Accounting



Topics Explained

Our explanations of accounting topics are recognized for their clarity by people all over the world.


The topics below are listed in the sequence we recommend if you are new to accounting. However, each topic can be read independently. To assist in your understanding, each explanation contains links to our 1,000 word dictionary.


Click one of the blue links below to access an easy-to-understand explanation:



Financial Accounting

Accounting Basics: Learn accounting principles, introduction to financial statements, debits and credits.

Debits and Credits: Learn accounting's double entry system. Tips for learning debits and credits, T-accounts, and sample journal entries are provided.

Chart of Accounts: Sample charts of accounts with many accounts and account descriptions.

Bookkeeping: Introduction to double entry bookkeeping, debits and credits, trial balance, and chart of accounts.

Accounting Equation: Learn how transactions affect the accounting equation, balance sheet, and income statement. See the connection between the accounting equation and debits and credits.

Accounting Principles: Learn the basic accounting principles (matching, cost, conservatism, etc.). Understand their impact on the financial statements.

Financial Accounting: Learn about financial reporting and financial statements. Introduction to the role of FASB and SEC.

Adjusting Entries: Accruals and deferrals necessary for financial reporting under the accrual basis of accounting.

Balance Sheet: Learn the proper reporting of assets, liabilities, owner's equity. Includes current vs long-term classifications.

Income Statement: Revenues, gains, expenses, losses, formats, reporting unusual items.

Cash Flow Statement: Tips for learning indirect method, format, illustration of transactions' effect on the statement, relationship to income statement and balance sheet.

Financial Ratios: Common-size balance sheet and income statement, current ratio, quick ratio, accounts receivable and inventory turnover ratios, profitability ratios.

Bank Reconciliation: Use of outstanding checks, deposits in transit, bank charges, and NSF checks to be certain the cash balance agrees with the bank statement balance.

Inventory and Cost of Goods Sold: Learn accounting's cost flow assumptions: periodic FIFO, LIFO, weighted average. Perpetual FIFO, LIFO, moving average. Estimating inventory methods.

Lower of Cost or Market: Conservatism, losses, replacement cost, net realizable value, normal profit.

Depreciation: Straight-line, journal entries, use of estimates, accelerated depreciation.

Payroll Accounting: Salaries, wages, overtime pay, Social Security and Medicare taxes (FICA), unemployment taxes, fringe benefits, sample journal entries.

Stockholders' Equity: Corporations, common stock, paid-in capital, retained earnings, treasury stock, stock splits, stock dividends, preferred stock, book value.

Present Value of a Single Amount: Time value of money and compounding of interest of a single amount. Illustrations for calculating the present value of a future cash amount, unknown interest rate, or length of time. Amortization of discount.

Present Value of an Ordinary Annuity: Time value of money and compounding of interest of a series of equal amounts at equal time intervals. Illustrations for calculating the present value of an ordinary annuity, the amount of each payment, the number of payments, or the interest rate. Amortization of interest/discount.

Accounting Degree: Learn about selecting the right college for earning your accounting degree, the CPA Exam, and accounting job opportunities held by people with accounting degrees.

Managerial & Cost Accounting

Break-even Point: Fixed and variable expenses, contribution margin, and desired profit.

Improving Profits: Relevant amounts for analyzing, business stories to illustrate profit improvement.

Evaluating Business Investments: Capital expenditures, rate of return, payback, net present value, internal rate of return.

Manufacturing Overhead: Examples of manufacturing overhead; allocation of overhead via direct labor, and via departmental machine hours.

Nonmanufacturing Overhead: Examples of selling, general, and administrative costs. Assigning nonmanufacturing costs to products and customers for pricing and other decisions.

Activity Based Costing: Comparison of Activity Based Costing (ABC) to traditional allocation of manufacturing overhead.

Standard Costing: Direct materials price and usage variances, direct labor rate and efficiency variances, manufacturing overhead volume, efficiency, spending, and budget variances. Disposing of variance amounts.




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