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Python Programming On Win32 by Mark Hammond, Andy Robinson

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The Chart of Accounts

The second concept to grasp is that of the chart of accounts, or as we call it, the tree of accounts. There is an almost universal consensus on what standard accounts should be called and how they relate to each other. This is a large part of what is known as Generally Accepted Accounting Practice or GAAP. If you have ever struggled with rules such as assets = liabilities + capital , relax: we deal with that in the next few minutes. Every company’s balance sheet is just a tree, and (with the arrival of Windows 95) almost everyone in the world knows what tree views look like, as shown in Figure 6.1.

The outermost layers of a balance sheet, as a tree
Figure 6.1. The outermost layers of a balance sheet, as a tree

Figure 6.1 shows a tree view of a company’s account structure. The balance sheet has two sections, Net Assets and Capital, both of which necessarily have equal size and opposite signs.[1] Net Assets are what the company is worth on paper and include Assets, which have a plus sign, and Liabilities, which have a negative sign. The totals on the right are inclusive balances showing everything in the tree below that point; ignore them for now.

If you investigate further (see Figure 6.2), you’ll see that Assets are made up of cash, tangible assets a company owns (like computers), and money owed by others. Similarly, Liabilities includes overdrafts, money owed to creditors, and long-term loans. Capital, which ...

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