Public accounting

Private accounting

Balance sheet

Income statement

business entitie

the basic elements of the accounting equation

the changes in the value of owner's equity

lists all assets, liabilities, and owner's equity balances as of the last day of the financial period

reports the amount of net income or loss, subtracting expenses from income over a period of time

Cash basis.

Accrual basis

They are the closure of all temporary accounts and the total change is recorded in the owner's capital account

Begins with the analysis of all transactions and their logging in the diary.

Used in an accounting year to correct errors, always done at the end of the accounting period

Is a collection of important data that is used to determine which adjusting entries must be performed. It also assists in the preparation of financial statements.

list of accounts with their debit or credit balances.

Rules

document used to record all similar transactions

Normal Account Balances.

Chart of accounts

Balance Sheet

Income Statement Accounts

Purchased with cash

Puruchased on credit

Purchased on credit, but are paid back early due to a cash discount incentive

If merchandise is returned or a price adjustment is necessary: debit Accounts Payable and credit the Purchases Returns and Allowances account.

The sales account should be credited if goods are sold for cash or on credit

For the advance payment a discount incentive must be given

All sales discounts, returns, and allowances reduce sales revenues.

3.If they are sold through a credit card, there will be a service fee. In that case they are debited to cash and card collection fees credit and credit accounts receivable.

1.If they are sold on credit, accounts receivable and credit sales are debited

2.If payments are made in cash, cash and credit accounts are debited

If a cash discount is taken advantage of, the cash and sale discount and accounts are credited by cash

Manufacturers and wholesalers reduce list prices by allowing commercial discounts

Discounts vary depending on the customer and the size of the order