Definition and Classification of Accounts in Accounting

classification of accounts in accounting

An account is a place to record financial transactions that affect the balance of assets, debt and capital.

The account is divided into two, namely:

    real account and nominal account. Real accounts are the types of accounts recorded on the balance sheet, such as assets, debt and capital.
    A nominal account is the account recorded in the profit / loss statement, such as income and expenses.

 Treasure account

Assets or assets are economic resources owned by the company to carry out business activities. Assets can be distinguished as follows:

    Current assets are assets that have a high level of liquidity and a service life of less than one year. For example cash, securities, trade receivables, notes receivable, inventories, equipment, and prepaid expenses.
    Fixed assets, are tangible assets and have an economic life of more than one year. For example land, equipment, buildings, machinery and transportation equipment.
    Intangible assets are assets that cannot be seen clearly but have economic value. For example, patents, copyrights, brands, franchises, and goodwill.
    Long-term investment is the company's assets in the form of securities. For example stocks and deposits.

Debt Account

Debt or liability is the cost incurred to finance the company's business activities. And the debt is divided into two, namely:

    Current liabilities,
    Long-term debt

Current debt is an obligation that must be paid by the company in less than one year. For example notes payable, trade payables, accrued expenses, and income received in advance.

Long-term debt, is an obligation that must be paid by the company in a period of more than one year. For example, bank debt, mortgages, and bonds.


Capital account

Capital is the property of the owner of a portion of the company's assets.


Income account

Revenue is the result obtained by the company for its business activities. Revenue is divided into two, namely:

    operating revenues
    non-business income.
Operating income is income derived from business activities. And non-business income is income derived from activities outside of business. For example, interest income, rent and commission.

Load account

Expenses are costs incurred by the company for running business activities. Expenses are also divided into two, namely:

     operating expenses
     expenses outside of business.

Operating expenses are costs incurred as a result of conducting business activities. if the out-of-business costs are costs incurred by the company because of activities outside the business. For example interest expense and rent.

Understanding And Example Of Income Statement

          The income statement is a report that is part of a financial report that contains information about the results of the company's operations, both income and expenses for a certain period.
its existence This profit and loss report is quite important, because this report can be used as a tool to predict future cash flows, many users of financial statements who use this income statement to predict future cash flows, such as investors and creditors. investors and creditors need to predict the company's future cash flows before they inject their funds into the company, of course investors and creditors do not want to inject funds into companies that they value cash flow or poor performance and carry too much risk. when the company experiences a consistent increase in income, although not significant but consistent from year to year, it can be used as a reference by investors and creditors to find out the condition of the company.

 The profit / loss calculation report needs to be arranged systematically and logically. In compiling the company's profit / loss the basis is:

Income / Revenue / Sales

That is the flow of cash receipts or other assets received as a result of the sale of goods / services.

    Cost

That is the cost of goods sold and other expenses in order to earn income.

    Profit and loss

namely the difference between the income received by the company and the costs incurred. If the income is large, the company will make a profit.

Form of Income Statement

1. Single Step
Where is the preparation of profit and loss by taking the total group of accounts in the income statement

2. Multiple Step
That is by classifying estimates of profit and loss according to the part reported in full.

Bad Debt Journal

                                                Uncollectible Account Expense/Bad Debt
Uncollectible Receivables:

Uncollectible receivables arise because of the risk of receivables that cannot be paid by the debtor of the company for various reasons, such as bankruptcy, bankruptcy, major force, customer characteristics, etc. The more accounts receivable given, the more the amount of receivables will not be paid.

There are two methods for treating this Bad Debt:

Direct Method:

Methods that use the method of direct removal of receivables that are truly known will not be paid.

Illustration:

November 30, 2017 The company's trade receivables CV.123 amounted to Rp. 10,000,000 will not be billed because of bankruptcy.

Journal:

D: Uncollectible Receivable Expenses Rp. 10,000,000
K: Trade Receivables Rp. 10,000,000

Upon CV.123 Trade Receivables which had been deleted on November 30, suddenly on December 5, the payment of receivables from CV. 123 worth 10,000,000 was received again.

Then the Journal:

D: Trade Receivables CV.123 Rp. 10,000,000
K: Uncollectible Receivable Expenses Rp. 10,000,000

D: Cash Rp. 10,000,000, -
K: Trade Receivables-CV.123 Rp. 10,000,000


Allowance Method:

       The method that uses indirect removal method is the method of allowance in the calculation of accounts that cannot be collected. There are two basic calculations for the allowance for uncollectible accounts, which consist of:


    percentage of Trade Receivables,
     percentage of Credit Sales


To calculate the amount of allowance for Uncollectible Accounts from the percentage of total Credit Sales obtained by the company in one accounting year.


Illustration:

The company determines the amount of Allowance for Uncollectible Receivables is 5% of Sales Credit. As for the results of Sales Loans obtained during 2017 are Rp. 20,000,000

Then the Allowance for Uncollectible Accounts = 5% x Rp. 20,000,000 = Rp. 1,000,000


Journal:

D: Uncollectible Receivable Expenses Rp. 1,000,000
K: Allowance for Uncollectible Accounts Rp. 1,000,000


However, there are trade receivables from CV.123 amounting to Rp. 20,000,000 - obviously no longer be billed, then made:


Journal:

D: Allowance for Uncollectible Receivables Rp.20,000,000
K: Trade Receivables-CV.123 Rp. 20,000,000


When in the future there was a good will from CV.123 to repay the trade debt worth 10,000,000 which was deleted, then made:


Journal:

D: Trade Receivables CV.123 Rp.10,000,000
K: Allowance for Uncollectible Receivables Rp.10,000,000

CV.123 actually pays the Trade Debt then it is made:

Journal:

D: Rp.10,000,000 cash
K: Trade Receivables-CV.123 Rp. 10,000,000

Determining Credit Debit in General Journal

The term credit debit is a characteristic of double entry accounting systems, surely friends have experienced confusion in determining debit and credit when going to do journal entries. In this paper, I will discuss how to easily determine credit debit.


          Definition of Credit Debit
    Debit is accounting when a condition occurs where assets and costs experience an increase (increase), or when the liability (debt / liability) and equity (capital) decrease (decrease). In accounting, the debit is on the left side.
    Credit is accounting records when conditions occur where liability and equity have increased (increased), or assets and costs have decreased (decreased). Credit is the opposite of debit, and is on the right side.

Easy Ways to Determine Credit Debits
To determine debit and credit easily, we must first understand the following two things:

Group or Account Classification

    Assets
    Liabilities
    Owner's Equity
    Income
    Expenses

Account groups 1, 2 and 3 are the accounts contained in the balance sheet financial statements. Whereas, accounts groups 4 and 5 are groups of accounts contained in the income statement financial
 statements.

Opposite Account

That will be the opponent of a transaction, where each transaction will affect at least 2 accounts. For example, on a machine purchase transaction on credit, the affected account is the machine (fixed assets), while the opponent is a business loan (buying on credit).

For groups of accounts in the balance sheet, the rules for determining debit and credit are as follows:

The account group that is to the left (assets), is recorded on the debit side if it is increased and the opponent's account is recorded as credit; and the account group that is on the right (liabilities and owner's equity), recorded credit if it increases and the opponent's account is recorded as a debit.

Example:

    Buying raw materials. Equipment. Equipment. Vehicles in cash. raw materials. Equipment. Equipment. vehicles are assets, if added, it is recorded in the debit position while the opposite account, namely cash is recorded as credit.
    Add capital deposits. The capital deposit is the owner of the equity, if it is increased then the credit is recorded, while the opponent's account, which is cash is recorded as debit.

For groups of accounts in the balance sheet, the rules for determining debit and credit are as follows:

The existing account group on the left (expenses), is recorded on the debit side if it is increased and the opponent's account is recorded as credit; and the account group that is on the right (income), recorded credit if it increases and the opponent's account is recorded as a debit.


Example:

    Paying employee salaries. Employee salaries include expenses, if the increase is recorded debit, while the opponent is recorded credit.

Conclusion

To determine credit debit easily, we must think logically and understand the classification of the account and the account of the opponent from a transaction.

Assets and Expenses are recorded as debit if they increase, while Liabilities, Owner's Equity and Income are recorded as credit if added.

Definition of Positive and Negative Fiscal Corrections

Positive Fiscal Correction

Positive Fiscal Correction is a correction or adjustment that will result in an increase in taxable profits which will ultimately make the Corporate Income Tax also increase.

Positive fiscal correction includes:

    Costs that are not directly related to the company's business activities to obtain, collect, and maintain income
    Costs that are not permitted as deductions from PFM
    Less recognized costs, such as depreciation, amortization, and deferred fees according to TAX MANDATOR are higher
    Costs derived from income that is not a tax object
    Costs derived from income that has been subject to Final Income Tax

Negative Fiscal Correction

is a correction or adjustment that will result in a decrease in taxable profit that makes the corporate income tax payable will also decrease. Negative fiscal corrections include:

    Higher costs are recognized, such as lower depreciation according to WP, amortization difference, and deferred costs of recognition
    Income derived from income that is not a tax object
    Income earned from income that has been subject to Final Income Tax

Fiscal Correction Difference

There is a difference in the treatment of the determination of income and costs according to Taxation with the Financial Accounting Standards as a result of the difference between temporary and temporary differences; accounting treatment for these differences needs to be reconciled between commercial financial statements

with fiscal financial statements; and the effect of these differences on the financial statements is on the amount of tax payable and the amount of operating income.

Fixed Difference

For companies:

All income is income that will add taxable income, and all expenses are expenses that will reduce taxable income. But in taxation

Not all income is an increase in taxable income, because there are several types of income that are not taxing profit enhancing factors because the income has been taxed final, and not all expenses are deducted by taxable income because there are several types of expenditure that are not is part of the company's activities (donations, entertaint or bribes without a normative list). In Taxation Accounting, this difference is called the Permanent Difference.

Fixed Differences According to the Standards of Financial Accounting and Fiscal
   Bank Interest Income, Non-business income that has been deducted by final income  Dividend income, non-business income Enter the exclusion of tax objects
    Donation Fee or Prize in the Culture (listed in the income statement) Does not reduce income
    Profits from investing in shares on the Indonesia Stock Exchange, Non-business income No income added
    Income from donations or grants Extraordinary income Does not increase income
    Employee benefits in kind, income (for employees) and costs (for employers) Does not reduce income
    Entertainment fees or bribes can be included as a cost as a deductible expense if there is a nominative list, and vice versa.
    Fees for fines and interest taxes Income deduction Non deductible expense

Easy Way to Calculate Cost of Goods Sold

what is the cost of goods sold?

Cost of Goods Sold is the cost of goods produced and sold, including raw material costs, purchase costs. Direct labor, and overhead costs. Do not include periods (operations) costs such as sales, advertising or electricity. Water and development.

the definition of HPP is all costs incurred to obtain goods to be resold.

By calculating the HPP, the Company can decide the price of the item to be sold


Small Illustration:

Ardi bought 1 unit of Cellphone in an online store worth 2,000,000 and was charged shipping rates and an administration fee of 300,000. The cellphone will be resold by Ardi by earning 200,000 profits.


What is the price of the Cellphone that Ardi bought?

and how much Ardi determines the price of the Cellphone that will be sold to get a profit of 200,000?

 If Ardi sells the Cellphone at a price of 2,200,000. Ardi suffered a loss of 100,000

because the price of the actual Handphone bought by Ardi at the Online store is worth 2,300,000


From the Small illustration above, Ardi only calculates the price of the item, without calculating the acquisition price or cost of goods sold.


            The cost of goods sold will be a report on the profit and loss of each operating cost and also the cost of sales. Cost of Goods Sold is usually only experienced by trading companies that have the purpose of trading merchandise. While each sale of merchandise must have a purchase value that has been sold. Several ways on how to calculate HPP, including:

1. Initial Inventory of Merchandise

The initial availability of merchandise available at the beginning of the period or the current accounting year. The balance of the initial inventory of merchandise is in the current account balance or the company's initial balance sheet or the previous year's balance sheet.

2. End Inventory of Merchandise

The final inventory of merchandise becomes a merchandise inventory available at the end of the period or the end of the current financial year. This inventory balance can usually be found in the company adjustment data at the end of the period.

3. Net Purchases

Net purchases are all purchases of merchandise carried out by the company, either purchasing merchandise in cash or purchasing goods on credit, plus the cost of transporting the purchase and deducting the purchase discount and the purchase returns that occur.

How to Calculate Cost of Goods Sold

     in calculating Cost of Goods Sold including transportation costs, purchase returns, purchase discounts, and so forth. If there are no transportation costs, purchase returns, purchase discounts, etc., the Cost of Goods Sold can still be calculated.


Following are the Formulas for calculating Cost of Goods Sold:


HPP = Goods available for sale - End inventory


Information :

    Available for sale items = (Initial Merchandise Inventory + Net purchase.)
    Clean supervision = (Purchase + purchase costs) - (Purchase Returns + Purchase Pieces)

Another way to calculate Cost of Goods Sold:

1. initial merchandise inventory (+)

2. purchase of merchandise (+)

3. purchase load (+)

4. purchase returns and price reductions (-)

5. purchase discount (-)

6. final merchandise inventory (-)


Example of Cost of Goods Sold


UD. JAYA, Surabaya as of December 31, 2017.

* Inventory of merchandise (initial) worth Rp. 25,000,000

* Purchases worth IDR 15,000,000

* Purchase returns worth IDR 3,000,000

* IDR 1,000,000 purchase discount

* Transportation cost of Rp 2,000,000


On December 31, when doing Stock Check, it was known that the remaining inventory of merchandise was worth Rp. 7,000,000


Calculate UDP UD. JAYA:

Merchandise inventory (initial) Rp. 25,000,000 (+)

Purchase IDR 15,000,000 (+)

Purchase return of IDR 3,000,000 (-)

Rp 1,000,000 (-) purchase discount

Transportation fee of Rp 2,000,000 (+)

Merchandise inventory (end) Rp. 7,000,000 (-)


Cost of Goods Sold Rp.31,000,000


With the cost of goods sold, it can be an accurate financial report and can be accounted for.

Differences in Periodic and Perpetual Methods

Periodic Method

           Periodic methods or also called physical methods, if there is an activity to purchase goods for resale, the journal is to debit the purchase account and make cash credit (if paid in cash) and trade debt (if paid for credit).

In the event of a sales activity, the journal is to debit the accounts receivable or cash account and to credit the sales account. To identify the ending inventory, it is necessary to do an inventory or stock taking at the end of the period.


 Perpetual method

           The perpetual method system is known as the book method. This perpetual method has a system that records every inventory that comes out and goes into a notebook. Each type of item is entered into an inventory card system, and in the bookkeeping record using an inventory auxiliary account. Records of details in the helper can be monitored through the control of inventory accounts in goods into large notebooks. The account used for inventory recording activities consists of several columns that can be used to record purchasing activities, sales activities and inventory balances. All changes to inventory are accompanied by recording activities in the inventory account so that inventory balances can be controlled and known at any time by looking at the column on the balance in the inventory account. Each column needs to be broken down again in order to quantity and quality of the income price. The use of the perpetual method will simplify the balance sheet and income statement in the short term. This is because there is no need to procure physical calculations to determine the amount of final inventory. Common features of this perpetual system are:

    On the purchase of goods recorded by compiled in a notebook by debiting the inventory account.
    At cost of goods sold is calculated every time a sales transaction and arranged through a notebook by debiting inventory through a HPP account.
    Inventory in the form of a control account that is equipped with an auxiliary book through inventory containing the composition of records in each type of inventory. The inventory logbook states the quantity and price of income for each type of item contained in the inventory

The most prominent differences between the 2 methods are:

•     In the periodic method there is no trading account inventory account and cost of goods sold.

•     In the Perpetual method there is no Purchase Account and Purchase Return Account,

accounting cycle of a trading company

           The accounting cycle is to make a company's financial statements for a certain period. In general, finance starts from transactions up to making company financial statements followed by financial journals.

Accounting Companies are companies that buy goods from suppliers and sell goods to consumers without changing the form of goods. Examples are shops and supermarkets. The second activity is an effort to buy daily necessities from and resell to consumers.

The accounting cycle of a company is no different from a service company. Both service companies and companies, all transactions must be recorded in journals and then periodically recorded into accounts in ledgers.

General Journal Transaction Identification

identification of transactions that occur in the company and account account. Transaction transactions are sales transactions. As a seller you have handed over official items and have earned money through payment from the buyer. Then we can identify such transactions as online sales transactions.

A special ledger or commonly referred to as a subsidiary ledger.

A ledger is part of a general ledger that aims to further detail data in one account. Recording of certain accounts (account account and debt account) is then used.

Post to ledger

Large book posts are moving data from general journals into ledgers. Apart from general journals, book data information for companies also comes from special journals. In this case it is called a big book post

Report on Cost of Goods Sold

If the company programs a continuous recording, the price automatically determines the price that applies when the transaction, when making a sales journal while recording the cost of goods sold. the calculation of the HPP will be considered as a component of the income statement that will be presented in the financial statements.

Creating a Balance Sheet (Trial Balance)

            The information used to make the balance sheet is derived from the general ledger, which is every final balance in each account. Debit and credit positions must be balanced if they are not balanced, meaning there are errors when recording from the ledger


Adjusting journal entry

            Adjusting journal adjustments is the result of transactions that affect a number of company accounts and sometimes the presence of a new account. Examples of transactions that occur in a trading company are usually store rentals that are due, costs that still have to be paid. Depreciation of company inventory.


After Adjustment Balance Sheet

            The next stage is the adjustment of the trial balance with an adjustment journal that produces a balance sheet after adjusting. Preparing a Financial Report The creation of a financial report is made with the aim of facilitating the search for information about the company's financial position such as the state of assets, debt, and company capital. The information used in the financial statements comes from the balance sheet after adjusting.

Create a Cover Journal

           After the financial report is complete, the next step is to make a closing journal of the accounts contained in the income statement, namely income and cost accounts. Balance Sheet After Closure This stage is an adjustment between the trial balance and the closing journal. Why does it need to be adjusted? ... Because it is to record back accounts that have changed both balance and account.

Reversing Journal

         In certain conditions there is no need to make a reversing journal because the reversing journal is made only for certain accounts. For example, for income transactions received in advance, where at the time of sale is recorded as income or for transactions paid in advance (accounts receivable).

That is the stage of the trading company accounting cycle

Service Company Accounting Cycle

Service Company Accounting Cycle is not much different from trading company accounting, but what distinguishes it is the absence of special journals and inventory auxiliary books, in accounting services firms.

below Example illustration of the accounting cycle of a Service company:

The accounting stage is the procedure for recording transactions so that they become financial statements. This is called the term as an accounting cycle. The accounting cycle can be said in the order of each transaction process event which is then analyzed so that it results in the formation of a financial report.


there are three stages in the accounting cycle:

1. Recording Phase

2. Sumarizing Phase

3. Reporting phase

     RECORDING STAGE

Service company transactions are initial information that must be recorded and processed as a basis for making financial statements. the steps taken in the company's recording stage include:

    Preparing document sources / proof of transactions Proof of transactions comes from checks, notes, invoices, memos, and receipts that are received every time a transaction or event occurs in the company.
    From the source of the transaction, then an analysis is done to the General Journal.
    After the analysis to the General Journal is complete, then it is posted into the ledger.

The process of moving from journal to ledger is called "Posting"

In the ledger, accounts are grouped according to their class. As:

     Balance sheet account or real account: that is the account reported on the balance sheet for a certain period. Balance sheet accounts include: Assets (Assets). Debt, capital and prive (liabilities).
     profit or loss account or Nominal Account: that is the account which is used as the basis for the calculation of the income statement. For example income and expenses.

STAGE OF EXTENSION

After the recording phase above has been completed, the next step is the pengikhtisaran stage. The order of the pengikhtisaran stage is as follows:


    Prepare a trial balance. The balance sheet data comes from the balance of the general ledger. This balance sheet is made as a first step to compile a working sheet (Work Sheet)
    Adjusting entry. Sometimes when a company records it, there are accounts that have not been recorded. This is where the recording is done to find out the real account balance or balance sheet account and profit and loss account actually.
    Working paper or Balance Sheet is a tool to make financial statements of transactions that occur within the company during an accounting period. Because it functions to know the development of the company, the working paper contains all the reports that occur including: Balance of account, AJP, NSD, Profit and Loss and Balance Sheet.
     After completing the working paper, the next step is to make a closing journal. This closing journal is where to cover nominal, prive, and profit-loss accounts so as not to recalculate transactions in the next period.
     The balance sheet after closing, the purpose of which is to determine whether the account in the ledger has been balanced to start activities in a certain period, this step relates to a reversal of a particular adjustment paragraph (Reversing Journal)

    REPORTING STAGE

The last is the reporting phase. This stage is the last in the accounting process. As for what is included in this reporting phase are: Financial Reports.

The final result of the accounting process is the Financial Report.

The financial statements have elements, namely:

     Income statement
     Statement of changes in capital
    Balance sheet

Usually companies know the development and performance of the company seen from their financial statements. The main objective of parties in need of accounting is as a basis for consideration for making economic decisions in a company.


The contents of the financial statements include:


1. Income Statement

The income statement contains all nominal accounts, namely income and expenses. From the calculation between the income and the expense of the account obtained the company's profit or loss. Nominal accounts are usually called temporary accounts.


2. Capital Change Report

The report on changes in capital has elements, namely initial capital, residual profit or loss of the company, prive, and the company's final capital, affecting the position of capital.


3. Balance Sheet

A balance sheet is a report that contains the position of assets, debt, and capital of the company at a certain time. The balance sheet contains real corporate accounts.