How do I understand accounting subjects and financial statements?

Accounting subjects are only statistical classifications of management information. Management personnel can add accounting subjects as needed.
 
There is a joke circulating by accounting personnel: a company's financial situation is not very good. By the end of the year, when the annual bonus is issued, the accountant will propose an amount for the boss to raise money. The boss pointed to the balance sheet and said, "aren't there many year-end bonuses on our account? Why don't we get them out ?」 Make the accountant laugh.

In fact, "year-end bonus Preparation" is an accounting subject for liabilities. It indicates the amount of year-end bonus that an enterprise owes to its employees. to issue a year-end bonus, you must check the amount of money in "bank deposits. This boss is not familiar with accounting subjects, so he will make a joke.

‧ Accounting subjects are statistical classifications of Management Information

Accounting subjects are often unpredictable to managers who do not understand accounting. Therefore, they do not want to view financial statements, but do not have any opinions on the purpose of accounting. In fact, the accounting subject is only a statistical classification of the enterprise management section. Therefore, if you understand the nature and structure of the accounting subject, every administrator can not only understand the financial statements, in addition, it can design accounting subjects to make accounting information a good management.

Accounting subjects are the basis for recording by accounting personnel. They are divided into five categories: (1) assets (2) liabilities (3) Capital (4) Income (5) cost (cost ). It is described as follows:

I. Assets: all valuable resources owned by an enterprise, which can be divided into three categories: current assets, fixed assets, and other assets. Current assets refer to the assets in which cash and enterprises want to turn into cash. Such as bank deposits, accounts receivable, and inventories. Fixed assets refer to assets that enterprises do not want to sell but are used for a long time, such as land, houses, and machines. Other assets refer to intangible assets, unapportioned expenses, and deposits.

Ii. Liability: refers to the debt of an enterprise, which can be divided into current liabilities, long-term liabilities and other liabilities. Current liabilities refer to liabilities of less than one year, long-term liabilities refer to liabilities of more than one year, and other liabilities refer to liabilities incurred for non-financial purposes, such as deposit, collection, and various losses.

Iii. Capital, also known as shareholder equity, is a part of the enterprise's shareholders, so it is equal to the difference between assets and liabilities. Capital can be divided into two types: equity and surplus. The share capital is the part invested by shareholders, and the surplus is the part earned by enterprises.

4. Income: refers to the income generated by an enterprise to sell products or provide services. The income can be divided into two types: business income and non-business income. The business income is the income of the enterprise within the predetermined business scope, non-profit refers to the income outside the pre-defined business scope, such as the interest income of non-financial industries.

5. Expenses: expenses incurred due to income, which are divided into four sub-categories: direct cost, sales cost, management cost, and non-business cost. The so-called direct cost is that the expenditure can be directly attributed to a business income, such as the sales cost and material cost. Sales expenses refer to expenses incurred for business purposes, but cannot be directly attributed to a business income, such as advertising fees and salaries of business personnel. Management expenses are the expenses that must be paid to maintain the operation of an enterprise, such as salaries and rental expenses of management personnel. Non-operating expenses refer to financial expenses, investment losses, and other expenses that are not necessary to achieve business income.

The income and expenditure mentioned above are not limited to the income and expenditure of cash and bank deposits. in accounting, it refers to the occurrence of creditor's rights and debts, that is, the basis for the occurrence of rights and responsibilities 」.

‧ Constant relationship among accounting subjects

The preceding five types of accounting subjects are listed in the financial statements. Three types of assets, liabilities, and capital constitute the balance sheet, which expresses the results of enterprise operations. Therefore, they are called real accounts. Profits and expenses constitute a profit and loss statement, which expresses the situation of enterprise management and finally changes to Enterprise Profit and Loss. Therefore, it is also called a virtual account. The relationship is as follows:

Income-cost = Profit and Loss

Assets = Liabilities + share capital + Profit and Loss

4. Separate accounting subjects for different purposes:

Insurance → labor insurance, fire insurance, water insurance
Intercommunication fee → business intercommunication fee, management intercommunication fee.
Indirect labor → repair fee, transportation fee, insurance fee, and Transportation Vehicle Fee

These accounting subjects are set up to allow financial statements to fully express the information required by managers, so that management personnel can discover problems, take actions, and make full use of key management effects.

‧ Generate a detail table with sub-accounts

In order to further grasp the detailed information, the accounting system also has a sub-subject design. sub-accounts are generally affiliated with three types of accounting subjects: assets, liabilities, and capital, which are more detailed categories. The biggest difference between a subaccount and an accounting subject is that the subaccount will not appear in the financial report and will only be attached to the financial report as a Appendix "for checking or managing ".

In short, accounting subjects are only statistical classifications of management information. Management personnel can add accounting subjects and subaccounts only according to management needs without considering accounting expertise, accounting information can be managed more efficiently.

Therefore, the management personnel can determine the purpose of the accounting department, master the required information, and verify the profit and loss authenticity by the formula above.

Accounting subjects refer to the statistical categories that may appear in the financial statements. They are generally used to setting (but management personnel can also add their own subjects as needed ), most accounting subjects and management personnel are expected to understand, but there are a small number of accounting subjects that need special explanation:

I. Prepare for bad debts: This subject aims to prevent some of the accounts receivable and bills receivable from bad debts, but it cannot be confirmed at present. Therefore, we should first estimate a bad debt number, in the statement of profit and loss, it is regarded as a loss, and the secondary account is listed under the receivables in the balance sheet, which is the Offset Account of the receivables (bills). In the future, when there will be real bad debts, reduce the amount of accounts receivable and the amount of funds used to offset the amount of bad debts at the same time, without affecting the capital (profit and loss. As a result, the more your account is, the more real your company's capital is.

Ii. Accumulative depreciation: This subject is used to express the depreciation of a fixed asset due to its use. The depreciation amount is usually set separately based on the service life of the asset, however, since it is only an estimated amount, only the amount payable under the assets in the balance sheet will be expressed. In the future, when assets are scrapped, the amount of assets and accumulated depreciation will be reduced at the same time, nor will it affect the shareholder's rights and interests.

Iii. Deferred charges: if the amount of some expenses is large and the effectiveness of the expenses exceeds the accounting period, these fees will be deferred XX (such as deferred advertising fees) accounts are recorded as assets and amortized on schedule. The larger the amount of such assets, the greater the burden on enterprises.

Iv. Preparations: Preparations refer to the future expenditures of enterprises. Therefore, they are uncertain liabilities, such as pension preparation and land value-added tax preparation, the purpose of these preparations is to inform the management personnel of the amount of money that the enterprise may have to pay in the future. In fact, the money is not prepared. Therefore, a stable enterprise often saves the prepared amount to a bank account, the bank account and the preparation account will be deducted at the time of future payment.

V. Public Debt: The amount of the company's surplus saved in the enterprise. It can be converted into a share capital in the future. Therefore, the more the company has, the better the financial system.

. Enterprise administrators can ask for special subjects

Without special requirements, accounting personnel usually set accounting subjects fairly simple to facilitate the operations of accounting personnel, but in order to meet the management needs, managers should understand the requirements of accounting personnel to set special subjects:

For example, in order to grasp the key points of enterprise operations, the management personnel can set more detailed accounting subjects for large amounts of matters and matters with high elasticity, or set some accounting subjects for abnormal situations, it can also work with budget management to set the corresponding accounting subjects. The following are some examples:

I. Use accounting subjects for more detailed classification of matters with a large amount:

Sales → sales of Class A products and sales of Class B Products ‥
→ Goods sales in Area A and goods sales in Area B ‥
Materials → Class A materials, Class B materials, dull Materials ‥
Receivables → export accounts receivable, internal sales accounts receivable, and collection accounts.

2. Separate special costs from normal costs for exception management.

Material cost → standard material cost, waste product, and disk damage
Direct Labor → labor cost, ineffective labor
Manufacturing Cost → manufacturing cost, project cost

3. expenses should be used with enterprise organizations to facilitate budget management.