Financial_training_DAX2009(12)

1. Basic concepts

The debit part for the Cash account is used, because the company’s cash is increased (it is “good” for the company). The credit part for the Customer account is used, because the Customer has decreased his debt to the company (it is “bad” for the company, because the Customer’s debt is decreased). If we look at the Customer account, we can see the following:

We can see that the Customer amount is zero ($15 (Debit) – $15 (Credit)). In other words, the Customer pays for the items, and has no debt to our company.

In real life, we receive the money for the pizza the same time when we deliver it. In this case, the payment transaction is included in the sales operation. But, when the company sells items to other companies, the payment occurs during the payment period. It can be 2 weeks, 1 month, or even 3 months after the items are delivered, in other words, during any time period.

Remember that the revenues are recognized as soon as a product has been sold, regardless of when the money is actually received. It is the accrual basis of accounting the type of revenue recognition

principle. Note that in our example, we calculate the revenue before the payment operation. It doesn’t matter when the payment occurs, because we assume that the money already belongs to us.

Chart of Accounts

You can ask how many accounts there can exist. Each company has its own set of accounts. An

account contains information about the amount of money that is used. One company sells books and has the Books account, another company sells cars and has individual accounts for each car brand (Fiat, ZAZ, Daewoo, Mercedes, etc). For convenience, the smart accountants who lived several centuries ago classified all accounts by groups.

The main groups of accounts are:

1. Assets:

o Current asset: Cash, Accounts receivable, Inventory

o Property, Plant, and Equipment: Land, Buildings, Equipment, Vehicles

2. Liabilities:

o Current liabilities: Accounts payable

3. Owner’s equity

4. Profit & Loss: Operating revenues (Sales), Cost of goods sold, Expenses

1. Basic concepts

The accounts used in this training belong to the following groups:

Figure 1.7 Account groups

A chart of accounts is a listing of the account names that a company has identified. In Microsoft

Dynamics AX, the chart of accounts can be opened under General ledger > Common Forms > Chart of Account Details.

Figure 1.8 Chart of accounts