up!........................................................................................131
Contents vii
PART III Employees and Payroll 133
HOUR 11 Salary and Wages 135
Hiring Employees............................................................................136
Required Government Forms..........................................................137
Form W-4....................................................................................137
Form I-9......................................................................................138
Form W-5....................................................................................138
Various Types of Wages and Pay Periods........................................138
Hour’s Up!........................................................................................143
HOUR 12 Payroll Taxes: Employee/Employer 145
Social Security Tax..........................................................................145
Medicare Tax ..................................................................................146
Federal Withholding Tax................................................................147
State Withholding Tax....................................................................149
Calculating Payroll Checks ............................................................150
Unemployment Taxes......................................................................152
Hour’s Up!........................................................................................154
HOUR 13 Posting Payroll, Computing Taxes, and Conforming to
Federal and State Rules and Regulations 157
Payroll Tax Deposits........................................................................161
Avoiding Tax Penalties....................................................................164
Conforming to Federal and State Regulations................................165
Hour’s Up!........................................................................................165
HOUR 14 Payroll Tax Reports 167
Employee Ledgers ..........................................................................167
Federal Tax Reports ........................................................................168
State Tax Reports............................................................................170
Unemployment Reports..................................................................173
How the Owner Pays Taxes............................................................176
Hour’s Up!........................................................................................177
PART IV End-of-the-Month Accounting Tasks and Procedures 179
HOUR 15 Cash Receipts Journal 181
Current Month and Year-to-Date Financial Data..........................181
Cash/Credit Transactions................................................................188
Posting Cash Receipts and Sales to the General Ledger................190
Balancing Accounts Receivable......................................................192
viii Alpha Teach Yourself Accounting in 24 Hours
Statements to Customers................................................................195
Hour’s Up!........................................................................................196
HOUR 16 Cash Disbursements Journal 199
Balancing Accrual Accounts..........................................................199
Paying Taxes....................................................................................200
Petty Cash Funds ............................................................................202
Temporary Posting Distributions ....................................................207
Hour’s Up!........................................................................................208
HOUR 17 Payroll Journal and Employee Expense Accounts 211
Employee Expense Accounts..........................................................211
Using a Payroll Service....................................................................214
Posting to the General Ledger........................................................217
Hour’s Up!........................................................................................219
HOUR 18 Reconciling the Bank Accounts and General Journal Entries 221
Balancing the Bank Accounts........................................................221
General Journal Entries ..................................................................225
Posting to the General Ledger........................................................226
Hour’s Up!........................................................................................230
HOUR 19 The Trial Balance 233
Reviewing the General Ledger Accounts ......................................233
How the Financial Statements Evolve............................................238
Formatting the Profit and Loss Statement......................................239
Hour’s Up!........................................................................................240
PART V Financial Statements 243
HOUR 20 The Monthly Balance Sheet 245
Producing the Balance Sheet..........................................................245
The Balance Sheet as a Management Tool....................................249
Hour’s Up!........................................................................................250
HOUR 21 The Monthly Profit and Loss Statement 253
Issuing the Profit and Loss Statement............................................253
Using the Profit and Loss Statement..............................................256
Tailoring the Income Statement to Specific Needs........................257
Hour’s Up! ......................................................................................259
Contents ix
HOUR 22 End-of-the-Year Payroll Reports and Other Tax Reports 261
W-2s for Employees ........................................................................262
1099s for Vendors............................................................................267
Completing the Federal Unemployment Tax Report ....................268
Personal and Business Tax Returns ................................................268
Hour’s Up!........................................................................................269
HOUR 23 Closing the Books at the End of the Year 271
What Happens to the General Ledger............................................271
Customer Accounts ........................................................................273
Vendor Accounts ............................................................................275
Moving from One Year to the Next................................................275
Hour’s Up!........................................................................................276
HOUR 24 Accounting Software Programs 279
Setting Up a Computer Program....................................................281
Modifying Programs to Specific Needs ..........................................282
Converting a Manual System to a Computerized System..............283
Hour’s Up!........................................................................................284
Appendixes
APPENDIX A Twenty-Minute Recap 287
APPENDIX B Sample Forms 293
APPENDIX C Accounting Terms, Resources, and Further Reading 325
APPENDIX D Answers to “Hour’s Up!” Quizzes 329
Index 333