Alpha Teach Yourself - Accounting in 24 Hours

HOUR1: THECHART OFACCOUNTS/BALANCESHEETACCOUNTSIn this hour, you learn how to set up the accounts thatwill be used in the Balance Sheet section of the account-ing system to record financial data. Because each accountis established in the Chart of Accounts, you will find anexplanation of its purpose and use in the accounting sys-tem. You will also learn how these accounts are presentedon the Balance Sheet section of the financial statements.HOUR2: PROFIT AND OSSLSTATEMENTACCOUNTSThis hour takes you further into the accounting structureand introduces all the accounts needed to record the day-to-day business activities. These accounts are presentedin the order in which they will appear on the Profit andLoss Statement, and each one is explained as it is estab-lished. At the end of this hour, you will have completeda standard Chart of Accounts.HOUR3: CHART OFACCOUNTSBECOMES THEGENERAL EDGERLIn this hour, you learn how the accounts established inthe two previous hours are transferred into the GeneralLedger, where the information is actually posted. Ac-counting periods and opening entries are presented, as isdetailed information on debits and credits. The lessongoes on to explain how all the accounts in the GeneralLedger offset each other to maintain order and balance.APPENDIXATwenty-Minute Recap

HOUR4: DEPRECIABLEASSETS, PREPAIDEXPENSES AND,OTHERACCOUNTSNow that you have studied the standard accounts needed by most compa-nies, this hour takes you a step further. You learn about the Assets that canbe depreciated, as well as why, how, and when they are written off. You alsolearn about prepaid accounts and their use in certain circumstances. Thehour concludes by providing information on miscellaneous accounts that areused by companies with specific needs.HOUR5: ORGANIZATION ANDPROPERACCOUNTINGPROCEDURESInformation on the operating account or the business checking account ispresented in this hour. Suggestions for banking and keeping the accountupdated are included. This hour also stresses the importance of setting upfiles and keeping the paperwork generated by the business in good order. Itincludes suggestions for types of filing systems, supplies, and ways to keepthe workload under control.HOUR6: DAILYSALESTRANSACTIONSThis is the first hour that deals with daily business transactions; it concen-trates on Income and the Income accounts. This is all the revenue gener-ated by sales or services. Cash sales and Credit Sales are covered, as are theprocedures for establishing customer accounts, collecting sales tax, and post-ing sales or any type of Income to the General Ledger.HOUR7: COST OFSALES ORSERVICESAll the Expenses directly related to sales or services are presented in thishour. You will find information on purchases and instructions for handlinginventory and adjusting it at the end of each month. Vendors and vendoraccounts are also covered, which leads into the information for AccountsPayable and posting all these purchases and other Expenses to the GeneralLedger.288Appendix A

Twenty-Minute Recap289HOUR8: DISCOUNTS, ALLOWANCES AND,OTHERADJUSTMENTSThis hour focuses on the special handling required by discounts, refunds,and other adjustments. It begins with the adjustments that apply to theIncome from sales and services. The hour continues with information onpurchase discounts. The final part of this lesson deals with customer ac-counts that have become uncollectable and must be deleted from theaccounting system. In each part of this hour, samples and instructions areprovided for posting these adjustments to the General Ledger.HOUR9: CASHDISBURSEMENTSSpecific information on writing checks and keeping the checkbook in orderis presented in this hour. The lesson also provides instructions for postingchecks to the various expense accounts in the General Ledger. This hourbuilds on the information in previous hours for Accounts Payable; it givesmore information on how this account is used to make sure that all theExpenses that relate to one particular month are recorded so that they canbe included on the financial statements.HOUR10: THE MPORTANCE OFIWORKPAPERS, RECEIPTS AND,OTHERRECORDSThis hour stresses the need for retaining records in good order. It offers sug-gestions on how this is done and gives information on the length of timethat each type of record needs to be kept. The hour continues with informa-tion on paying bills and reconciling vendor statements and the records thatmust be maintained for these tasks. Finally, this hour introduces and explainsthe reports that must be completed and retained for sales tax reporting.HOUR11: SALARY ANDWAGESHiring employees is a big step for any business, and it requires advance plan-ning and research. This hour provides information that will familiarize youwith the items that should be in place before that first employee is hired.The required government forms are presented and explained. Informationon the different types of wages is also included.

HOUR12: PAYROLLTAXES: EMPLOYEE/EMPLOYERBecoming an employer entails a lot of record keeping for the accounting sys-tem. An introduction and explanation of all the taxes associated with em-ployees is presented in this hour. This includes the employee and employerportions of Social Security and Medicare taxes, as well as the federal andstate withholding taxes and unemployment taxes.HOUR13: POSTINGPAYROLL, COMPUTINGTAXES AND,CONFORMING TO EDERAL ANDFSTATERULES ANDREGULATIONSIn this hour, you learn about the requirements for remitting payroll taxes tothe federal government. A special section shows you how to compute yourtax Liabilities and explains tax accrual accounts. Posting taxes to the Gen-eral Ledger using these accrual accounts is also covered. The hour ends withinformation on deadlines for paying the various types of taxes and the penal-ties for failure to honor the deadlines.HOUR14: PAYROLLTAXREPORTSQuarterly payroll tax reports are introduced and explained in this hour. Thislesson includes detailed instructions for compiling the information neededfor the reports and gives more instructions on how to calculate the taxes onworksheets that can be used to complete the forms. Reports for both the fed-eral government and state taxing entities are presented.HOUR15: CASHRECEIPTS OURNALJThe Cash Receipts Journal is used to record all the revenue that comes intothe business during the month. Examinations of the books for two differentcompanies will help explain the end-of-the-month tasks and proceduresassociated with the cash receipts. In this hour, you learn how the informa-tion in this journal is reviewed and adjusted in the General Ledger. Informa-tion on balancing the customer accounts and sending out statements to thecustomers is also reviewed.290Appendix A

HOUR16: CASHDISBURSEMENTS OURNALJBalancing Accounts Payable, paying taxes, and reconciling vendor statementsand petty cash funds are all explained in this hour. A new account, TemporaryPostings, is also introduced, and its function and purpose are outlined. In addi-tion, this hour includes sample reports and examples of how all of these itemsare processed and posted to the General Ledger.HOUR17: PAYROLL OURNAL ANDJEMPLOYEEEXPENSEACCOUNTSThe end-of-the-month tasks related to payroll and employee ledgers are pre-sented and explained in this hour. Employee expense accounts are introduced,and the procedures for handling the different types of reimbursements andallowances are described in detail. This hour also outlines how all of theseemployee-related items are posted to the General Ledger, along with samplesthat can be studied.HOUR18: RECONCILING THEBANKACCOUNTS ANDGENERALJOURNALENTRIESIn this hour, you learn how to verify the balance in the operating account withthe balance in the General Ledger cash account and the balance on the bankstatement. A sample worksheet shows you how to analyze and compare theinformation in the General Ledger with the bank statement. The lesson con-tinues with instructions on making the various end-of-the-month adjustmentsfor corrections and Expenses such as depreciation.HOUR19: THETRIALBALANCEIn this hour, you will see samples of the Trial Balance, the report that lists allthe accounts in the General Ledger with their year-to-date balances. Thisreport is used to review the account balances before they are transferred to theBalance Sheet and the Profit and Loss Statement. Information is also pre-sented on how the financial statements evolve from the Trial Balance and theGeneral Ledger, as well as how to format this information to the needs of vari-ous types of businesses.Twenty-Minute Recap291

HOUR20: THEMONTHLYBALANCESHEETA monthly Balance Sheet is presented for two different sample companies.The process for producing a manual report is described, and a computerizedreport sample is explained and reviewed. This hour also provides informa-tion on how the Balance Sheet is used by management and other interestedparties.HOUR21: THEMONTHLYPROFIT AND OSSLSTATEMENTUsing the two sample companies, Profit and Loss Statements are presentedand explained. The process for producing this statement manually is alsooutlined. The hour continues with information on how to tailor this reportto the specific needs of various companies.HOUR22: E - -ND OF THE-YEARPAYROLLREPORTS ANDOTHERTAXREPORTSIn this hour, you learn about the end-of-the-year payroll reports that must becompleted and filed. Employee W-2s and 1099s are presented and explained.The hour also describes the process for compiling information needed forcorporate and personal tax returns that comes from the accounting system.HOUR23: CLOSING THEBOOKS AT THEEND OF THEYEARInformation and procedures for closing out the year in the accounting sys-tem is presented in this hour. As the old year ends, the new year begins; thishour gives suggestions that will help you understand it all. It also explainsthe effects that the year-end close has on the accounts in the GeneralLedger.HOUR24: ACCOUNTINGSOFTWAREPROGRAMSIn this final hour, you learn how to apply what you have learned in the pre-ceding hours to a computerized accounting system. Included are suggestionson how to choose a software program and how to enter your accounting datainto the program so that it works well for your business.292Appendix A

APPENDIXBSample FormsBalance Sheet.

294Appendix BIncome Statement.

Sample Forms295Chart of Accounts—manufacturingcompany.continues

Chart of Accounts—manufacturingcompany.296Appendix Bcontinued

Sample Forms297Chart of Accounts—nonprofit organiza-tion.continues

298Appendix BChart of Accounts—nonprofit organiza-tion.continued

Sample Forms299Chart of Accounts—contractor.continues

300Appendix BChart of Accounts—contractor.continuedcontinues

Sample Forms301Chart of Accounts—contractor.continued

302Appendix BGeneral JournalEntry on four-column ledgerpaper.

Sample Forms303AmortizationSchedule on four-column ledgerpaper.

304Appendix BApplication forEmployerIdentificationNumber.

Sample Forms305W-4 form.

306Appendix BW-4 form (page 2).

Sample Forms307W-5 form.

308Appendix BI-9 form.

Sample Forms309Form 4070.

310Appendix BFederal tax with-holding tables.

Sample Forms311Federal tax with-holding tables.

312Appendix BForm 8109-B.

Sample Forms313Form 941Quarterly FederalReport.

314Appendix BForm 940 AnnualFederal Unemploy-ment Report.

Sample Forms315Form A-1 StateQuarterly Report(Arizona).

316Appendix BForm A-1 StateQuarterly Report(Arizona) (page 2).

Sample Forms317State QuarterlyUnemploymentReport (Arizona).

318Appendix BSchedule C—Profitor Loss fromBusiness.

Sample Forms319Schedule C—Profitor Loss fromBusiness (page 2).

320Appendix BSchedule SE—Self-EmploymentTax.

Sample Forms321Schedule SE—Self-EmploymentTax (page 2).

322Appendix BSchedule ES—Estimated TaxWorksheet.

Sample Forms3231099–MISC.

324Appendix B1096 Transmittalfor 1099 Reports.

ACCOUNTINGTERMSaccountA specific place within an accounting system used to record and hold financialdata.Accounts PayableThe account set up to record Expenses that are owed but not yet paidout.Accounts ReceivableThe account set up to record Income on sales or services that willbe collected at a later date.accrual basisRecognizing Income on sales or services that has not yet been collected,and recognizing Expenses that have not yet been paid out. This method puts AccountsPayable and Accounts Receivable into use.amortizationThe process by which the value of intangible business Assets is reducedand written off the books.AssetSomething of value that is owned by a business.Balance SheetThe financial report that presents the year-to-date values of Assets,Liabilities, and Equity.bottom lineThe net profit or loss.capitalCash or something of value that is invested in an enterprise.cash basisThe method of accounting that recognizes only the revenue that has actuallybeen received and the Expenses that have actually been paid out.Cash Disbursements JournalThe place in an accounting system where outgoing pay-ments are recorded.APPENDIXCAccounting Terms, Resources, and Further Reading

326Appendix CCash Receipts JournalThe place in an accounting system where incoming revenue isrecorded.Chart of AccountsThe listing of accounts established to record financial data.creditAn offset to a debit.debitAn offset to a credit.depreciationThe reduction in value of an asset.entryThe method by which financial information is recorded.EquityThe value that is retained.financial statementsReports that present the financial condition of a business.General Journal EntryAn adjustment made to accounts in the General Ledger.General LedgerThe place in an accounting system that holds all the accounts and theentries that have been posted to them.Gross ProfitThe amount of Income remaining after direct costs have been deductedfrom the revenue generated by sales or services.Income StatementAnother term for the Profit and Loss Statement.LiabilitiesDebts or Expenses.net lossThe amount that exceeds the Income from sales or services after costs andExpenses have been deducted.net profitThe amount of Income remaining after direct costs and Expenses have beendeducted from the revenue generated by sales or services.Profit and Loss StatementThe report that presents the Income and Expenses of a busi-ness enterprise.retained earningsThe amount of profit or loss that is carried over from month to monthand year to year.Trial BalanceA report that lists all the accounts in the General Ledger, with their year-to-date balances.

Accounting Terms, Resources, and Further Reading327RESOURCESYour state’s Society of Certified Public Accountants can recommend professional accoun-tants to handle more complex accounting duties and tax issues.The Internal Revenue Service offers a number of tax assistance and information programsfor individuals and small businesses. You can access the IRS’s Internet Web site 24 hours a day, 7 days a week, at www.irs.gov todownload forms, instructions, and publications; see answers to frequently asked tax ques-tions, and figure your withholding allowances by using the site’s W-4 calculator.IRS forms and publications can also be obtained by calling 1-800-829-3676. You can listento prerecorded messages on tax topics by calling 1-800-829-4477.Contact your state for state tax information, forms, and publications. Many states haveWeb sites that provide these services as well.FURTHERREADINGThe following books will provide more information on the topics that you studied in this text:Aslett, Don. The Office Clutter Cure: How to Get Out from Under It All. USA:Marsh Creek Press, April, 1995.Hemphill, Barbara. Taming the Paper Tiger at Work.USA: Kiplinger Books,October, 1998. Horngren, Charles T. Cost Accounting: A Managerial Emphasis.USA: PrenticeHall, July, 1999.Horngren, Charles T. et al. Introduction to Management Accounting.USA: PrenticeHall, August, 1998.Tracey, John A. How to Read a Financial Report.USA: John Wiley & Sons,February, 1999. Viale, J. David. Basics of Inventory Management: From Warehouse to DistributionCenter.USA: Crisp Publications, January, 1997.



HOUR11.b2.a3.b4.b5.d6.a7.b8.b9.b10.aAPPENDIXDAnswers to “Hour’s Up!” QuizzesHOUR21.b2.c3.d4.a5.b6.a7.a8.c9.a10.aHOUR31.a2.a3.a4.b5.b6.a7.b8.c9.a10.cHOUR41.a2.a3.b4.d5.a6.a7.b8.b9.c10.bHOUR51.a2.d3.b4.b5.a6.c7.b8.a9.a10.bHOUR61.a2.a3.b4.b5.a6.c7.a8.b9.a10.a

330Appendix DHOUR81.b2.a3.b4.c5.a6.b7.b8.a9.c10.bHOUR91.b2.a3.c4.a5.b6.a7.a8.b9.a10.cHOUR71.a2.b3.a4.a5.a6.b7.b8.b9.b10.bHOUR101.b2.a3.b4.c5.a6.a7.a8.d9.b10.bHOUR121.c2.a3.b4.b5.a6.b7.a8.c9.c10.bHOUR111.a2.b3.a4.b5.c6.b7.b8.a9.b10.a

Answers to “Hour’s Up!” Quizzes331HOUR131.a2.b3.a4.b5.b6.c7.a8.b9.b10.bHOUR141.c2.b3.b4.d5.a6.b7.b8.a9.b10.aHOUR151.a2.a3.c4.a5.a6.b7.d8.a9.b10.cHOUR161.c2.b3.a4.b5.c6.b7.b8.b9.b10.aHOUR171.a2.b3.a4.b5.b6.c7.a8.b9.a10.bHOUR181.b2.a3.c4.c5.b6.b7.a8.b9.b10.c

332Appendix DHOUR191.c2.a3.b4.a5.a6.b7.a8.a9.a10.dHOUR201.b2.a3.c4.b5.d6.a7.a8.a9.a10.aHOUR211.b2.a3.c4.a5.b6.a7.a8.b9.a10.cHOUR221.a2.a3.b4.a5.c6.b7.a8.a9.c10.bHOUR231.a2.a3.c4.b5.b6.b7.b8.a9.a10.bHOUR241.a2.a3.c4.b5.d6.a7.a8.b9.a10.c

Symbols1099 reports, 267-268941 Forms, 168-170Aaccounting periods, 26-27accountsaccrual, 199-200bank, 221-225checking, 107-110cost of sales, 17-18Freight Charges,18Other Costs, 18PurchaseDiscounts, 18Purchase Returnsand Allowances,18Purchases, 17customerend-of-yearprocess, 273-275expense, 18, 21-23Advertising, 19AmortizationExpenses, 20Auto Expenses, 19Bank ServiceCharges, 20DepreciationExpenses, 20Dues andSubscriptions, 20Employee ExpenseAccounts,211-214Equipment Rental,20General Expenses,19Income Taxes, 21Insurance, 20Index

Interest Expenses,20Legal andAccounting, 20Meals, 21MiscellaneousExpenses, 20Office Expenses,20Other Taxes, 21Payroll Taxes, 21Penalties, 21Postage, 20Rent Expenses, 21Repairs andMaintenance, 21Salaries andWages, 19Supplies, 21Telephone, 21Travel, 21Utilities, 20General Ledger, 233-238income, 16Interest Income,16Other Income, 16Sale of FixedAssets, 17Sale of Goods orServices, 16Sales Discounts,16Sales Returns andAllowances, 16operatingestablishing andmanaging, 51-54TemporaryDistribution, 207vendorend-of-yearprocess, 275reconciling andpaying, 124-126Accounts Payable, 9,86-90, 110-113Accounts Receivable, 6balancing, 192, 195combining cash andcredit sales, 74-76accrual accounts, 199-200accrual basis accountingsystems, 4Accrued Expensesaccounts, 10Accrued Payroll Taxesaccounts, 10AccumulatedAmortization, 28-30,36AccumulatedDepreciation, 20Building accounts, 7Equipment accounts,8Furniture andFixtures accounts, 8LeaseholdImprovementsaccounts, 8Vehicles accounts, 8adding inventory, 80-86adjustments, 99-104Advertising accounts,19allowancespurchases, 99sales, 95-97amortization, 8-9Amortization Expenseaccounts, 20assets, 9, 39-45Assets accounts, 6Accounts Receivable,6AccumulatedDepreciationBuilding, 7Equipment, 8Furniture andFixtures, 8LeaseholdImprovements, 8Vehicles, 8Amortization(OrganizationCosts), 9Building, 7Cash in Checking, 6Cash in Savings, 6Cash on Hand, 6current versus long-term assets, 6334accounts

depreciable assets, 7-9Equipment, 8Furniture andFixtures, 8Inventory, 6-7Land, 7LeaseholdImprovements, 8Organization Costs, 8Other Assets, 9Vehicles, 8Auto Expensesaccounts, 19BBalance Sheets, 5-6,245-247Assets accounts, 6-9AccountsReceivable, 6AccumulatedDepreciation, 7-8Amortization(OrganizationCosts), 9Building, 7Cash in Checking,6Cash in Savings, 6Cash on Hand, 6current versuslong-term assets,6depreciable assets,7-9Equipment, 8Furniture andFixtures, 8Inventory, 6-7Land, 7LeaseholdImprovements, 8OrganizationCosts, 8Other Assets, 9Vehicles, 8Equity accounts, 11-13Capital, 11Common Stock,11Drawing, 11Retained Earnings,11Liabilities accounts, 9Accounts Payable,9Accrued Expenses,10Accrued PayrollTaxes, 10Credit CardsPayable, 10Loans Payable, 10long-term versusshort-term liabili-ties, 9-10Sales TaxCollected, 10utilizing as a manag-ing tool, 249balancingAccounts Receivable,192-195accrual accounts,199-200bank accounts, 221-225bank accounts, 221-225Bank Service Chargesaccounts, 20Basics of InventoryManagement: FromWarehouse toDistribution(Viale), 86bottom line, 253Building accounts, 7businesseschecking accounts,107-110taxes, 176-177, 268-269Ccalculations, interest,99-102Capital accounts, 11cash basis accountingsystems, 4Cash DisbursementsJournals, 199balancing accrualaccounts, 199-200Cash Disbursements Journals335