Plumb Accounting Basics | The Accounting Equation

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Plumb Accounting Basics: The Accounting Equation

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 ASSETS = LIABILITIES + OWNERS’ EQUITY

A. Assets

1. Economic resources expected to benefit company in future

a. Cash: Money, certificates of deposit and checks

b. Accounts Receivable: Oral or implied promise, usually arise from sales made to customers, no promissory note exists

c. Notes Receivable: Promissory notes

d. Inventory: Merchandise the entity holds or manufactures to sell

e. Land: Property the business owns and uses in operations

f. Building: Cost of an office, warehouse, garage, etc.

g. Equipment , furniture & fixtures: Accounts that record the cost of office equipment and store equipment

B. Liabilities: Economic obligations, debts

1. Accounts Payable: Oral or implied promise to pay debts which arise from credit purchases

2. Notes Payable: Amounts the company must pay as a result of signing a promissory note for goods or services

3. Taxes Payable: Wages payable, Salary payable

C. Owners’ Equity: Claims held by owners, divided into two main categories

1. Contributed or Paid in Capital (Amounts invested in corporation by owners)

2. Retained Earnings (Income earned from operations)

a. Expenses: Decreases in retained earnings resulting from operations

b. Revenues: Increases in retained earnings resulting from operations

C. Dividends: Distributions of assets to shareholders decreases R. E.

 

Plumb Accounting provides expert services and support to accounting departments and growing organizations that need added expertise but do not want the burden of full-time Controller or CFO.

Services Offered:

  • Outsourced Accounting
  • Outsourced Bookkeeping
  • Policy and procedure review
  • Audit preparation
  • Budget review and preparation
  • Accounting systems/software analysis
  • M & A Accounting
  • Performance indicator development
  • Cash flow forecasting
  • Software upgrades
  • Monthly financial statements
  • Cash management
  • Vendor management
  • Management reporting
  • SEC reporting

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