Fico: accounting equations

Preface:
Some consultants said that the highest level of using SAP for Fico is to forget to borrow money. Well, this is probably an amazing word for SAP.
As a business software (FICO should calculate this type), it is based on business principles, and we use it to make full use of it thoroughly and flexibly. The basis and concept of its design (Business Principles) how can I forget it? Why forget it ?!
The following is a summary of the experience of some friends on the Internet, which shows the feelings of friends who have no financial background or insufficient financial knowledge.
Although these content is a small case for me who have received professional financial training, it is not enough to examine or learn from them with an open mind.

Text:

After understanding the true meaning of this sentence, no matter how complicated the business is, it is easy to record the loan entries.

First, mark all accounting subjects and amounts involved in a transaction to be recorded and divide them into assets, liabilities, equity, income, and expenses.

Remember the equation:Assets + expenses = Liabilities + benefits + Income

Next, determine the debit and credit:The left and right of the entry are loans. The left side (borrow) of the equation is increment, and the right side (loan) of the equation is increment.. In this way, you can determine whether it is recorded as a debit or a credit based on the increase or decrease in the number of subjects. For example, selling inventory100, Inventory is reduced, cash is increased, cash is assets, increase for borrowing, So borrow: Cash100, Inventory is also an asset, reduced to loan, loan: Inventory100

Finally,Calculates whether the sum of the debit amount of the entry is equal to the credit.

TIPS: according to the principle that lending must be equal, if there is a subject in the transaction that is difficult to determine whether the lending or lending is the same, you can determine it after other subjects, the difference between the borrower and the lender determines the loan. For example, when a bond is issued and you do not know how to record the discount or premium part, assume that the nominal value 1000 RMB bond 1200 Yuan price issued, received cash 1200 , It is easy to determine that it is to borrow: Cash 1200 The increase in bonds payable as liabilities is recorded in the nominal value. Loan: bonds payable 1000 , The remaining bond discount or premium, you can see, the borrower 1200 , Credit 1000 , It is easy to determine the loan: bond discount / Premium 200

In addition, one thing about the equation above can be used to verify that the record is correct. After the entry is completed, the equation is still valid. That is, if the number of assets in an entry increases, the amount of assets, liabilities, equity, and income, will definitely decrease. If such a relationship is not found in the entry, it may be that the wrong direction of the subject is incorrect.

 

ForBad Debt PreparationProblems:

First, you need to understand the relationship between the Bad Debt Preparation balance and the amount accrued for bad debt preparation. Then, because bad debt preparation is the asset's secondary account, its lending direction is opposite to that of the asset (that is, increase is loan, decrease is borrow ).

Under the percentage of accounts receivable balance method: the end-to-end balance of bad debt preparation should be the proportion of accounts receivable × accrued. The end-of-year balance is the credit amount.

In the middle of the year, when a bad debt actually occurs, reduce the Bad Debt Preparation (borrow) and reduce the accounts receivable.

By the end of the year, the provision for bad debt will be increased, and the loss of impairment of assets will be increased ). After the withdrawal, you must ensure that the balance at the end of the year is the proportion (credit) agreed to be accrued ).

From textbooks203For example:

00The Bad Debt Preparation balance at the end of the year should be1200000×3‰ =3600RMB (credit ),

01 in the middle of the year, when a bad debt occurs, borrow: Bad Debt Preparation 5000 , loan: Accounts Receivable 5000 . At this time, the bad debt preparation balance is 1400 (borrower ).

01 change the Bad Debt Preparation balance to 1400000 × 3 ‰ = 4200 (credit), requires loan: Bad Debt Preparation 5600 : impairment loss 5600 . 01 at the end of the year, the bad debt preparation balance is equal to the agreed proportion of accounts receivable 4200 (credit ).

02 in the middle of the year, when a bad debt occurs, borrow: Bad Debt Preparation 2500 , loan: Accounts Receivable 2500 , at this time, the bad debt preparation balance becomes 1700 (credit),

02When the year ends, the bad debt reserve balance should be changed1500000×3‰ =4500(Credit), loan required: Bad Debt Preparation2800, Corresponding, borrow: impairment loss of assets2800. In this way, the accrued Bad Debt Preparation balance is equal to the agreed proportion of accounts receivable.

 

The easiest way to determine the amount of bad debt preparation at the end of the year is to establishTForm account: for example:

Bad Debt Preparation

-------------

Borrow:│ Loan:3600---00End of year

5000│---01Year-on-year bad debt

│X┈01Accrued amount at the end of the year

------│-------

│4200---01Bad Debt Preparation balance at the end of the year (percentage of accounts receivable)

Balance of lending needs:3600 + X-5000=4200Therefore, the accrued amount is as follows:5600