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ABC 2016 Fall Summit

Accounting for Non-accountants

September 7, 2016

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Objectives

Introduce basic accounting concepts and elements

Overview of how these concepts and elements are applied on our Campus

Understand specifics of some more common accounting transactions

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Accounting Definition

The American Institute of Certified Public Accountants (AICPA) defines Accounting as "the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof."

Accounting is a “language”

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Accounting Concepts

An accounting information system collects and processes transaction data and then disseminates the financial information to interested parties.

Accounting information systemOracle ‐ PeopleSoft

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Accounting concepts

Basic elements - Definitions

Asset: An asset is a resource controlled by the organization from which future benefits are expected, e.g. Cash and Computers

Liability: A liability is an obligation of the organization arising from past events that is owed to others, e.g. Accounts Payable and Use Tax Payable

Equity: Equity is the residual interest in the assets of the organization after deducting all the liabilities, e.g. Fund Balance

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Accounting concepts

Basic elements - Definitions

Revenue: Increases in economic benefit during an accounting period in the form of inflows or enhancements of assets, e.g. Student Fees and Contributions

Expenses: Decreases in economic benefits during an accounting period in the form of outflows, e.g. Salaries, Travel, Supplies and Services

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Accounting Concepts

Trial Balance

Fund Fdescr SL001‐948‐485 CSU Operating Fund

485‐TF‐CSU Operating Fund

Acct Type Fdescr Actual

10‐Assets 81,077,304.21

20‐Liabilities ‐21,432,358.98

30‐Fund Equity and Reserves ‐68,234,868.94

50‐Revenues ‐188,026,010.13

60‐Expenditures 196,615,933.84

Grand Total 0.00

8/26/2016 ** CAL POLY CONFIDENTIAL ** Trial Balance

kperez@calpoly.edu Page 1

Finance Dashboard – Trial Balance (Default)

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Accounting Equation

ASSETS = LIABILITIES + EQUITY

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Debits and Credits

T-Account

Left Side = Debit Right Side = Credit

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Debits and Credits

In PeopleSoft:

Debit = positive amount

Credit = negative amount

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Debits and Credits

Debits = Credits

ALWAYS !

Because we use a double‐entry accounting system:

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= + -Asset Liability Equity Revenue Expense

Debit (DR)

Credit (CR)

Debits and Credits

Normal Balance

DR CR CR CR DR

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Trial Balance

ASSETS

LIABILITIES

EQUITY

EXPENSES

REVENUES

Category

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Trial Balance

ASSETS

LIABILITIES

EQUITY

EXPENSES

REVENUES

DEBIT CREDIT

Increase Decrease

Increase Decrease

IncreaseDecrease

IncreaseDecrease

IncreaseDecrease

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Chartfield StringPeopleSoft uses a Chart of Accounts (COA) . A COA is designed to:• Comply with external financial reporting requirements

(Chancellor’s Office, GAAP, State, Federal Government, etc.)• Allow for consistency and data integrity within the campus and

CSU System• Provide information needed for analysis, benchmarking and

decision making (IPEDS, Budget, Surveys, etc)

In Peoplesoft, the Chart of Accounts is comprised of information fields that provide the basic structure to segregate and categorize transactional and budget data. Each informational field is called a "CHARTFIELD".

Combining a series of chartfields makes up a Chartfield String. A Chartfield String is used to define, identify, categorize and sort transactions.

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Chartfield String: Account

Assets: 1xxxxx

Liabilities: 2xxxxxEquity: 3xxxxx

Revenues: 5xxxxx

Expenses: 6xxxxx

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Chartfield String: Fund

UCP

Operating Fund

LotteryEnterprise

SL002

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Chartfield String

Like we said, accounting is a language:“The Biology departmentpurchased instructional equipmentusing college based fees with allocated budget in the Operating Fund”

619002 – SL001- 115100 – AA006 $15,230

Dept ID ProgramFundAccount

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Chartfield String

Like we said, accounting is a language:“The ITS departmentprovided telephone services to campusin a Cost Recovery fund”

580094 – RL003– 133100 ($5,000)

Dept IDFundAccount

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Test your knowledge

Which of the following statements is true regarding debits and credits?

A. Debits and credits work just like debit and credit cards

B. Credits are good, debits are badC. Debits and credits are used to separate

transactions using the double-entry accounting system

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Test your knowledge

What is the normal sign for an expenditure?

A. Credit (-)B. Debit (+)C. Peace sign

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Accounting for non-accountants