In this lesson we will offer an introduction to accounting. Financials and Accounting are big topics in any industry. This lesson is designed to provide an entry level understanding of basic accounting principals and the use of adilas accounting software. I will begin by offering some basic definitions and concepts and a brief description of what makes adilas.biz software different than other accounting softwares. Then, I will offer a system demo of some of the core adilas accounting functions. Lets get started.
We should begin with agreeing on a few simple definitions and concepts. Language is a critical for successful accounting.
What is accounting?
Accounting is simply defined as “The language of business”.
Accounting Defined:
Business - A business is an organization or enterprising entity engaged in commercial, industrial, or professional activities.
A business may be small or large. A company may contain one person or thousands. All businesses use accounting. Cannabis organizations may include operations for cultivation, manufacturing, or selling marijuana.
Language - everything a business needs to communicate about it’s business.
Why does Accounting Exist?
To help people make decisions.
People both outside the company and within the company use their business language to make decisions about the company. There are three types of accounting.
3 Types:
Tax Accounting
Managerial Accounting
Financial Accounting
Tax Accounting tells us what we owe in taxes. Tax Accounting must follow specific rules provided by the government. We wont discuss taxes in detail in this lesson, but they are addressed in detail in Adilas420 Training.
Managerial Accounting helps people inside the company make decisions. Simple examples of this include, how much of a product should we make? Or how much should we sell it for? The fun and challenging thing about Managerial Accounting is there is not specific rules or requirements for best managerial accounting practices.
Financial Accounting helps people either outside or inside the company make decisions. Interested people may include creditors, investors, suppliers, the government, customers or Labor Unions.
Financial Accounting includes multi purpose reports. Specific rules are offered for financial reporting. In the US. we use Generally Accepted Accounting Principles (or GAAP).
General Ledger:
A company will have a general ledger, which is the main accounting record of a company or organization. The General Ledger will be used for Tax, Managerial and Financial Accounting. The General Ledger helps us to keep records and produce reports. Historically, a book, pen and paper were used. Now, accounting software offer digital general ledgers, equipped with lot of tools for ease of data entry and recording. Adilas.biz is a general ledger for thousands of businesses across the world.
Chart of Accounts:
A General Ledger should offer a Chart of Accounts. A chart of accounts is a listing of the names of the accounts that a company has identified and made available for recording transactions in its general ledger. Accounts can be categorized and named to make communication easy. A naming convention is a convention (generally agreed scheme) for naming things. Conventions differ in their intents, which may include to: Allow useful information to be deduced from the names based on regularities. We can begin by grouping accounts into two different account types: Balance Sheet Accounts or Income Statement Accounts.
BALANCE SHEET ACCOUNTS
INCOME STATEMENT ACCOUNTS
There is a little more to accounting than just naming accounts. The Balance Sheet is a summary of accounts at a specific point (date) in time. The most basic concept of the balance sheet to understand is Assets = Liabilities + Owners Equity. While sophisticated softwares like adilas will generate many components of your balance sheet for you, you still need to understand how the balance sheet works in order to read it, audit it or report on it properly. The Balance Sheet is made up of assets, liability and equity accounts.
Common asset categories include cash and cash equivalents; accounts receivable; inventory; prepaid expenses; and property and equipment. Examples of liability accounts reported on a company's balance sheet include:
- Notes Payable.
- Accounts Payable.
- Salaries Payable.
- Wages Payable.
- Interest Payable.
- Other Accrued Expenses Payable.
- Income Taxes Payable.
Examples of Equity include, stocks, paid in capital and retained earnings.
In traditional accounting, debits and credits are used for records of increasing and decreasing these accounts. Every debit should have a credit and the formula Assets = Liabilities + Owner’s Equity should always remain true.
ASSETS = LIABILITIES + EQUITY
Debits & Credits
Debits and Credits can be confusing. The simplest thing to remember is if there is a debit, there needs to be a credit. I have seen many great tools for helping to remember which accounts or debits and credits go on which side of the equation. Try to remember DC - ADE LER (Or DC DEALER). Debits and Credits can go on either side of the equation.
(DEBITS) = (CREDITS)
6 commonly used accounts can summarize the equation: The total of Assets, Draws or Dividends and Expenses should equal the total of Liabilities, Equity and Revenue accounts. The Expense and Revenue Accounts will comprise the Income Statement.
DRAWS (or Dividends) EQUITY ASSETS LIABILITIES EXPENSES REVENUE
What elements were affected?
What accounts were affected?
Did the accounts go up or down?
The Income Statement
The income statement presents the financial results of a business for a stated period of time. The statement quantifies the amount of revenue generated and expenses incurred by an organization, as well as any resulting net profit or loss.
There is no required template in the accounting standards for how the income statement is to be presented or the details of each account.
- Adilas provides a robust accounting suite as a part of it’s basic out of the box solution.
- Adilas software can be used for any business.
- Language is customizable.
Financials refer to the system applications that comprise the accounting features of Adilas.
Tools include:
- Balance sheet reporting.
- Profit and loss reporting.
- Sales and profit reporting.
- Tax reporting.
- Track multiple banks.
- Track payables.
- Track receivables.
- etc.
The system financial requires data entry including, multiple types of PO’s, Invoices, Expenses and Deposits. PO’s and Invoices are used to record entries for inventory. Records of inventory are entered using positive and negative lines on a PO or an Invoice. Expenses record payments for PO’s while Deposits record the details of funds collected.
Different deposit and expense types can be created to make your chart of accounts.
Canned reports for Tax, Managerial and Financial Accounting are available from the Reports Home Page or advanced searches of PO’s, Invoices, Expense Receipts and Deposits will provide financial reports.
What makes ADILAS accounting software different?
Adilas has built the software with ACCOPS in mind. ACCOPS is combining operations and accounting. Roll call accounting employees to enter accounting records in real time. The system will maintain a history of the details of all records made. Including, who made it, when and the details of which accounts the data effects.
In the video provided above, a demonstration of the main adilas cannabis accounting software tools. In the next lesson we will explore some of the other main players in more detail offering a conceptual understanding of this powerful cannabis accounting software.
