Jacksonville CPA | Opening Up Your Checking Account
Good morning and welcome to the podcast. This is Brandon Mcelroy and I’m the president of Mineva, Jacksonville based tax and accounting firm. So Mineva, our mission is to lead guide and direct our clients everything that we do. So we just want to educate you today on the different accounting terms, transactions, financial statements. I’m just so you can know you don’t need to be an expert just so you can know the information that you need to run your business to understand your numbers. So if you’re a Jacksonville CPA is not helping you with these things, then please give them an eva a call. Um, and Mr Robb Smolan is an accounting professor and so we’re just going to see what he has to say about accounting transactions and analysis
account, opening a business checking account and they issue shares of stock to themselves. Is this is a corporation. Okay, so cash is an asset. Assets increased. Now it’s not a liability. We don’t owe this money to anybody. Therefore, if we have an asset of 10 and we don’t have a liability, it’s gotta be stockholders equity. When we make an investment in exchange for shares of stock, we show that increase to stockholders equity in the common stock account or capital stock account, and that’s what we see in our slide here. Assets cash in particular increased by 10,000 stockholders’ equity increased and we put the increase in the common stock account. Now remember, there’s no such account called assets. Assets as a category within assets, we have cash, accounts receivable, supplies, inventory, land building, equipment, et cetera. We don’t have an account called liabilities as a category.
Within liabilities we have accounts payable, unearned revenue, notes payable, wages payable, interest payable, Cetera, and again, stockholders’ equity is not an account, it’s a category. Within stockholders’ equity, we have common stock retained earnings, and of course within retained earnings we have richmond, new expense and dividends. Okay, so here’s our first transaction. Later on we’ll see what this looks like as a journal entry. Okay, so we’ve funded the company, we have injected money into the company and now before we can start providing services, we typically have to buy supplies, equipment, et cetera. Okay. On October first we borrowed some money. We needed some more money, so we borrowed $5,000 from the bank and we signed a three month, 12 percent.
If you have a Jacksonville CPA that is not meeting your needs and that you are not happy with, please give them a neighbor a call so we can help you grow your business. $5,000. Note payable. We signed what’s called a promissory note.
We needed a little bit more cash to start up with and we plan on paying this back relatively quickly and we’re going to have to pay 12 percent interest for three months. Alright, so we have $5,000 more cash. So notice we put a plaza, we increased cash, assets increased. So the left side increased. The right side has to increase and we owed this money to the bank. That’s a liability. We’re going to put it under notes. Paly, I know payable is when you borrow money from a bank and account payable is when we do transactions with a vendor. For example, buying supplies, buying inventory. I’m paying a security guard service companies that provide business on a regular basis, that’s an account payable. We borrow money, it’s a note payable. Okay, so our accounting equation assets equal 15,000 and the right side liabilities of five plus equity of 10. The right side has 15 were inbound. We’re always in balance on October second, ABC purchased office equipment by paying $5,000 cash to staples equipment sales company. Okay, so we paid cash, cash went down and now we have a $5,000 piece of office equipment. Perhaps it’s a, you know, a fancy copy machine for example. Okay, so one asset, increased equipment, one asset decreased cash toe.
So talking about assets, liabilities, equity, things like that, things that you need to know, um, in your business. So if you’re Jacksonville CPA is not focused on educating you, giving you the information you need to be financially successful, then please give me a call.
What a laugh. It stayed the same. We still have $15,000 on the left side. We have a 5,000 liability and we have 10,000 in stockholders’ equity. Okay? So this transaction involved in asset and an asset. Let’s go back and look at the previous transactions. The first transaction we had an asset and stock holders, equity, cash and common stock. Second transaction, we had an asset and a liability. Cash and notes payable. Third Transaction, we have two assets, cash and equipment. One acid increased by five. One asset decreased by five. Total assets stayed the same. Next transaction on October, second, ABC is ABC, received 1200 cash from swollen. I know that guy. He’s one of our clients. Okay, so swollen gave us $1,200 and he expects to receive service of some sort. Whatever the company does in the near future, he simply paid for the service in advance.
Now, in accounting and in a future lecture every shipped into future lecture, we’re going to find out that in order for us to record revenue, we have to actually do the work. Revenue has to be earned well here. The money was paid in advance or it has not yet been earned, so we can’t call it revenue. Instead, we call it on earned revenue. Now I know the word revenue is in there, but the word on earned right here tells us that it is a liability. Okay? Because we have an obligation to provide service in the near future, so an asset cash increased by 1200 and now liabilities on the right side increased by 1200 as well. So again, we are still in balance. Jacksonville CPA Now when we provide service, we will then transfer the $1,200 out of the liability, unearned revenue and into the revenue account called service revenue. And we call that an adjusting entry. And that’s in the following chapter, will talk more about that next transaction. On October third, ABC received $10,000 cash from Kristin Company for advertising services performed. Okay, so we provide advertising services. That’s what our business does. We have our expertise there. People hire us, we build ads for them, magazine ads, billboard ads, whatever. And they pay us well. This company hired us to develop an ad for them and they paid us $10,000 cash. Okay. For advertising services performed.
So if you have a Jacksonville CPA that is not helping you achieve your financial goals, then please give Mineva a call. And we will lead guide and direct you into financial freedom. So there are many Jacksonville CPAS. I’m so that are not, have not the slightest clue how to help you grow your business. They’re are just focused on, um, the compliance work needed to make the government happy. So we don’t want to just make the government happy. We want to make you as a small business owner happy as well.
Okay, so notice cash increased assets and on the right side, under stockholders’ equity we see a 10,000 increase and we’re putting it under the retained earnings umbrella, if you will, but more specifically in the revenue account service revenue, it looks just as revenue here we would call the service revenue. Sometimes you would call it fees earned or fees. Earned revenue, as you’ll find in accounting, is more than one way to say the same thing. And this is just one of many examples. Okay? So cash is an asset. It increased service revenue, if you remember from last lecture, increases retained earnings, which is stockholders’ equity. So we remained in balance.
Okay? Next transaction on October third, ABC Corporation paid his office rent for the month of October in cash for $9,000. She will be $900. Okay, so we pay rent by the month typically, and rent is simply a cost we have to incur now a cost we incur to run our business, we call an expense, so we’re going to call this rent expense. We know that at rent expense, like all my expenses is part of retained earnings and it reduces retained earnings, so we paid cash. Cash is an asset. It decreased expenses, decrease retained earnings, which has stockholders equity. Okay, so we paid cash, we record an expense, okay? And equity goes down and we remain in balance Jacksonville CPA.