Financial Accounting Handbook

By Dr. Anis I. Milad D.B.A. S.C.P.M

This book is a collection of the accounting principles and interpretations on accounting theories and methodologies which are taught in two sequential university courses. Throughout the book, Dr. Milad intended to elaborate on the difficult concepts that his accounting students have asked for clarifications and desperately needed to understand.

• Language: English
• Publisher: AuthorHouse
• Release date: May 22, 2009
• ISBN: 9781438977614

Dr. Anis I. Milad D.B.A. S.C.P.M

I hope you enjoyed or you will enjoy this Financial Accounting Handbook!! Besides teaching in higher education for more than 7 years, I also have worked as an accountant and manager/owner in my practice for over 20 years. Helping small businesses achieve their objectives professionally, dealing with their struggles to survive, and interacting with the successes and failures they encounter are valuable life experiences I treasure because they add meaning to my work and give me the sense of accomplishment.  I am interested in writing about different subjects, watching cable channels for entertainments and world affairs, and reading the newspapers on the Internet. And during the years, I wrote poetry, short stories, minute plays, thoughts in religion and philosophy, and I also wrote interpretations on accounting theories and methodologies. I have published four books plus my dissertation in the United States and three other books have been published and distributed overseas.   EDUCATION   D.B.A. Financial Management, Northcentral University, Prescott Valley, AZ M.B.A. Managerial Leadership, City University of Seattle, Bellevue, WA B.S. Accounting,  Excelsior College , Albany, NY   PROFESSIONAL CERTIFICATION   S.C.P.M. Stanford Certified Project Manager, Stanford University, Stanford, CA  

Book preview

© 2009 Dr. Anis I. Milad, D.B.A., S.C.P.M. All rights reserved.

No part of this book may be reproduced, stored in a retrieval system, or

transmitted by any means without the written permission of the author.

Published by AuthorHouse 01/20/2021

ISBN: 978-1-4389-7760-7 (sc)

ISBN: 978-1-4389-7761-4 (e)

Library of Congress Control Number: 2009904671

CONTENTS

Week 1- Lecture – Debit and Credit

Week 1 - Recap

Week 2 – Lecture – Trial Balance

Week 2 - Recap

Week 3 – Lecture – Adjusting Entries

Week 3 - Recap

Week 4 – Lecture - Inventory

Week 4 - Recap

Week 5 – Lecture – Internal Control

Week 5 - Recap

Week 6 Lecture – Accounts Receivable & Depreciation

Week 6 - Recap

Week 7 Lecture – Accounts Payable & Bonds

Week 7 - Recap

Week 8 Lecture – Stock Corporations

Week 8 - Recap

Week 9 Lecture – Statement of Cash Flows

Week 9 - Recap

Week 10 Lecture - Ethics

Week 10 - Recap

About the Author

Financial Accounting Handbook

Week 1- Lecture – Debit and Credit

A family is a social unit. A typical family consists of parents and children. Parents have to be able to support the children and themselves. When I was growing up I realized that managing money requires skills. Every month my father earned money from work and every day my mother spent a certain amount of money and she never ran out of money until the next pay check. The first businesses in history, I might say, were based on the family unit. Many families would be more successful than the others, why? It depends on the parents’ skills of surviving!!

An accounting course provides you with a tool to survive and succeed. The basic knowledge of accounting would help you to make decisions for yourself or for others. If you have a small business you need to record your revenues and expenses to stay in business and to understand the weaknesses and strengths of your business. Studying accounting will make a difference in people’s lives.

Debit and Credit:

Analyzing a simple transaction between two people would lead to an interesting conclusion. We will find out that a simple transaction consists of two actions. The first one is giving and the second is taking. Every business transaction consists of two or more actions. Here is an example of a business transaction. You have to pay the rent to the Rouse Company. You paid $5000.00 by check for the current month. To you the rent is an expense and it is revenue to the Rouse Company.

Understanding the concept of Debit (Dr.) and Credit (Cr.) is important. When you record in your journal the rent you paid to the Rouse Company you record it as follows:

And the Rouse Company would record the rent as follows:

You can remember that Expenses, such as, rent expense, telephone, utilities, etc., are recorded as Debit, why? The nature of all expenses is debt related and an obligation. On the other hand, Revenues such as rent income, sales of goods, etc. are recorded as Credit, why? Credit implies what someone, like the Rouse Company, deserves (Webster, 1979, p. 428). On the other hand, because the nature balance of the Cash Account is debit the balance of the Cash Account will increase by debiting the amount as in Rent Income, and it will decrease by crediting the amount as in Rent Expense.

Cash normal balance is Debit:

Note (1)

The common misconception of debit and credit is easy to explain!! Banks consider your deposit as credit and your withdrawals as debit. But you consider your deposit as debit to cash and your withdrawal as credit to cash. In your bank statements you are seeing the transaction from the bank’s point of view not from your point of view.

Note (2)

You should remember that the company is a separate entity and the stockholders are among the creditors of this company. The first entry you must record is to record the stockholders as creditors as follows:

Now, Cash means two points: First point, the money in the bank is considered assets to this company. Second point, the stockholders are among the creditors who deserve the money in the bank, and the assets in general, in case of liquidation.

Debit and Credit: If you understand what the normal balance of an account mean you are about to understand the basic concept of Debit and Credit. From Note 1 I want you to realize that Cash normal balance is Debit; however, you credit cash when you pay out for expenses, dividends, or assets.

Example:

Use this entry to record utility expense. You notice Cash Account is Credited. If you had $50000 (see Note 2) in the bank now the Cash Balance after the payment