#EXIT_EXAM_FUNDAMENTAL_ACCOUNTING_AND_FINANCE_PART_12

በዚህ ቻናል ሁሉም የአካውንቲግ እና ፋይናንስ ኮርሶች በጥሩ ሁኔታ ተዘጋጅተው ይቀርባሉ። ሰብስክራይብ በማድረግ ቤተሰብ ይሁኑ።
What is accounting?
What are debits and credits?
Rules of Debit and Credit
balance position
What is an Asset in Accounting
What are International Financial Reporting Standards (IFRS)
Types of assets in Accounting
Current assets in Accounting
Non-current assets in Accounting
Intangible assets
a Liability in Accounting
Types of Liabilities
What is Equity
Income and expenses
Accounting principles
Practice accounting entries
Elements of accounting,
Raw materials,
Semi-finished goods,
Fully finished goods,
Deferred income taxes
Other income
Depreciation,
Amortization,
#Financial Health
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The starting point is: where is the normal balance of an account? DC ADE LER tells you: debits on the left, credits on the right. ADE is on the debit side, on the left: Assets, Dividends, Expenses. LER is on the credit side, on the right: Liabilities, Equity, Revenue. Instead of dividends, some people use the broader term drawings. Debits and credits are fundamental to accounting. To understand DC ADE LER, you need to go step by step. We start off with half the terms. Focus first on understanding the accounting equation: assets equal liabilities plus equity. This is sometimes also called the balance sheet equation.
Assets are things that a company owns. OWN. How do assets increase? How do assets decrease? The normal balance of an asset account is debit. Asset accounts increase by recording more debits to it, and decrease by recording credits to it.
Liabilities are things that a company owes. OWE. How do liabilities increase? How do liabilities decrease? The normal balance of a liabilities account is credit. Liability accounts increase by recording more credits to it, and decrease by recording debits to it.
Now for the second half of DC ADE LER. The other three letters that we have not covered yet are all connected with the E of Equity. Equity is also called shareholders’ capital. In a way, this is the amount owed to shareholders. The main driver of income in most companies is revenue. The normal balance for revenue is a credit. This is directly connected to the fact that if companies earn revenue, then the shareholders benefit from this, and equity goes up. However, in order to earn that revenue, companies incur expenses (cost of goods sold, operating expenses, etcetera). The normal balance for an expense is a debit. This is directly connected to the fact that if companies incur expenses, then the shareholders get “hurt” by this, and equity goes down. In reality, it is the difference between revenue and expenses that shareholders look at. If revenues are bigger than expenses, then the company makes a profit, and equity increases. If revenues are smaller than expenses, then the company makes a loss, and equity decreases. Profitable companies could consider paying a dividend to shareholders, a distribution of the profit. This would decrease equity. As the normal balance for equity is a credit, a debit through dividends would reduce it.
Now for the second half of DC ADE LER. The other three letters that we have not covered yet are all connected with the E of Equity. Equity is also called shareholders’ capital. In a way, this is the amount owed to shareholders. The main driver of income in most companies is revenue. The normal balance for revenue is a credit. This is directly connected to the fact that if companies earn revenue, then the shareholders benefit from this, and equity goes up. However, in order to earn that revenue, companies incur expenses (cost of goods sold, operating expenses, etcetera). The normal balance for an expense is a debit. This is directly connect

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