The Roughneck is a fully loaded Accounting System for Oil and Gas Operators. Oil and Gas Accounting is a bit more complex than normal accounting. An Oil and Gas company has a special need to disburse some of the Revenue it receives to Investors and to Bill Investors for some of the Expenses. Additionaly, there can be many variations on the Operators Partnership agreements.

Therefore, there are a few things about Accounting you need to understand in order to operate the accounting principles of Roughneck.

Accounting revolves around a General Ledger system. Every entry requires both a Debit and a Credit to the General Ledger. Further, all debits must equal all credits. If they don't, the entry is out of balance. That's not good. Out-of-balance entries throw your balance sheet out of balance.

The following are the types of accounts used by Roughneck.

Assets
Stuff you own. Buildings, Equipment, Cash Accounts (Checking Accounts), Accounts Receivable

Liabilities
Stuff you owe like Accounts Payable

Equities
Difference between what you own(Assets) and what you owe(Liabilities)

Revenue Sales
Oil or Gas Revenue Income. Posting to these will cause the Revenue to be disbursed to Investors when you print Operating Statements. Rougneck uses 2 kinds of Income Accounts. Revenue Sales = for Income that will be disbursed to Investors during printing of the Operating Statements. Other Income = for Income that will not be disbursed to Investors

Other Income
Income not disbursed to Investors during printing of Operating Statements

Taxes/Deductions
These are deducted from Revenue Sales on the Operating Statements

Expenses
Stuff you buy, some of it is Billed to Investors on Operating Statements and some of it is not. In Roughneck, you have 2 different Categories of Expenses - Billable to Investors and Non-Billable. Which account you use will determine whether or not the Expense will be billed to the Investors on the Operating Statements.

Every entry requires both a Debit and a Credit. Further, all debits must equal all credits. If they don't, the entry is out of balance. That's not good. Out-of-balance entries throw your balance sheet out of balance.

Depending on what type of account you are dealing with, a debit or credit will either increase or decrease the account balance. For every increase in one account, there is an opposite (and equal) decrease in another. That's what keeps the entry in balance.

Debits and Credits vs. Account Types

Account	Debit	Credit
Assets	Increases	Decreases
Liabilities	Decreases	Increases
Income	Decreases	Increases
Expenses	Increases	Decreases

Example of a Credit Sale (a sale for which buyer did not pay cash)
Debit - Accounts Receivable (Asset)
Credit - either Revenue Sales Income or Other Income

Example of entering a Payment for the Credit Sale above (the buyer now pays cash for item purchased)
Debit - Cash in your bank account (Asset)
Credit - Accounts Receivable (Asset)

Example of a Cash Sale (you sold something and received cash)
Debit - Cash in your bank account (Asset)
Credit - Sales Income (Income)

Example of Receiving a Run Check that will be disbursed to Investors
Debit - Cash for Net Check Amount (Gross - Taxes)
Credit - Oil Sales for Gross Amount
Credit - State Tax for State Tax Amount
Credit - Severance Tax for Severance Tax Amount

Example of Receiving a Payment from Investors
Debit - Cash
Credit - Accounts Receivable

Example of buying something on Credit (you did not pay cash)
Debit - Expense
Credit - Accounts Payable

Example of paying cash for something you bought on Credit
Debit - Accounts Payable
Credit - Cash

Example of a Cash Purchase
Debit - Expense
Credit - Cash

Debits and Credits for General Journal Entries (Transactions that don't pertain to Accounts Payable or Accounts Receivable) are entered using the Enter Journal Entries into the monthly Transaction file.

Debits and Credits for Accounts Payable and Accounts Receivables are normally entered through their respective routines, but their debits and credits are automatically added to the monthly Transaction file. The monthly Transaction file contains every debit and credit made for the month.

These accounts are used to print the Balance sheet. When we set up your chart of accounts, there will be separate sections and numbering schemes for the assets and liabilities that make up the balance sheet.

Identifying assets
Simply stated, assets are those things of value that your company owns. The cash in your bank account is an asset. So is the company car you drive. Assets are the objects, rights and claims owned by and having value for the company.

Since your company has a right to the future collection of money, accounts receivable are an asset-probably a major asset, at that. The machinery you own is also an asset. If your company owns real estate or other tangible property, those are considered assets as well. If you were a bank, the loans you make would be considered assets since they represent a right of future collection.

There may also be intangible assets owned by your company. Patents, the exclusive right to use a trademark, and goodwill from the acquisition of another company are such intangible assets. Their value can be somewhat hazy.

Increase assets with a debit and decrease them with a credit. Increase liabilities with a credit and decrease them with a debit.
Debits Increase
Credits Decrease

Identifying liabilities
Think of liabilities as the opposite of assets. These are the obligations of one company to another. Accounts payable are liabilities, since they represent your company's future duty to pay a vendor. So is the loan you took from your bank. If you were a bank, your customer's deposits would be a liability, since they represent future claims against the bank.

We segregate liabilities into short-term and long-term categories on the balance sheet. This division is nothing more than separating those liabilities scheduled for payment within the next accounting period (usually the next twelve months) from those not to be paid until later. We often separate debt like this. It gives readers a clearer picture of how much the company owes and when.
Debits Decrease
Credits Increase

Equity
After the liability section in both the chart of accounts and the balance sheet comes owners' equity. This is the difference between assets and liabilities. Hopefully, it's positive-assets exceed liabilities and we have a positive owners' equity. In this section we'll put in things like:

- Partners' capital accounts
- Stock
- Retained earnings

Owners' equity is increased and decreased just like a liability.
Debits decrease
Credits increase

Most automated accounting systems require identification of the retained earnings account. By the way, retained earnings are the accumulated profits from prior years. At the end of one accounting year, all the income and expense accounts are netted against one another, and a single number (profit or loss for the year) is moved into the retained earnings account. This is what belongs to the company's owners-that's why it's in the owners' equity section. The income and expense accounts go to zero. That's how we're able to begin the new year with a clean slate against which to track income and expense.

The balance sheet, on the other hand, does not get zeroed out at year-end. The balance in each asset, liability, and owners' equity account rolls into the next year. So the ending balance of one year becomes the beginning balance of the next.

Think of the balance sheet as today's snapshot of the assets and liabilities the company has acquired since the first day of business. The income statement, in contrast, is a summation of the income and expenses from the first day of this accounting period (probably from the beginning of this fiscal year).

These accounts are used to calculate Profit and Loss Statements. Further down in the chart of accounts (usually after the owners' equity section) come the income and expense accounts. Most companies want to keep track of just where they get income and where it goes, and these accounts tell you.

Income accounts
If you have several lines of business, you'll probably want to establish an income account for each. In that way, you can identify exactly where your income is coming from. Adding them together yields total revenue.

Typical income accounts would be:

- Sales revenue from product A
- Sales revenue from product B (and so on for each product you want to track)
- Interest income
- Income from sale of assets
- Consulting income

Because of the special need for an Oil and Gas company to disburse some of the Revenue it receives to Investors, Roughneck has 2 basic categories for Income. Revenue Sales = for Income that will be disbursed to Investors during printing of the Operating Statements. Other Income = for Income that will not be disbursed to Investors.

Revenue Sales
Oil or Gas Revenue Income. Posting to these will cause the Revenue to be disbursed to Investors when you print Operating Statements.
Other Income
Income not disbursed to Investors during printing of Operating Statements

Most companies have only a few income accounts. That's really the way you want it. Too many accounts are a burden for the accounting department and probably don't tell management what it wants to know. Nevertheless, if there's a source of income you want to track, create an account for it in the chart of accounts and use it.

For income accounts, use credits to increase them and debits to decrease them.
Debits decrease
Credits increase

Expense accounts
Most companies have a separate account for each type of expense they incur. Your company probably incurs pretty much the same expenses month after month, so once they are established, the expense accounts won't vary much from month to month. Typical expense accounts include Salaries and wages:
- Telephone
- Electric utilities
- Repairs
- Maintenance
- Depreciation
- Amortization
- Interest
- Rent

Because of the special need for an Oil and Gas company to Bill Investors for some of the Expenses, Roughneck has 2 basic categories for Expenses.

   Billable Expenses
   These expenses will be Billed to the Investors when you print Operating Statements.

   Non-Billable Expenses
   These expenses will NOT be Billed to the Investors.

For expense accounts, use debits to increase them and credits to decrease them.
Debits increase
Credits decrease