26 February 2017

How to debit and credit prepaid insurance

 

Prepaid insurance is a common example of prepaid expenses. What is a prepaid expense? A prepaid expense is the payment of an expense that the benefit will expand over more than one accounting period. Although we call it “expense”, accrual accounting treats a prepaid expense initially as an asset.

 

This post is part of the “how to debit and credit” tutorials that describe how to record accounting transactions. In the basic accounting tutorials, we use the transactions of Frontier Advertising Company (FAC). For simplicity, we assume that FAC uses accounting period of one month. Three levels of transaction analysis will be adopted (that is, the basic analysis, analysis using accounting equation, and debit-credit analysis). According to those analyses, you will easily understand how transactions are recorded in the general journal.

Index of how to debit and credit tutorial

What is a prepaid expense?

A prepaid expense arises when a company pays cash advance to cover some expenses that the benefit will expand over more than one accounting period. Although it is called an “expense”, accrual-based accounting should record a prepaid expense or prepayment initially as an asset. At the end of the period, prepaid expense accounts usually require adjustments to reflect the “consumed” or “used-up” portion as expenses in the current period.

The most common examples of prepaid expenses are insurance expense, rent expense, and supplies expense.

 

How to debit and credit payment of prepaid insurance?

On January 4, FAC pays $600 for insurance policy. The insurance policy covers one-year period that means it will expire on December 31. How to debit and credit this transaction?

 

Basic transaction analysis

The asset in the form of prepaid insurance of $600 arises. The other asset, cash, decrease $600. The payment is recognized as an asset since it extends to more than the current accounting period (the month of January).

 

Accounting equation analysis

Accounting equation can be used to show the economic effects of an accounting transaction. It states that the total value of a company's assets must always equal the combined value of its liabilities and its owners' equity.

In this illustration, the effects of the cash payment and the increase in prepaid insurance can be shown in terms of the accounting equation as follows:How to debit and credit payment of prepaid insurance?

The amount in parentheses means it has a subtracting effect or minus sign.

 

Debit-credit analysis

According to the debit-credit rule, the increase in assets is debited. Since the payment is related to more than the accounting period of one month, we treat the payment as having future benefit. From the accounting point of view, the Prepaid Insurance account is debited $600.

According to the debit-credit rule, the decrease in assets is credited. The payment in cash means that the cash paid is no longer held by the company. Technically, the Cash account is credited $600.

How to debit and credit payment of prepaid insurance?

 

Journal entryHow to debit and credit payment of prepaid insurance?

In a manual accounting system, the journal entry is recorded in a general journal book. The general journal is made of pages with several columns for date, account title, account code, reference, and debit and credit amounts. Periodically, a batch of debit and credit amounts in the general journal are posted to the relevant accounts in the general ledger.

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25 February 2017

How to debit and credit: payment of rent expense

 

What is an expense? An expense is the cost of asset consumed or the cost of service used in the process of earning revenue. It is a component of profit or loss that decreases owner’s equity. In business, expenses arise from operating the company.

 

This post is part of the “how to debit and credit” tutorials that describe how to record accounting transactions. In this basic accounting level, we use the transactions of Frontier Advertising Company (FAC). For simplicity, we assume that FAC uses accounting period of one month. Three levels of transaction analysis will be adopted (that is, the basic analysis, analysis using accounting equation, and debit-credit analysis). According to those analyses, you will easily understand how transactions are recorded in the general journal.

Index of how to debit and credit tutorial

Why does a company incur expenses?

A company incurs expenses as it consumes economic resources in the process of earning revenue. For example, the office used by an advertising company requires the use of electricity, services performed by employees, and office supplies. In accounting, expenses are recognized and recorded to reflect the cost of such resources that has been consumed or used up. On the other hand, the cost of resources that still has future benefits is recorded as assets.

 

How to debit and credit payment of rent expenses?

On January 3, FAC pays office rent for January in cash, $900. The occupational rent payments are agreed to be made monthly.

 

Basic transaction analysis

The asset of FAC in the form of $900 cash is no longer held by the FAC. On the other hand, the equity component, Rent Expense, arises. The payment is recognized as an expense since it only pertains to the current accounting period (the month of January).

 

Accounting equation analysis

Accounting equation can be used to show the economic effects of an accounting transaction. It states that the total value of a company's assets must always equal the combined value of its liabilities and its owners' equity.

In this illustration, the effects of the cash payment and the incurring of rent expense can be shown in terms of the accounting equation as follows:How to debit and credit payment of rent expenses?

The amount of $900 is in parentheses. It is the conventional accounting notation to show subtracting effect or minus sign.

 

Debit-credit analysis

According to the debit-credit rule, the decrease in assets is credited. The payment in cash means that the cash paid is no longer held by the company. Technically, the Cash account is credited $900.

The debit-credit rule also requires the incurring of expenses to be debited in expense account. Since the rent payment is related to the month of January, the same accounting period, we treat the payment as being consumed by FAC. From the accounting point of view, the Rent Expense account is debited $900.

How to debit and credit payment of rent expenses?

 

Journal entry

How to debit and credit payment of rent expenses?In a manual accounting system, the journal entry is recorded in a general journal book. The general journal is made of pages with several columns for date, account title, account code, reference, and debit and credit amounts. Regularly, a batch of debit and credit amounts in the journal entries are posted to the relevant accounts in the general ledger.

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How to debit and credit: unearned revenue

This post is part of the “how to debit and credit” tutorials that describe how to record accounting transactions. In this basic accounting level, we use the transactions of Frontier Advertising Company (FAC). As in the previous post, we assume that FAC uses accounting period of one month. Three levels of transaction analysis will be adopted (that is, the basic analysis, analysis using accounting equation, and debit-credit analysis). According to those analyses, you will easily understand how transactions are recorded in the general journal.

Index of how to debit and credit tutorial

What is unearned revenue?

A company may receive cash as an advance from customers for delivering goods or services in the future. In practical sense, it means that the cash receipt implies the incurring of liability, an obligation to render services or deliver goods. In accounting, such an obligation is called unearned revenue. Although we say it “revenue”, the unearned revenue is considered and treated as liability.

 

How to debit and credit unearned revenue?

On January 2, FAC receives a $1,200 cash from J. Bieber. Bieber is the first client of FAC who agree to pay an advance for advertising services that are expected to be finished by March 31.

 

Basic transaction analysis

The asset of FAC in the form of $1,200 cash increases (becomes available for use), and the liability in the form of $1,200 Unearned Service Revenue is incurred. In this case, FAC incurs the liability because the advertising service has not been performed yet.

 

Accounting equation analysis

Accounting equation can be used to show the economic effects of an accounting transaction. It states that the total value of a company's assets must always equal the combined value of its liabilities and its owners' equity.

In this illustration, the effects of the cash receipt and the incurring of unearned revenue can be shown in terms of the accounting equation as follows:

How to debit and credit unearned revenue?

 

Debit-credit analysis

According to the debit-credit rule, the increase in assets is debited. The asset of $1,200 cash becomes available in FAC. In accounting terms, the Cash account is debited $1,200.

The debit-credit rule also requires the increase in liabilities to be credited. The incurring of obligation to perform future advertising service increases a liability, an Unearned Service Revenue of $1,200 in FAC. From the accounting point of view, the Unearned Service Revenue account is credited $1,200.

How to debit and credit unearned revenue?

 

Journal entry

How to debit and credit unearned revenue?In a manual accounting system, the journal entry is recorded in a general journal book. The general journal is made of pages with several columns for date, account title, account code, reference, and debit and credit amounts. Regularly, a batch of debit and credit amounts in the journal entries are posted to the relevant accounts in the general ledger.

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How to debit and credit purchase of equipment

This post is part of the “how to debit and credit” tutorials that describe how to record accounting transactions. In this basic accounting level, we use the transactions of Frontier Advertising Company (FAC). As in the previous post, we assume that FAC uses accounting period of one month. Three levels of transaction analysis will be adopted (that is, the basic analysis, analysis using accounting equation, and debit-credit analysis). According to those analyses, you will easily understand how transactions are recorded in the general journal.

Index of how to debit and credit tutorial

What’s happening when a company purchases equipment?

When a company purchases an asset such as supplies and equipment, it receives the asset from a supplier. If the purchase is for cash, the company pays cash to the supplier in exchange for the asset. If the purchase is on credit, the company incurs a liability. The most common liabilities are accounts payable and notes payable.

 

How to debit and credit the purchase of equipment?

On January 1, FAC buys some pieces of equipment to be used in the office. They cost $5,000 in total. FAC signs a note payable of $5,000, 3-month period, 12% interest, to complete the transaction.

 

Basic transaction analysis

The asset of FAC in the form of equipment valued at $5,000 increases (becomes available for use), and the liability in the form of $5,000 Note Payable is incurred.

 

Accounting equation analysis

The accounting equation is used to show the economic effects of an accounting transaction. The accounting equation states that that the total assets must always equal the combined value of its liabilities and its owners' equity.

In this illustration, the effects of equipment acquisition and the incurring of notes payable can be displayed in terms of the accounting equation as follows: How to debit and credit the purchase of assets?

 

Debit-credit analysis

According to the debit-credit rule, the increase in assets is debited. The equipment at cost of $5,000 become available in FAC. In accounting terms, the Equipment account is debited $5,000.

The debit-credit rule also requires the increase in liabilities to be credited. The purchase made on credit incurs a liability, a Note Payable of $5,000 in FAC. From the accounting perspective, the Notes Payable account is credited $5,000. How to debit and credit the purchase of assets?

 

Journal entry

How to debit and credit the purchase of assets?In a manual accounting system, the journal entry is recorded in a general journal book. The general journal is made of pages with several columns for date, account title, account code, reference, and debit and credit amounts. Regularly, a batch debit and credit amounts in the journal entries are posted to the relevant accounts in the general ledger.

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24 February 2017

How to debit and credit investment by owner

In this post and the other “how to debit and credit” tutorials, we will illustrate how to record transactions. For the basic accounting level, we will use the transactions of Frontier Advertising Company (FAC). For simplicity, we assume that FAC uses accounting period of one month. Three levels of transaction analysis will be illustrated (that is, the basic analysis, accounting equation analysis, and debit-credit analysis). Based on those analyses, we will show you how each transaction is entered to the general journal.

Index of how to debit and credit tutorial

What is the owner’s investment transaction?

In a sole proprietorship, the owner invests his/her personal assets when he/she decides to start a new business. The assets may take the form of cash, on hand or in the bank account, or other resources to be used in the business. For accounting purpose, the owner and his/her company are viewed as separate entities, and we will apply accounting for the owner’s investment transaction from the company’s perspective (the entity assumption).

 

How to debit and credit investment made by owner?

On January 1, S. Gomez (the owner) puts $10,000 cash in a new advertising company. The company is called Frontier Advertising Company (FAC).

 

Basic transaction analysis

The asset of FAC in the form of $10,000 Cash increases (becomes available), and the owner’s equity, S. Gomez, Capital, also increases $10,000.

 

Accounting equation analysis

The accounting equation can be used to show the economic effects of an accounting transaction. The total value of a company's assets must always equal the total value of its liabilities and its owners' equity.

In our illustration, the effects of cash receipt by the company and Gomez’s investment can be displayed in terms of the accounting equation as follows:

How to debit and credit investment by owner transaction

 

Debit-credit analysis

According to the debit-credit rule, the increase in assets is debited. The $10,000 invested by S. Gomez makes the cash available in FAC. From the accounting point of view, the Cash account is debited $10,000.

According to the debit-credit rule, the increase in owner's equity is credited. The investment made by S. Gomez increases her equity in FAC. From the accounting point of view, the S. Gomez, Capital is credited $10,000.

How to debit and credit investment made by owner?

 

Journal entry

How to debit and credit investment made by owner?

In a manual accounting system, the journal entry is written down in a general journal book. The general journal book consists of pages with several columns for date, account title, account code, reference, and debit and credit amounts. Periodically, a batch of the debits and credits of journal entries is posted to the relevant accounts in the general ledger.

In the next post, we will discuss how to debit and credit the purchase of assets.

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21 February 2017

What is an account?

This video defines what an account really is. An account is an accounting record of increases and decreases in a specific asset, liability, or equity item. In its simplest form, an account consists of three parts: (1) a title, (2) a left or debit side, and (3) a right or credit side. The meaning of debit and credit balance in accounting is also explained. As you will see, normal balance is a critical concept in double-entry accounting system.

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17 February 2017

[VIDEO] Persamaan akuntansi dan laporan keuangan

Video ini merupakan seri kedua materi pengantar akuntansi yang dikembangkan melalui media audiovisual. Seri ini menjelaskan definisi elemen-elemen persamaan akuntansi (aset, liabilitas, dan ekuitas) serta menjelaskan teknik penyusunan laporan keuangan (laporan posisi keuangan, laporan laba-rugi, laporan perubahan ekuitas, dan laporan arus kas) dengan menggunakan persamaan akuntansi.

Indeks video lainnya:

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01 February 2017

[VIDEO] Apa itu akuntansi?

Video ini merupakan seri pertama materi pengantar akuntansi yang dikembangkan melalui media audiovisual. Seri ini menjelaskan definisi akuntansi, pengguna informasi akuntansi, manfaat informasi akuntansi dalam pengambilan keputusan, tinjauan umum profesi akuntansi serta isu etika dalam akuntansi, serta asumsi-asumsi yang mendasari praktik akuntansi keuangan.

Indeks video lainnya:

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30 July 2016

Manajemen keuangan pribadi dan literasi keuangan

Anda bekerja, berpenghasilan, tapi mengapa uang Anda seperti menguap begitu saja. Tagihan menganga, utang menggunung, sementara anak-anak semakin besar dan biaya pendidikan mereka juga meningkat. Ya, Anda tentu ingin uang lebih banyak lagi untuk mengatasi semua itu. Tapi ketika penghasilan Anda bertambah, ternyata pengeluaran menjadi lebih banyak lagi. Akibatnya, Anda tetap berada pada masalah yang sama. Tagihan masih menganga, utang tetap menggunung.

Jika Anda mengalami penderitaan semacam itu, saatnya Anda melakukan introspeksi. Barangkali ada yang salah dengan cara Anda mengelola uang. Walaupun banyak uang, Anda mungkin tidak tahu cara untuk menggunakannya secara optimal. Jika demikian, Anda harus lebih serius dengan pengelolaan uang dan belajar bagaimana membelanjakan uang itu sebaik-baiknya…

Bagaimanapun juga, Anda ternyata tidak sendirian. Konsumerisme, rendahnya kesadaran akan pentingnya mengelola uang secara serius, dan kurangnya wawasan tentang pentingnya menabung dan berinvestasi, dengan sedikit didramatisasi bisa dikatakan, merupakan masalah nasional.

Bekerja sama dengan berbagai asosiasi industri jasa keuangan, Otoritas Jasa Keuangan (OJK) telah melakukan upaya-upaya edukasi keuangan kepada masyarakat sejak tahun 2014. Portal Web sikapiuangmu.ojk.go.id hanyalah salah satu contoh dari upaya itu.

Sayangnya, tekanan Pemerintah sepertinya lebih kepada upaya memperkenalkan masyarakat pada produk dan layanan bank dan institusi keuangan lainnya. Dengan kata lain, literasi keuangan, istilah ini diserap dari istilah Bahasa Inggris “financial literacy”, lebih banyak diartikan sebagai penguasaan pengetahuan mengenai tabungan, asuransi, reksa dana, dana pensiun, dan sejenisnya yang dihasilkan oleh institusi keuangan.

Tapi tujuan tulisan ini bukan untuk mengevaluasi kebijakan Pemerintah. Cukup Anda tahu, Pemerintah peduli dengan bagaimana rakyatnya membelanjakan uang untuk tujuan-tujuan yang lebih produktif. Selebihnya, mari kita belajar…

Lantas, apa itu manajemen keuangan pribadi?

Semoga istilah “manajemen” tidak terkesan terlalu akademik. Saya harus mengingatkan diri sendiri bahwa target audien saya kali ini bukan hanya mahasiswa. Agar lebih terkesan praktis, istilah “manajemen” akan digunakan secara bergantian dengan “pengelolaan”, yang secara sederhana berarti mengurus sumber daya (yang jumlahnya terbatas) untuk mencapai tujuan tertentu.

Sumber daya bisa apa saja: manusia, uang, tanah, air, mineral, alat produksi, teknologi, pengetahuan…apa saja yang bermanfaat bisa dianggap sumber daya. Ketika uang diurus untuk tujuan tertentu, aktivitas dan keputusan dalam mengurus uang itu dinamakan manajemen keuangan. Dan ketika subyek yang berurusan dengan uang itu adalah Anda, sebagai individu atau “bendahara keluarga”, yang tentu memiliki tujuan-tujuan tertentu, itu berarti Anda sedang melakukan manajemen keuangan bagi diri Anda atau keluarga Anda. Anda adalah manajer keuangan, pengambil keputusan keuangan, bagi diri Anda atau keluarga Anda.

Sebagai manajer, Anda akan dihadapkan pada pertanyaan: untuk apa uang Anda? Anda punya kebutuhan dasar. Anda sudah berkeluarga atau belum, punya anak atau belum. Anda juga punya selera dan hobi. Semua itu akan menentukan preferensi Anda dalam menggunakan uang.

Sayangnya, seperti sumber daya lainnya, uang Anda jumlahnya terbatas. Orang yang paling kaya sekalipun jumlah uangnya bisa dihitung. Di sinilah pentingnya manajemen keuangan pribadi. Pertanyaan dasarnya adalah: dengan keterbatasan uang yang Anda miliki, bagaimana Anda mencapai tujuan keuangan Anda atau keluarga Anda.

  • Anda perlu menyusun rencana keuangan (anggaran), jangka pendek dan jangka panjang, untuk menjabarkan tujuan keuangan dalam angka-angka.
  • Anda harus menabung untuk mengantisipasi hal-hal tak terduga.
  • Jika memungkinkan, Anda mencoba membeli produk asuransi, produk investasi, atau dana pensiun.
  • Anda mungkin memutuskan meminjam uang untuk membeli rumah atau kendaraan.
  • Dengan semakin terkumpulnya kekayaan, Anda mulai serius dalam merencanakan pembayaran pajak.

Meskipun tujuan dan preferensi setiap individu atau keluarga berbeda, ada “praktik terbaik” yang menjadikan Anda mampu mengurus uang secara optimal untuk mencapai tujuan keuangan Anda dan keluarga.

Manajemen keuangan pribadi bukan hanya bagi orang dewasa yang berpenghasilan. Bagi pelajar atau mahasiswa, uang saku yang mereka terima dari orang tua juga merupakan “penghasilan” ketika mereka memiliki kebebasan untuk menggunakannya. Karena itulah banyak yang mengusulkan agar manajemen keuangan pribadi dimasukkan dalam kurikulum pendidikan, bahkan dari tingkat dasar sampai perguruan tinggi.

Paparan di atas sebenarnya sudah mencakup seluruh aspek manajemen keuangan pribadi. Secara singkat, saya menyebut manajemen keuangan pribadi atau pengelolaan keuangan pribadi sebagai “pendekatan rasional terhadap uang” yang digunakan setiap orang atau keluarga untuk mencapai tujuan-tujuan keuangan.

Literasi keuangan secara sederhana berarti penguasaan seseorang terhadap pengetahuan dan keterampilan terkait manajemen keuangan pribadi. Istilah “literacy” mengingatkan saya ke masa kecil, ketika Pemerintahan Soeharto memberantas buta huruf di tahun 1980an. Orang yang mampu mengelola uang secara efektif boleh disebut “melek duit” atau “financially literate”, sedangkan orang yang konsumtif, besar pasak daripada tiang, disebut “buta duit” atau “not financially literate”.

Termasuk dalam golongan orang yang manakah Anda?

(terakhir di-update 30 Juli 2016 – bersambung)

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19 April 2016

Properti yang digunakan sendiri: definisi menurut PSAK 13

daftar istilah akuntansi

Properti yang digunakan sendiri adalah properti yang dikuasai ( oleh pemilik atau lessee
melalui sewa pembiayaan) untuk digunakan dalam produksi atau penyediaan barang atau jasa atau untuk tujuan administratif.

Sumber: Pernyataan Standar Akuntansi Keuangan 13 Properti Investasi, paragraf 5 (PSAK 13.5)

Owner-occupied property is property held (by the owner or by the lessee
under a finance lease) for use in the production or supply of goods or
services or for administrative purposes.

Sources: International Accounting Standard 40 Investment Property, paragraph 5 (IAS 40.5)

Penjelasan tambahan.

Properti yang digunakan sendiri mencakup di antaranya: properti yang dikuasai untuk digunakan di masa depan sebagai properti yang digunakan sendiri, properti yang dimiliki untuk pengembangan di masa depan dan selanjutnya digunakan sebagai properti yang digunakan sendiri, properti yang digunakan oleh karyawan (dengan atau tanpa pembayaran rental sesuai harga pasar oleh karyawan) dan properti yang digunakan sendiri yang menunggu untuk dijual.

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