ready okay so everyone think this lecture number four we continue with the example or which is what we call problem there and I'll give you something similar like this for the exam okay and we have a number of that here's a repair shop starts on May 1 by Nancy ok and you are asked to prepare a table like this ok of the following transactions here is number one Nancy takes 10,000 and invested to start the repair shop so you have down assets ok liabilities equity and now the question is when 10,000 in investment what changes well right now there's absolutely nothing so the business begins with ten thousand to ten thousand capital so cash increases to ten thousand okay so cash goes up ten thousand is the nested receivable no change equipment no change Accounts Payable no change it's got recorded capital you see how they say equity and then they say capital st. and capital and time so you will get 10,000 cash cash goes up and equity goes up by ten thousand and we see how it goes see 10,000 cash goes up did they have and thousand cash for this and that's the transaction cash ten thousand up and equity and that's a lot okay so you always have to think in terms of going up or going down okay because later we will use for this get it and credit okay which is coming time so cash up so now transaction number two let's see what's number two and all that when you say 10,000 10,000 you write on the side the type of transaction what happened just invested hopefully we get to number two number two purchase equipment for path as cash so when you buy equipment equipment goes up for five times okay so you see cash accounts receivable so equipment will be plus five thousand okay equipment we say goes up means plus and when you say purchased equipment for cash five thousand this means your spend 5,000 cash being cash going down five thousand so it should be cash - five thousand you spend cash in equipment plus five times this is example where one is it goes down with another asset goes up the previous example was acid God equity : ok so cash minus 5,000 equipment plus five times and then it says purchase equipment and see what happens now - 5,000 here plus 5,000 plus and their equipment for purchase equipment okay number three and so you see how we say one this three corresponds to this premium okay so the numbers was on pay four hundred cash for rent a four hundred cash for rent so if you pay means pay four hundred cash means cash goes down so this will be minus four hundred can see nothing here equipment nothing here liability nothing here and this one will be equity so the hain cash for coffee strength is an expense is the rent expense and expense reduces equity so this will be minus four hundred and this one here minus 400 and this one should be read let's see what happens now - format okay Blackie over there - four hundred and may rent me okay it's a rent expense okay they should here purchase equipment okay that's okay is it that clean this one somebody's head slowly slow yeah why not first of all here for the cash 400 you can cast okay it is because expense means and what you going down this is from two or three or four slides ago where we had that equity is increased by revenue and equity decreased by expense do you remember that slide where how many slides go can anyone come up with a number of slide slide number what number is that you remember okay slide everybody everybody slide number twenty-seven owner's equity asking your classmate owner's equity decrease decrease mean going down when you have expense okay is that anything so all those equity expense means going down so when you have an expense you put minus two owner technically owner equity now okay so write expense and you keep going down number four number four this for corresponding to this for receiving five thousand one hundred from customers if it's received from customers for service you receive from service it means revenue okay and you receive I assume it's five thousand from customers for cash okay so you receive five thousand cash it should be plus five thousand one hundred cash so cash goes up five thousand another and for customer for service or repair service it means it's a service revenue okay so it is revenue it should be here plus five thousand one hundred revenue okay so plus hi honey so we have a transaction where this is plus and this is from class okay let's see whatever cash okay lucky and then over here equity plus okay equity plus and then there should be another one rewrite on your riveting okay lucky again all right Zach ethically yeah questions move on number five number five we draw one thousand years of personal use so we draw cash is the exactly opposite of invest cash okay so investing cash is plus sign with rock ashes - so the business paying cash cannot going down - one thousand and nothing here another here here equity going cash down for craft down by 1000 so - - 1000 next chair - 1000 - 1000 drawing drawing is the same as dividend I was explaining ok for with sometimes a capital withdraw okay number five who's even number six a part-time employee salaries of 2000 so so when you're paying a salary which called a salary expense okay so salary is an expense so it will you have be equity point the nd equity goes down by by the down by 2000 and then you pay salary is paid by cash - usually doing I am - out out so - mm going down - mm and then see what happens - mm - mm FN expense we call this salary expense okay all right next one yeah good luck you incur 250 of advertising costs now remember when we say the definition of expense is a cost okay so usually cost will usually mean expense but not always okay because it may be purchased computer cost 1000 okay and if you purchase computer from 1000 for purchase computer for 10,000 it is not an expense it is one asset going down and quickly going okay so it depends the cost of one okay it is the custom of another asset then it's not an expense in this particular case it is the cost of advertising oh it is all account on account means don't pay now they later so first of all if you're 2000 ever dies in commerce and have ever fallen out if it's all like that we're going to be account payable account payable is money that must be paid to suppliers for goods or services receive so this one will go let make sure incurred 2,000 of advertising cost over this is expense yes expense means that in 2000 that's a cost on account it's an expense so this one will be going down and this one will be going cookout up so this one plus what is it two hundred and fifty and this one - two hundred and fifty n a0 plus 250 - 2250 0 so plus 250 - 250 + 250 - true expense no right provided 753 clear services on account repair service is a revenue if it's a revenue 750 will be plus 750 for the economy equity okay so radio is the same as this relativity plus 750 it is all account if it's wrong account it's here the accounts receivable is present when you provide good or service and you will be collecting money later so this is you the business gets paid later and this is you paid others later so this others pay you and is you may have so this is provided syllabus this one goes up 750 and this one go up go down a little okay up up 750 plus 750 plus 750 and you see now how expense - fictions - expense - expense - radio + sign anybody name is going to be great Plus sign regular plus sign okay you also have to have investment plus sign drawing or dividend - okay you see the sides correspond alright let's see what else okay collected 120 cash for services previously build previously built means that before you hadn't helped receiver okay before II an account receivable collect cash means cash going up 120 and before account receivable means account receivable down down means get to you before and now they owe less okay so cash going up account receivable going down should be like that 120 cash up 120 minus 120 okay and this collection of cash receding witnessing what they write they don't write it they just now provide totals in the dollars ten thousand minus five is five times okay minus 4 is 4 thousand six hundred plus five one is what is it 9700 okay plus minus this minus this six eight twenty this one is easy seven eighty minus 126 35,000 becomes five not this one is 250 becomes 2 it is one you add up the number 10,000 minus four by one you can enter to check now you can also check or meaning double check by Elham is number six eight twenty plus 6/13 makes seven thousand and four hundred fifty seven and five is twelve four fifty and this is twelve to four hundred and physically so twelve 450 1250 whole numbers and okay so this is one simple example and then we will continue with debit and credit but now you can see cash this is called ending balance ending that's okay ending those empty barrels and Logan's of explain okay and finally we have a ninja star everybody pay attention for the four financial statements to explain each one of them quickly for today for first month we always prepare is the income statement remember when you prepare when you prepare financial statements this one is always first and you cannot prepare this without this okay you need this to prepare this so the first one is income statement second one is owner's equity can I just give you example this is what the owner's equity looks like so you make one especially for you make one for expenses and revenues so the income statement is taken about expenses and revenues the owner's equity is about expenses revenues investments in withdrawals before balance sheet is about assets liabilities and owner's equity so you need revenues and expenses to prepare the equity you need the equity to prepare the balance sheet and then you have statement of cash flows in statement of cash flows is literally how much cash coming in how much games coming out because want to have cash you want to make payment in cash all right video question let's will result during the time period when and will loo net income net income is like rock okay net income is the same as profit and then thinkin is usually revenue minus expenses with revenues are more than expansion so it says as its exceed liabilities know as its exceed revenues no expenses exceed revenues no it's the revenues exceed expenses so to finish okay so net income income is about revenues and expenses and assets liabilities the differences good you guys ready going to continue I've got a few more minutes for the moment everybody alright let's continue okay you're going to have after that time you also should read before okay so this is what an income statement looks like okay first of all income statement reports the revenues and expenses so income statement reporting revenues in revenues is money coming in in expenses money going out okay ran is expensive for a specific period of time for one week or for one load but for three months for six months or for a full year the most common one for small businesses every month at the end of the month you want to see how much you make money you know how much you made so the income statement is about making money which we call profits if it's positive number we call profit if it's a negative number all loss so when revenue it greater than expense profit if it's expense more than revenue we call loss second again revenues and income oh yeah net income same as group its profit okay so say anything and then its loss is same as loss okay so loss is the same as net loss net usually means after taking out all expenses this would work that means that means after you subtract all so usually the income statement to have revenues one court expenses another poor and then the end will be net income sometimes would be loss and it's a loss it will be a negative number you're right negative or you're right brackets that's coming soon so radio service regular five 850 okay and expenses salary expense 2000 random expense 400 every time some expense 250 and total expenses so you will get revenues and add total revenue you'll have expenses you get total expenses and then you take total revenue minus total expenses irrigator if it's a positive number or again a net loss if it's a negative and that's a simple easy intercept aha now they get how and here's the connection that's why I explained to you that's why we first stood in income stable and then we do the owner's equity we do the owner's equity because we take the net income number here we did this now can we copy this number here okay so this number 3,200 is coming from the income statement okay that's why I told you you cannot prepare this before you prepare this okay you can't do that okay you first do this then this and what do you have for owner's equity all those equities got three parts investments and income and drawings drawings as in dividends okay so investment increases net income increases or if it's a net loss decreases and drawings difference so it is investment let me draw that as well it is very simple here you also have the initial capital initial capital in this particular case with zero business got started before the business begin it had zero capital so next month you will begin with s number given and investment you will add profit subtract loss and when we subtract the drawing okay this time because business is brand-new and zero capital no capital to start so you say old capital and investment and profit subtract the dividend they call it problems okay that's it that's everything we risk so both capital and profit and investment subtract then that's it 10,000 plus 3013 2 minus 1 times 2012 that's it next one owner's equity okay the almost equity continues simply indicates why owner's equity increased or decreased it's a simple explanation of what happened to the power so if you own a little restaurant this is the most important piece for you you want to know how much capital you started how much profit you made what investments you make how much money you take out if what's your capital at the end of the so it's a vulnerable business this shows you your ownership how your ownership meaning how your capital change during and finally see how the arrow goes here you Katie homeless capital or the owner's equity you take the last number and you put it back in the balance sheet so belchy gives you all assets cash accounts receivable equipment and glasses and then gives you liabilities position accounts payable and owner's equity well owner's equity this number here you copy from you that's one when you make financial statements you're always with the balance sheet University in good statement to get the net income profit or loss then you create the capital statement or owner's equity statement and when you get the owner's equity you can create the damn machine and if everything's correct the total number of assets twelve or fifteen must equal to the liabilities in f12 450 and that's by comparing these two numbers you know everything is correct okay so you were except by step by step and then the numbers are correct this number should equal distance and that's an example and I will give you on the quiz a similar example like this one let's see what else we have okay explanation now just the battleship all right battleship reporting assets liabilities and owner's equity these are assets the liabilities and owner's equity at a specific date so it is done on Christmas or it's done on December 31st okay so on a particular day so notice you want pay attention this is very tricky to remember income statement is for a period of time one month okay bell shape is at the end of the month so battleship is for one moment okay income statement is all the customers all the revenues and all the expenses for one month the balance sheet is only at the end of them okay and that's very important to understand okay so you can have income statement for January income statement for February income statement for a month and then have a balance sheet for in the month okay but March 31st January February March and then March 31st you got it income statement keeping up sort of the balance sheet you have January statement February statement March statement pork it half for three months with income state so in your statement good before one day or one week or one month three month for six months why better she is only in the January and of today and this week and the dismount end of this quarter in the vision okay so balance sheet one point and finally for assets a list that's the American convention in American style accounting we always begin with assets then we always write liabilities and then we always finish with almost Eggman sometimes we write assets on the Left liabilities and owner's equity on the right that's awesome we'll see examples later but it's always number one number two number three or number one number two number three always keep this forward and finally I already explained total assets is this number total f12 450 he closed or must equal total liabilities and owner's equity liabilities and owner's equity well 450 this number must equal this okay so when you do accounting you do this number separately and you know this number separately and the two numbers must be correct if they are equal means you did a good career if they're not equal then something was wrong usually what accountants do is they do the one number then the other number they compare they see the difference and they look to find the difference they look to find something wasn't right we did not become for some asset without account for somebody and that's usually what takes a lot of time again so usually when you solve the problem you can solve it for only twenty minutes and if the numbers are different if you take half hour it takes more time to find where you make a mistake but by knowing the difference you know what to look for okay you know to look for 104,000 grayed out or maybe something like a minus and a plus okay you got the wrong attracted dedicated - or plaza and from here you do the statement of cash flow you see how we take cash this number here which is this number here it's gotta be the same number in cash flows is actually very simple here they make it a little bit more complicated so I'll explain this cash flow is basically cash coming in and kept going out and in accounting and in finance they like to separate all cash flows in three groups group number - operating activities meaning they like the business for a restaurant it will just mean customers coming in okay for this university the main operating business is student a tuition that's the main line of business so cash flow from operating Geron is cash flow from investing update if you buy building investment activity will be build a gym build a full by car built on your building so investment activity is associated with acquiring an asset which you're going to use for many years okay swimming pool you'll use five ten twenty years or a brand new building even in those four five or something that will take many years of use so that's investing picnic financing activity is associated usually cheap investment like owners is associated with owners and with creditors so you take a loan from the bank it's a financing okay you take investment from them all worse into finance so all business operations are divided into operation the dividend investing activities and financing there and here's the key investment here means purchasing of long-term asset so investment means one restaurant purchases another okay that's why another very confusing word in finance in very confusing word in economics that accounting is investment okay people think differently about investment from accounting from - NIC analogies here investment means the purchase of a long term assets okay that's the best financing means laws bonds or orders and you separate casual operating activities cash flow will be cash receipts same as revenue the word received means money coming in from the word received a cash pay it so received is always from ready okay that's why you just say regular and just want to sing expenses and this operating activities is go male line of business and the main thing keep nesting is purchase of equipment investing is purchase of a new luxury car okay investment is purchase of a camera investment will be purchased in this case of equipment of a projector okay so all of these represents in castellón clinton is acquiring an acid meaning a long-term asset which you're going to use for many years you can also have hope cash flow from investing activities for example when you sell when you're an old car for example the president of the university purchases a brand new put these guys drive here in Versailles but right so she buys a brand new Mercedes right he's got a cash outflow minus number for the new Mercedes then he sells the old Mercedes I'm 20,000 50,000 100,000 right he gets a little bit of money from y'all so when you have a brand new Mercedes okay it's a cash outflow you pay money to get the Mercedes when you sell the old one you can catch info and see also what they do here they put the little crackers the little bracket means - number means negative number so it is 5202 - maybe trying to zoom a little trying to zoom in a little bit with the camera never something so 5220 - 2400 is to 8 to 20 ok just a little bit we don't have to zoom to the second cash flow from investing you purchase equipment this means you spend money okay so the numbers in the bracket means spending money means cash flow going or recovered cash out right let's define this when cash flow money comes in with a cash inflow when cash is going out we say cash outflow so inflow is positive number our slope is negative number outflow we use - or we use brackets you have to use always - - - or you have to use all these bracket bracket bracket bracket okay so you use brackets for negative or instead of neck in their cash flow from financing you have investment of 10000 this is money coming in we say casual well you have dividend or my older coming out and then you have separate cash flow from operating activities mm then you have cash flow from financing activities nine thousand and then you have let's say financing painted in AD by homeowners so cash flow from operating from investing from finance okay so investing is on the distance all right here it gives you the find of a number over here and this mine alone six eight twenty must equal this one eight one on the balance sheet so the numbers must correspond okay let's see what else you have to finish so statement of cash flow is always your specific period of time we shave it for family money coming in money going up it still tells you the following where did cash come from with all this cash input sources of cash coming in what was cash used for Nana was where the cash go out sources of or cash out and what was the in the balance get cash go up for cash go down okay sometimes business will make some money in the disabled why we make so much money but the end of the month less cash and the answer is maybe you purchase a proof lens you buy a pregnant or says of course your cash is going to go down right you make money with you convert your profit into more sales or you take leave it and out okay you just take the money out if you pay for your house or for something else so sometimes business and wonder why we make such a good month so much profit and then there's so little cash and the answer is this is the profit from the business you either purchase something like a business card or you buy a second restaurant okay that was this is like reinvesting in their own business or you took them out and spend it on vacation or something else you buy you some towels or something else so it - what is the cash balance and explains why your cash goes up or cash goes down review question okay statement is prepared for a specific date and I explained the balance sheet is for a specific day this is for a period this is for a period this is worth here is it over company's net income okay okay finally you can get a lot of jobs in accounting accounting Scott you got jobs in government as many as you know we can be hotel it can be restaurant computer software you name any kind of business the most common job in the world is account okay if you do a good accounting you can always find the job is it account account see alright good enough
