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{{accounting}}


The principles of '''accountancy''' are applied to business entities in three divisions of practical art, named 
# '''accounting''' ( [[w:fi:laskentatoimi]] ) which is classically split to ( [[w:Financial accountancy|financial]] and [[w:Managerial accounting|managerial]] accounting )
#'''[[w:bookkeeping|bookkeeping]]''' ( [[w:fi:kirjanpito]] ) and 
#'''[[w:auditing|auditing]]''' ( [[w:fi:auditointi]], mahd. [[w:fi:tilintarkastus]] ). ( Wikipedia )

'''[[w:Accounting|Accounting]]''' ( verb ) or '''accountancy''' ( noun ) is the process of communicating [[w:financial information|financial information]] about a [[w:business entity]] to users such as [[w:shareholders|shareholders]] and [[w:manager|manager]]s. The communication is generally in the form of financial statements that show in money terms the economic resources under the control of [[w:management|management]]; the art lies in selecting the information that is relevant to the user and is reliable. ( Wikipedia )
:::'''[[w:fi:Laskentatoimi]]''' on toimintaa, jonka tehtävänä on kuvata [[w:fi:rahaprosessi|rahaprosessi]]a, kerätä, rekisteröidä ja analysoida yrityksen tai muun organisaation toimintaa kuvaavia taloudellisia laskelmia. ( Finnish Wikipedia )

'''[[w:Bookkeeping|Bookkeeping]]''', in [[w:business|business]], is the recording of financial transactions, and is part of the process of accounting. 
::: Transactions include purchases, sales, receipts and payments by an individual or organization.  ( Wikipedia )

An '''[[w:Audit|Audit]]''' is a planned and documented activity performed by qualified personnel to determine by investigation, examination, or evaluation of objective evidence, the adequacy and compliance with established procedures, or applicable documents, and the effectiveness of implementation. ( Wikipedia )

{{bookkeeping}}

== Accounting for a New Business 1 ==

=== Accounting classes ===

=== Accounting lesson 1 Double-entry bookkeeping, credit and debit ===

:* '''[[w:Double-entry accounting]]''' ( or '''double-entry [[w:bookkeeping]] system''' ) is a set of rules for recording financial information in a [[w:financial accounting]] system in which <u>'''''every transaction'''''</u> or event <u>'''''changes at least two'''''</u> different nominal [[w:ledger]] <u>'''''accounts'''''</u>. ( Wikipedia )

: In '''[[w:double-entry bookkeeping]]''' ( [[w:fi:Kahdenkertainen kirjanpito]] ) a minimum of '''2 [[w:ledger]] accounts''' ( [[w:fi:Reskontra]] ) are touched, one '''[[w:debit]]ed''' and another '''[[w:credit]]ed''' with every action recorded. ( [[w:fi:Debet ja kredit]] ) ( jubo-jubo )

:* '''[[w:Financial accountancy]]''' (or '''financial accounting''') is the field of [[w:accountancy]] concerned with the preparation of [[w:financial statements]] for decision makers, such as [[w:Shareholder|stockholder]]s, [[w:vendor (supply chain)|supplier]]s, [[w:bank]]s, employees, [[w:government agencies]], owners, and other stakeholders. Financial capital maintenance can be measured in either [[w:nominal monetary units]] or [[w:units of constant purchasing power]]. ( Wikipedia ) 

:* '''Management accounting''' or '''[[w:managerial accounting]]''' is concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis to make informed business decisions that will allow them to be better equipped in their management and control functions. ( Wikipedia )

:* '''[[w:Income statement]]''' (also referred to as '''profit and loss statement (P&L)''', '''revenue statement''', '''statement of financial performance''', '''earnings statement''', '''operating statement''' or '''statement of operations)'''is a company's '''[[w:financial statement]]''' that indicates how the revenue (money received from the sale of products and services before expenses are taken out, also known as the "top line") is transformed into the net income (the result after all revenues and expenses have been accounted for, also known as Net Profit or the "bottom line"). ( Wikipedia )

==== Income statement or profit and loss statement ====


::<tt>Mnemonic:</tt> ''"The [[w:income statement]] describes the income possibilities of the [[w:entrepreneur]] with 100% of shares <u>not</u> the income of the business, that's called the [[w:top line]] and is only small part of the whole thing."''

::An '''''[[w:income statement]]''''' (also referred to as '''''profit and loss statement (P&L)''''', '''''revenue statement''''', '''''statement of financial performance''''', '''''earnings statement''''', '''''operating statement''''' or '''''statement of operations''''') is a company's [[w:financial statement]] that indicates how the [[w:revenue]] (money received from the sale of products and services before expenses are taken out, also known as the "top line") is transformed into the [[w:net income]] (the result after all revenues and expenses have been accounted for, also known as Net Profit or the "bottom line"). It displays the revenues recognized for a specific period, and the [[w:cost]] and [[w:expense]]s charged against these revenues, including [[w:write-off]]s (e.g., [[w:depreciation]] and [[w:amortization]] of various [[w:asset]]s) and [[w:tax]]es. The purpose of the income statement is to show [[w:Management|managers]] and [[w:investor]]s whether the company made or lost money during the period being reported. ( Wikipedia )

<tt>Formula for income statement</tt>
:: <tt> incoming </tt> '''[[w:revenue]]''' == '''[[w:top line]]''' == '''[[w:turnover]]''' == '''[[w:income]]''' == '''[[w:cash flow]]'''
:: <tt> minus outgoing </tt> '''[[w:expenses]]'''
:: <tt> equals </tt> '''[[w:net income]]'''  == '''The [[w:bottom line]]''' == '''[[w:net profit]]'''  == [[w:net earnings]]'''

:an example of an income statement for a really small business involved in international trade 

:::''''+ [[w:Revenue]]'''
:::'''- [[w:Fixed costs]]''' (
::::- [[w:Personel]] costs
::::- [[w:Facilities]], [[w:office]] and [[w:bookkeeping]] and [[w:accounting]] [[w:cost]]s )
:::'''- [[w:Variable costs]]''' (
::::- [[w:Unit price]] x lot size + [[w:VAT]]
::::- [[w:Duty (economics)|Duties]] and [[w:tariffs]] or in case of [[w:single-market]] or [[w:free trade area]] no need
::::- [[w:Logistics]] and [[w:warehousing]]
::::- [[w:distribution]] costs
::: )
:::________________________________
:::== '''[[w:Net income]]'''


==== Balance sheet ====

:* A '''[[w:Balance sheet]]''' or '''statement of financial position''' ( in [[w:financial accounting]] ) is a summary of the financial balances of a [[w:sole proprietorship]], a [[w:Partnership|business partnership]], a [[w:corporation]] or other business organization, such as an [[w:Limited liability company|LLC]] or an [[w:LLP]]. [[w:Asset]]s, [[w:liability (financial accounting)|liabilities]] and [[w:ownership equity]] are listed as of a specific date, such as the end of its [[w:financial year]]. A balance sheet is often described as a ''"snapshot of a company's financial condition"''. ( Wikipedia )
::: '''Balance sheet terms'''
:::::* '''[[w:Asset]]s == [[w:current assets]] + [[w:non-current assets]]'''
:::::::A '''[[w:current asset]]''' is an [[w:asset]] which can either be converted to cash or used to pay current liabilities within 12 months.  Typical current assets include [[w:cash]], [[w:cash equivalents]], short-term investments, [[w:accounts receivable]], [[w:inventory]] and the portion of prepaid liabilities which will be paid within a year. ( Wikipedia )

:::::* '''[[w:Liability|Liabilities]] == [[w:Current liabilities]] + [[w:non-current liabilities]]'''

::To understand what's going on with a [[w:business]] in addition to having an [[w:income statement]] one must also have knowledge of where the capital is, what is it's cost and it's payoff i.e. the <u>'''''[[w:Balance sheet]]'''''</u>, then you can calculate all sorts of fun [[w:metrics]] like [[w:Return on equity]] and [[w:return on investment]] etc.


In [[w:financial accounting]], a '''[[w:balance sheet]]''' or '''statement of financial position''' is a summary of the financial balances of a [[w:sole proprietorship]], a [[w:Partnership|business partnership]], a [[w:corporation]] or other business organization, such as an [[w:Limited liability company|LLC]] or an [[w:LLP]]. '''[[w:Asset]]s, [[w:liability (financial accounting)|liabilities]]''' and '''[[w:ownership equity]]''' are listed as of a specific date, such as the end of its [[w:financial year]]. A balance sheet is often described as a "snapshot of a company's financial condition". Of the four basic [[w:financial statements]], the balance sheet is the only statement which app


=== Balances and flow statements ===
( [[w:fi:XYZ]] ) 
:*For every '''[[w:fiscal year|fiscal year]]''' ( [[w:fi:Tilikausi]] )a business must produce a '''[[w:annual report]]''' which contains ( in [[w:Finland]] )
:** the annual '''[[w:financial statement]]''' ( [[w:fi:Tilinpäätös]] ) which contains naturally 
:*** the '''[[w:balance sheet]]''' (  main document of accounts, [[w:fi:tase]] )
:***the '''[[w:income statement]]''' ( main flow document, [[w:fi:tuloslaskelma]] ) 
:*** the attachments for balance sheet and income statements [[w:fi:liitteet]]
:*** the [[w:statement of changes in equity]] (SOCE) 
:** Textform description of businesses activities ( [[w:fi:toimintakertomus]] )

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==== Accounting class week 9 ====
:* Team quiz on new terminology ( [[w:Category:Accounting terminology]] )
:* '''[[w:Assets]]'''
:* '''[[w:Liabilities]]'''
:* '''[[w:Equity (finance)]]''' ( [[w:fi:Oma pääoma]] )

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==== Accounting class week 10 ====

:*'''[[w:Accrual]]''' (''accumulation'') of something is, in [[w:finance]], the adding together of [[w:interest]] or different [[w:investments]] over a period of time. It holds specific meanings in [[w:accounting]], where it can refer to accounts on a [[w:balance sheet]] that represent liabilities and non-cash-based assets used in accrual-based accounting. These types of accounts include, among others, [[w:accounts payable]], [[w:accounts receivable]], [[w:Goodwill (accounting)|goodwill]], [[w:deferred tax]] [[w:liability (accounting)|liability]] and future interest expense. ( Wikipedia )

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==== Accounting class week 11 ====
* '''[[w:VAT]] accounting''' ( [[w:fi:Arvonlisävero]] )

* [[w:VAT]] vs. [[w:sales tax]] ( not the same thing )




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==== Accounting class week 12 ====
:Joint exam with [[#Business Math 1|Business Math 1]]
lies to a single point in time of a business' calendar year. ( Wikipedia )

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== Accounting for a New Business 2 ==
Course consists of mostly '''[[w:Managerial accounting]]''' and '''[[w:cost accounting]]'''

Topics covered:
* [[w:Forecasting]] [[w:revenue]]s, [[w:sales]] [[w:budgeting]]
* [[w:Pricing]] of products and services
* Estimation of [[w:operational costs]]
* [[w:Profitability]], feasible [[w:business plan]]
* Required [[w:investments]] and [[w:working capital]]
* [[w:Bank loan]]s and other [[w:financial instruments]]
* Annual percentage rate of charge for [[w:loans]] and [[w:credits]]

==== Accounting 2 class week 14 ====
Topics: Financial flows

* '''[[w:cost-volume-profit analysis]]'''
::in managerial economics, is a form of cost accounting. It is a simplified model, useful for elementary instruction and for short-run decisions. ( Wikipedia )

* '''[[w:Contribution margin]]''' ( [[w:fi:Katetuottolaskenta]] ) 
::In [[w:cost-volume-profit analysis]], a form of [[w:management accounting]], '''contribution margin''' is the marginal profit per unit sale. It is a useful quantity in carrying out various calculations, and can be used as a measure of [[w:operating leverage]]. Typically, high contribution margins are prevalent in the labour-intensive tertiary sector while low contribution margins are prevalent in the capital-intensive industrial sector.n ( Wikipedia )

* '''[[w:Break-even]]''' (or break even) is the point of balance between making either a profit or a loss. The term originates in finance, but the concept has been applied widely since. ( Wikipedia )

* '''[[w:Margin_of_safety_(accounting)#Margin_of_Safety|Margin of safety]]''' represents the strength of the business. It enables a business to know what is the exact amount it has gained or lost and whether they are over or below the break even point. ( Wikipedia )

* '''[[w:Operating leverage]]''' ( [[w:fi:Velkavipu]] ) is a measure of how revenue growth translates into growth in operating income. Leverage, and of how risky (volatile) a company's operating income is. ( Wikipedia )

::Homework: ex. 4,5,6,7

==== Accounting 2 class week 15 ====

==== Accounting 2 class week 16 ====
* '''[[w:Pricing]]'''
:: Long-run vs. short-run pricing approaches

*'''[[w:Target costing]]''' or '''target pricing''' is a [[w:pricing]] method used by firms.  It is defined as "a cost management tool for reducing the overall cost of a product over its entire [[w:Product lifecycle (engineering)|life-cycle]] with the help of production, engineering, research and design". A target cost is the maximum amount of cost that can be incurred on a product and with it the firm can still earn the required [[w:profit margin]] from that product at a particular selling price. ( Wikipedia )

*'''[[w:Cost-plus pricing]]''' is a pricing method used by companies to maximize their rate of returns. ( Wikipedia )

==== Accounting 2 class week 17 ====
* '''[[w:Operating leverage]]''' is a measure of how revenue growth translates into growth in '''[[w:operating income]]'''. '''[[w:Leverage (finance)|Leverage]]''', and of how risky (volatile) a company's operating income is.

* The '''[[w:current ratio]]''' is a [[w:financial ratio]] that measures whether or not a firm has enough resources to pay its debts over the next 12 months. It compares a firm's [[w:current asset]]s to its [[w:current liabilities]]. ( Wikipedia )

* The '''Acid-test''' or '''[[w:quick ratio]]''' or '''liquid ratio''' ( [[w:fi: Maksuvalmiussuhde]] )  measures the ability of a company to use its ''near cash'' or quick assets to extinguish or retire its [[w:current liability|current liabilities]] immediately. Quick assets include those [[w:current asset]]s that presumably can be quickly converted to cash at close to their [[w:book value]]s. ( Wikipedia )

* '''[[w:Return on investment]]''' ('''ROI''') is the concept of an [[w:investment]] of some resource yielding a benefit to the investor. As a performance measure, it is used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. ( Wikipedia )

==== Accounting 2 class week 18 ====


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== Managerial Accounting ==

# lesson: '''Cost behaviour''' and '''[[w:cost object|cost object]]s
# lesson: '''[[w:Job costing|Job costing]]''' and '''[[w:overheads|overheads]]'''
# lesson: '''[[w:Activity based costing|Activity based costing]]'''
# lesson: '''[[w:Cost-volume-profit analysis|Cost-volume-profit analysis]]'''
# lesson: '''Master budgets''' and '''operational [[w:budget|budget]]s'''
# lesson: NO LESSON
# lesson: '''Short term business decisions'''

=== Lesson 1 Cost behaviour and cost objects ===
* '''A [[w:Cost object|Cost object]]s''' is a tangible input for a product manufactured/service provided, like labor or material. ( Wikipedia )

* '''[[w:Managerial accounting|Managerial accounting]]''' vs. '''[[w:financial accounting|financial accounting]]''' - differences and characteristics listed in hand-out

* Proper financial accounting is [[w:GAAP|GAAP]] + [[w:IFRS|IFRS]] compliant and is [[w:Certified Public Accountant|CPA]] [[w:auditing|audited]]
::: Certified Public Accountant (CPA) is the statutory title of qualified accountants in the United States ( Wikipedia )

* '''[[w:Generally accepted accounting principles|Generally accepted accounting principles]]''' ('''GAAP''') refer to the standard framework of guidelines for [[w:financial accounting|financial accounting]] used in any given jurisdiction; generally known as '''accounting standards''' or [[w:standard accounting practice|standard accounting practice]]. These include the standards, conventions, and rules that accountants follow in recording and summarizing and in the preparation of [[w:financial statements|financial statements]]. ( Wikipedia )

* '''[[w:International Financial Reporting Standards|International Financial Reporting Standards]] ([[w:IFRS|IFRS]]) are designed as a common global language for business affairs so that company accounts are understandable and comparable across international boundaries. ( Wikipedia )

* '''[[w:Inventory|Inventory]]''' or stock refers to the goods and materials that a business holds for the ultimate purpose of resale (or repair)

* '''[[w:w:Inventory management software|w:Inventory management software]]''' is a [[w:computer|computer]]-based system for tracking [[w:inventory|inventory]] levels, orders, [[w:sales|sales]] and deliveries. ( Wikipedia )

* '''[[w:Working capital|Working capital]]''' or '''operating capital''' is a financial metric which represents [[w:Accounting liquidity|operating liquidity|]] available to a business, organization or other entity, including governmental entity.  Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Gross working capital equals to current assets. Net working capital (NWC) is calculated as [[w:current assets|current assets]] minus [[w:current liabilities|current liabilities]]. ( Wikipedia )


=== Lesson 2 [[w:Job costing|Job costing]] and [[w:overheads|overheads]] ===
* '''[[w:Job costing|Job costing]]'''  involves the calculation of costs involved in a construction "job" or the manufacturing of goods done in discrete batches. These costs are recorded in ledger accounts throughout the life of the job or batch and are then summarized in the final trial balance before the preparing of the job cost or batch manufacturing statement. ( Wikipedia )

* An '''[[w:overhead|overhead]]''' or '''overhead expense''' refers to an ongoing [[w:expense|expense]] of operating a business; it is also known as an "operating expense". Examples include rent, gas, electricity, and labour burden. The term ''overhead'' is usually used when grouping expenses that are necessary to the continued functioning of the business but cannot be immediately associated with the products or services being offered (i.e.,&nbsp;do not directly generate [[w:profit (accounting)|profit|]]s). ( Wikipedia )

=== Lesson 3 Activity based costing ===
'''[[w:Activity based costing|Activity based costing]]''' ('''ABC''')  is a costing methodology that identifies activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption by each. This model assigns more [[w:indirect costs|indirect costs]] ([[w:overhead (business)|overhead]]) into [[w:direct costs|direct costs]] compared to conventional costing. ( Wikipedia )
:::CIMA (Chartered Institute of Management Accountants) defines ABC as 
:::: ''an approach to the costing and monitoring of activities which involves tracing resource consumption and costing final outputs.'' 
::::Resources are assigned to activities, and activities to cost objects based on consumption estimates. The latter utilize cost drivers to attach activity costs to outputs. ( Wikipedia )

=== Lesson 4 Cost-volume-profit analysis ===
'''[[w:Cost–volume–profit analysis|Cost–volume–profit analysis]]''' ('''CVP'''), in [[w:managerial economics|managerial economics]], is a form of [[w:cost accounting|cost accounting]]. It is a simplified model, useful for elementary instruction and for short-run decisions. ( Wikipedia )

=== Lesson 5 Master budgets and operational budgets ===
* A '''[[w:budget|budget]]''' is a quantitative expression of a plan for a defined period of time. It may include planned sales volumes and revenues, resource quantities, costs and expenses, assets, liabilities and cash flows. ( Wikipedia )

=== Lesson 6 NO LESSON ===

=== Lesson 7 Short term business decisions ===
'''Short term business decisions'''

* In '''[[w:finance|finance]]''' or financial operations of borrowing and investing, what is considered 
:::*'''''long-term''''' is usually above 3 years, with 
:::*'''''medium-term''''' usually between 1 and 3 years and 
:::*'''''short-term''''' usually under 1 year. ( Wikipedia on [[w:Term (time)|Term]] )


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== Further reading ==
* [[Finance]]


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== Learn in Wikipedia ==
:* '''[[w:Category:Accounting terminology]]'''

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== Further learning ==

: '''[[w:analysis#Business|Business and investment analyses]]:'''
:# '''[[w:Financial statement analysis|Financial statement analysis]]''' – the analysis of the accounts and the economic prospects of a firm
:# '''[[w:Fundamental analysis|Fundamental analysis]]''' – a stock valuation method that uses financial analysis
:# '''[[w:Technical analysis]]'''  ( [[w:fi:Tekninen analyysi]] )  – the study of price action in securities markets in order to forecast future prices
:# '''[[W:Business analysis|Business analysis]]''' – involves identifying the needs and determining the solutions to business problems
:# '''[[w:Price analysis|Price analysis]]''' – involves the breakdown of a price to a unit figure
:# '''[[w:Market analysis|Market analysis]]''' – consists of suppliers and customers, and price is determined by the interaction of '''[[w:supply and demand]]''' ( Wikipedia )

:build upon understanding of accounting and business math terminology and procedures.
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