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Tulane - ACCT 2010 - Accounting Final Study guide - Study Guide

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Tulane - ACCT 2010 - Accounting Final Study guide - Study Guide

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background image Definitions:* "language*we*use*to*tell*the*story"* ! Need*to*be*able*to*compare*stores*(of*company*A*to*company*B);*need*same* criteria*prepared*by*a*set*of*standards/rulebook*that*everybody*shares* Important*because*every*userCgroup*are*all*trying*to*make*decisions;*decision* usefulness*is*the*overarching*reason*that*we*exist*as*storytellers! ! Accounting:*Special*language*used*to*communicate*financial*information*about* economic*entities*to*interested*parties GAAP:*"Generally*Accepted*Accounting*Standards"*a*set*of*accounting*standards* that has*been*adopted*by*nearly*all*publicly*traded*U.S.*companies. International0Financial0Reporting0Standards0(IFRS):*standards*used*by*all*other*"Level*1"* country*economies* Internal0users:*interested*parties*within*the*economic*entity*(firm);*ex:*CEOs,*CPAs,* shareholders,*employees External0users:*interested*parties*outside*the*economic*entity;*ex:*competitors,* creditors,*potential*investors* Economic0Entity0Assumption:0we,*as*storytellers,*are*going*to*identify,*measure,*record,* and*communicate*all*of*the*financial*information*about*this*economic*entity*as*if*that* economic*entity*is*separate*and*apart*from*its*owners*(whether*or*not,*legally,*that*is*the* case)* Monetary0Unit0Assumption:*that*we*are*going*to*capture*and*record*these*financial* transactions*in*terms*of*some*monetary*unit*aka*dollars* Unnamed0Assumption:*that,*in*the*forCprofit*world*of*storytelling,*we*assume*that* people*go*into*business*to*make*money*and*profit– not*a*bad*assumption! Assets:*future*economic*benefit;*an*unused*cost;*things*you*own,*things*that*are*owed*to* you Equities:*claims*to*the*assets;*broken*down*into*two*categories*to*represent*the*source* of*the*asset*(who*has*a*claim*to*the*asset)* Liabilities:*nonCowners*equity* Assets–Liabilities=Owners*Equity ! Contributed0capital:*the*owner*putting*assets*directly*into*the*business* ! Earned0capital:*When*you*make*profit*so*assets*increase!*The*owners*have*claim* to*these*assets*because*they*took*the*financial*risk* ! Owner's0equity/shareholders0equity:*owners'*equity;*claims*arise*from*either* contributed*capital*or*earned*capital* SoleIproprietorship:*one*owner*who*takes*complete*risks*for*the*entity Accounts0Receivable:*claim*to*cash*against*the*customer*because*they*purchased*goods* and*haven't*yet*paid*the*company Drawing/capital0withdrawn0(if*a*corporation,*it*would*be*dividends):*a*returning*of*the* assets*of*the*business*to*the*owners) that*we*will*record*revenues*and*expenses*when*we've*earned*them,*we*will*find* that,*at*this*point,*someone*needs*to*look*at*the*Trial*Balance*and*ask:*In*light*of* everything*we*know*about*this*business,*do*these*amounts*reflect*reality? ! Accrual0Method of*accounting:*WE*USE;*Under*GAF,*we*tell*stories*under*this*method,* saying*that*we*will*record*all*of*the*changes,*regardless*of*the*movement*of*cash* Cash0Basis0of*accounting:*only*records*accounting*when*there*is*a*movement*of*cash;* does*not*show*the*whole*story Businesses*cannot*spend*this;*this*money*does*not*exist* ! You*can't*spend*earnings!!* ! "measurement*of*success"* ! Net0income:0SalesCExpenses;*Net*increase*in*owner's*claims*of*assets*that*were* generated*during*this*period*due*to*successfully*operating*the*business Created*in*1492*by*an*Italian*priest*who*documented*and*wrote*on*accounting ! Double0entry0bookkeeping0system0of0accounting:* Any*business*has*had/does*have/will*have*only*one*general*ledger*in*the*life*of*the* business* ! General0ledger:*the*sum*of*all*of*the*individual*accounts*of*any*entity*that*we*are* keeping*score*of* Debit*≠ increase*or*decrease,*good*or*bad* ! INCREASES*assets,*decreases*owner's*equity*and*liability ! Debit:*means*left;*if*we*debit*any*account,*we*are*affected*the*left*side* INCREASES*owner's*equity*and*liability,*decreases*assets* ! Credit:*means*right Journalisation:*first*step*of*accounting*cycle;*we*go*to*the*general*journal General0Journal:*record,*every*day,*in*chronological*order,*the*economic*events*of*the* business* Expenses:*caused*by*operations*of*the*business Not*seen*by*company ! Even*if*debits=credits,*it*does*not*mean*everything*was*done*right* ! Trial0Balance0sheet:0Needed*to*make*sure*we*followed*the*laws*of*debit*and*credit*in*our* process*of*recording*all*these*transactions;*means*that*the*debits*mathematically*equals* the*credits* Period*of*time*when*we*analyze*transaction*and*organize*it*into*our*story! ! Accounting0cycle:*time*it*takes*to*be*introduced*to*the*accounting*events*in*terms*of*an* artificially*induced*time*period* Revenue0Recognition0Principle:*you*cannot*credit*revenue*until*you've*earned*it Revenue:*a*temporary*owner's*equity*account;*We*can*recognize*revenue*after* completing*the*service* Analyze*the*business* event(s) 1. Record*the*event(s)* (the*transactions)* in*the*appropriate* journal0 2. Periodically*(i.e.* instantly,* daily,*weekly,* monthly)* post*transactions* to*the*general0ledger
(book*of*accounts)
3. Determine* the*balance* in*each* and*every*general* ledger*account a. Prepare*the*unadjusted0trial0balance b. If*and*when*it*is*time* to*prepare*financial* statements* (usually*at*the*end*of*the*accounting*
period*C end*of*month,* end*of*quarter,* end*of*year):
4. Analyze*each* and*every*account* balance* in*light*of*everything*that* we*know*about*the*
business*and*information*we*have*to*develop*and:
5. Post*entries*to*the*general*ledger a. Obtain*new*balances* in*each* and*every*general* ledger*account b. Prepare*the*adjusted0trial0balance c. Prepare*any*necessary* adjusting*entries* in*the*general* journal 6. Income* Statement a. Statement* of*Owner’s*Equity*or*Statement* of*Stockholders’* Equity/*Retained*
Earnings,*if*a*corporation
b. Balance* Sheet c. Statement* of*Cash*Flows d. Footnotes e. Prepare*a*complete* set* of*classified* financial* statements 7. Prepare*closing*entries* in*the*general* journal* a. Post*entries*to*the*general*ledger b. Obtain*new*balances* in*each* and*every*general* ledger*account c. Prepare*PostCclosing* trial*balance d. If*it*is*the*end*of*the*accounting* year: 8. Accounting0 Cycle00(JournalI>0 LedgerI>0Trial0 balanceI>0 AdjustmentsI>0New0trial0balanceI>0
Statements)0
The*cycle* starts* anew….repeat* process* with*Step*I General0Journal:0record*transaction*#,*account*name,*and*whether*it*is*debited*or* credited* Transaction*# Accounts Debit Credit 1 Cash Beau's*capital $1000 C C $1000 2 Cash Inventory Accounts*Payable C $10,000 C $600 C $9400 3a Cash Accounts*Receivable Sales*Revenue $200 $4000 C C C $4200 3b Inventory COGS C $3000 $3000 C 4 Cash Accounts*Receivable $2500 C C $2500 5 Cash Accounts*Payable C $2700 $2700 C 6 Cash Beau*Parent*Drawing C $250 $250 C 7 Account's*Payable Rent*Expense C $50 ! $50 ! Balance0Sheet:*Above*the*double*horizontal*lines:*permanent*or*real*accounts;* continue*as*long*as*the*business*is*in*business ! temporary0or0nominal0accounts:0Below*the*double*horizontal*lines;*once*you* measure*the*success*for*a*given*period,**you*start*over*and*start*measuring*again ! Normal:*subtract*smaller*from*the*larger;*whatever*the*larger*side*is*will*be*the* normal*balance ! Use*TIaccounts General0Ledger:0 Trial0Balance:0to*make*sure*everything*is*mathematically*balanced;*Trial*balance*has* three*columns:*name*of*account,*debt,*and*credit* CCS Trial*Balance* **July*31st,*2016 Account Debit Credit Cash $150 Equipment 2,400 Delivery 4,200 Supplies 3,300 Prepaid*Rent 4,000 Accounts* Receivable 5,300 Prepaid*insurance* 1,200 Unearned* Catering*fees $5400 Accounts* Payable 2,250 C*Smith*Capital 10,000 Drawing <750> Fees* Earned 9200 Wage*Expense 5,100 Delivery*Van*Expense* 450 Totals $26,850 $26,850 Income0Statement:0tells*you*Net*Income*of*the*business* CCS Income* Statement For*the*Month*Ended*July*31st,*2016 Fees* Earned:*$11,000 REVENUES:* Wages:* $600
Supplies:* $2100
Maintenance:* $450
Rent:* $400
Insurance:* $100
Depreciation* delivery*van:*70
Depreciation* equipment:* 50*
Total*expenses:* $9,770 EXPENSES: NET0INCOME:0SalesCExpenses=* $1,230 Statement0of0Owner's0Equity:0tells*you*the*balance*of*the*Owner's*Equity*at*the*end*of* the*month;*includes*beginning*capital,*contributed*capital,*net*income,*and*capital* withdrawn* CCS Statement* of*Owner's*Equity For*the*Month*Ended*July*31st,*2016 Christine's*Capital,* 7/1 $0* Contributed:* * $10,000 Net* Income:* $1,230 Capital*Withdrawal/* Christine's*Drawing: <$750> Christine's*Capital* July*31st,*2016:***************$10,480 Balance0Sheet:*totals*everything*up*to*make*sure*assets=liabilities;*divided*into*Assets* and*Liabilities EX*1*(simple)* BBBB Balance* Sheet January*31st,*2016 Cash:*$150
Inventory:* $7,000
Accounts* Receivable:* $1,500
Assets: Total*Assets:* $8,650 Accounts* Payable*$6,750 Liabilities: Beau's*Capital:* $1,900 Owner's*Equity: Total*Liabilities:* $8,650 EX*2*(complex)* CCS Balance* Sheet July*31st,*2016 ASSETS: Cash:*$150
Inventory:* $2100
Supplies:* $1200
Prepaid*Rent:* $3000
Prepaid*insurance:* $1100
AIR:*$5300
Current:* Total*Current*Assets:* $10,750 Long*Term:*
Property,*Plant,*Equipment:* $2,350
Equipment:* $2400
=Net* Equipment:* $2,350 Less* Accumulated* Depreciation:* C50 Delivery*Van*$4,200 =Net* Delivery* Van:*$4,130* Less* accumulated* depreciation:* $70 Total*PPE:*$6,480 TOTAL*ASSETS:* $17,230 LIABILITIES: Unearned* Fees:* $3,600
Accrued*Wages:* $900
Accounts* Payable:* $2250
Current: Total*currently* liabilities:* $6,750 Christine*Smith*Capital:* $10,400 Owner's*Equity TOTAL*LIABILITIES:* $17,230 Assets Liabilities*+*equities* EXPENSES REVENUES Debit*increases Credit*decreases* Normal*debit*balance* Debit*decreases Credit*increases Normal*credit*balance* Note:*balance*is*noted*as**<___>* when*the*normal*balance*is*on* the*wrong*side* Accounting)Study)Guide) Sunday,*September* 25,*2016 3:30*PM
background image Definitions:* "language*we*use*to*tell*the*story"* ! Need*to*be*able*to*compare*stores*(of*company*A*to*company*B);*need*same* criteria*prepared*by*a*set*of*standards/rulebook*that*everybody*shares* Important*because*every*userCgroup*are*all*trying*to*make*decisions;*decision* usefulness*is*the*overarching*reason*that*we*exist*as*storytellers! ! Accounting:*Special*language*used*to*communicate*financial*information*about* economic*entities*to*interested*parties GAAP:*"Generally*Accepted*Accounting*Standards"*a*set*of*accounting*standards* that has*been*adopted*by*nearly*all*publicly*traded*U.S.*companies. International0Financial0Reporting0Standards0(IFRS):*standards*used*by*all*other*"Level*1"* country*economies* Internal0users:*interested*parties*within*the*economic*entity*(firm);*ex:*CEOs,*CPAs,* shareholders,*employees External0users:*interested*parties*outside*the*economic*entity;*ex:*competitors,* creditors,*potential*investors* Economic0Entity0Assumption:0we,*as*storytellers,*are*going*to*identify,*measure,*record,* and*communicate*all*of*the*financial*information*about*this*economic*entity*as*if*that* economic*entity*is*separate*and*apart*from*its*owners*(whether*or*not,*legally,*that*is*the* case)* Monetary0Unit0Assumption:*that*we*are*going*to*capture*and*record*these*financial* transactions*in*terms*of*some*monetary*unit*aka*dollars* Unnamed0Assumption:*that,*in*the*forCprofit*world*of*storytelling,*we*assume*that* people*go*into*business*to*make*money*and*profit– not*a*bad*assumption! Assets:*future*economic*benefit;*an*unused*cost;*things*you*own,*things*that*are*owed*to* you Equities:*claims*to*the*assets;*broken*down*into*two*categories*to*represent*the*source* of*the*asset*(who*has*a*claim*to*the*asset)* Liabilities:*nonCowners*equity* Assets–Liabilities=Owners*Equity ! Contributed0capital:*the*owner*putting*assets*directly*into*the*business* ! Earned0capital:*When*you*make*profit*so*assets*increase!*The*owners*have*claim* to*these*assets*because*they*took*the*financial*risk* ! Owner's0equity/shareholders0equity:*owners'*equity;*claims*arise*from*either* contributed*capital*or*earned*capital* SoleIproprietorship:*one*owner*who*takes*complete*risks*for*the*entity Accounts0Receivable:*claim*to*cash*against*the*customer*because*they*purchased*goods* and*haven't*yet*paid*the*company Drawing/capital0withdrawn0(if*a*corporation,*it*would*be*dividends):*a*returning*of*the* assets*of*the*business*to*the*owners) that*we*will*record*revenues*and*expenses*when*we've*earned*them,*we*will*find* that,*at*this*point,*someone*needs*to*look*at*the*Trial*Balance*and*ask:*In*light*of* everything*we*know*about*this*business,*do*these*amounts*reflect*reality? ! Accrual0Method of*accounting:*WE*USE;*Under*GAF,*we*tell*stories*under*this*method,* saying*that*we*will*record*all*of*the*changes,*regardless*of*the*movement*of*cash* Cash0Basis0of*accounting:*only*records*accounting*when*there*is*a*movement*of*cash;* does*not*show*the*whole*story Businesses*cannot*spend*this;*this*money*does*not*exist* ! You*can't*spend*earnings!!* ! "measurement*of*success"* ! Net0income:0SalesCExpenses;*Net*increase*in*owner's*claims*of*assets*that*were* generated*during*this*period*due*to*successfully*operating*the*business Created*in*1492*by*an*Italian*priest*who*documented*and*wrote*on*accounting ! Double0entry0bookkeeping0system0of0accounting:* Any*business*has*had/does*have/will*have*only*one*general*ledger*in*the*life*of*the* business* ! General0ledger:*the*sum*of*all*of*the*individual*accounts*of*any*entity*that*we*are* keeping*score*of* Debit*≠ increase*or*decrease,*good*or*bad* ! INCREASES*assets,*decreases*owner's*equity*and*liability ! Debit:*means*left;*if*we*debit*any*account,*we*are*affected*the*left*side* INCREASES*owner's*equity*and*liability,*decreases*assets* ! Credit:*means*right Journalisation:*first*step*of*accounting*cycle;*we*go*to*the*general*journal General0Journal:*record,*every*day,*in*chronological*order,*the*economic*events*of*the* business* Expenses:*caused*by*operations*of*the*business Not*seen*by*company ! Even*if*debits=credits,*it*does*not*mean*everything*was*done*right* ! Trial0Balance0sheet:0Needed*to*make*sure*we*followed*the*laws*of*debit*and*credit*in*our* process*of*recording*all*these*transactions;*means*that*the*debits*mathematically*equals* the*credits* Period*of*time*when*we*analyze*transaction*and*organize*it*into*our*story! ! Accounting0cycle:*time*it*takes*to*be*introduced*to*the*accounting*events*in*terms*of*an* artificially*induced*time*period* Revenue0Recognition0Principle:*you*cannot*credit*revenue*until*you've*earned*it Revenue:*a*temporary*owner's*equity*account;*We*can*recognize*revenue*after* completing*the*service* Analyze*the*business* event(s) 1. Record*the*event(s)* (the*transactions)* in*the*appropriate* journal0 2. Periodically*(i.e.* instantly,* daily,*weekly,* monthly)* post*transactions* to*the*general0ledger
(book*of*accounts)
3. Determine* the*balance* in*each* and*every*general* ledger*account a. Prepare*the*unadjusted0trial0balance b. If*and*when*it*is*time* to*prepare*financial* statements* (usually*at*the*end*of*the*accounting*
period*C end*of*month,* end*of*quarter,* end*of*year):
4. Analyze*each* and*every*account* balance* in*light*of*everything*that* we*know*about*the*
business*and*information*we*have*to*develop*and:
5. Post*entries*to*the*general*ledger a. Obtain*new*balances* in*each* and*every*general* ledger*account b. Prepare*the*adjusted0trial0balance c. Prepare*any*necessary* adjusting*entries* in*the*general* journal 6. Income* Statement a. Statement* of*Owner’s*Equity*or*Statement* of*Stockholders’* Equity/*Retained*
Earnings,*if*a*corporation
b. Balance* Sheet c. Statement* of*Cash*Flows d. Footnotes e. Prepare*a*complete* set* of*classified* financial* statements 7. Prepare*closing*entries* in*the*general* journal* a. Post*entries*to*the*general*ledger b. Obtain*new*balances* in*each* and*every*general* ledger*account c. Prepare*PostCclosing* trial*balance d. If*it*is*the*end*of*the*accounting* year: 8. Accounting0 Cycle00(JournalI>0 LedgerI>0Trial0 balanceI>0 AdjustmentsI>0New0trial0balanceI>0
Statements)0
The*cycle* starts* anew….repeat* process* with*Step*I General0Journal:0record*transaction*#,*account*name,*and*whether*it*is*debited*or* credited* Transaction*# Accounts Debit Credit 1 Cash Beau's*capital $1000 C C $1000 2 Cash Inventory Accounts*Payable C $10,000 C $600 C $9400 3a Cash Accounts*Receivable Sales*Revenue $200 $4000 C C C $4200 3b Inventory COGS C $3000 $3000 C 4 Cash Accounts*Receivable $2500 C C $2500 5 Cash Accounts*Payable C $2700 $2700 C 6 Cash Beau*Parent*Drawing C $250 $250 C 7 Account's*Payable Rent*Expense C $50 ! $50 ! Balance0Sheet:*Above*the*double*horizontal*lines:*permanent*or*real*accounts;* continue*as*long*as*the*business*is*in*business ! temporary0or0nominal0accounts:0Below*the*double*horizontal*lines;*once*you* measure*the*success*for*a*given*period,**you*start*over*and*start*measuring*again ! Normal:*subtract*smaller*from*the*larger;*whatever*the*larger*side*is*will*be*the* normal*balance ! Use*TIaccounts General0Ledger:0 Trial0Balance:0to*make*sure*everything*is*mathematically*balanced;*Trial*balance*has* three*columns:*name*of*account,*debt,*and*credit* CCS Trial*Balance* **July*31st,*2016 Account Debit Credit Cash $150 Equipment 2,400 Delivery 4,200 Supplies 3,300 Prepaid*Rent 4,000 Accounts* Receivable 5,300 Prepaid*insurance* 1,200 Unearned* Catering*fees $5400 Accounts* Payable 2,250 C*Smith*Capital 10,000 Drawing <750> Fees* Earned 9200 Wage*Expense 5,100 Delivery*Van*Expense* 450 Totals $26,850 $26,850 Income0Statement:0tells*you*Net*Income*of*the*business* CCS Income* Statement For*the*Month*Ended*July*31st,*2016 Fees* Earned:*$11,000 REVENUES:* Wages:* $600
Supplies:* $2100
Maintenance:* $450
Rent:* $400
Insurance:* $100
Depreciation* delivery*van:*70
Depreciation* equipment:* 50*
Total*expenses:* $9,770 EXPENSES: NET0INCOME:0SalesCExpenses=* $1,230 Statement0of0Owner's0Equity:0tells*you*the*balance*of*the*Owner's*Equity*at*the*end*of* the*month;*includes*beginning*capital,*contributed*capital,*net*income,*and*capital* withdrawn* CCS Statement* of*Owner's*Equity For*the*Month*Ended*July*31st,*2016 Christine's*Capital,* 7/1 $0* Contributed:* * $10,000 Net* Income:* $1,230 Capital*Withdrawal/* Christine's*Drawing: <$750> Christine's*Capital* July*31st,*2016:***************$10,480 Balance0Sheet:*totals*everything*up*to*make*sure*assets=liabilities;*divided*into*Assets* and*Liabilities EX*1*(simple)* BBBB Balance* Sheet January*31st,*2016 Cash:*$150
Inventory:* $7,000
Accounts* Receivable:* $1,500
Assets: Total*Assets:* $8,650 Accounts* Payable*$6,750 Liabilities: Beau's*Capital:* $1,900 Owner's*Equity: Total*Liabilities:* $8,650 EX*2*(complex)* CCS Balance* Sheet July*31st,*2016 ASSETS: Cash:*$150
Inventory:* $2100
Supplies:* $1200
Prepaid*Rent:* $3000
Prepaid*insurance:* $1100
AIR:*$5300
Current:* Total*Current*Assets:* $10,750 Long*Term:*
Property,*Plant,*Equipment:* $2,350
Equipment:* $2400
=Net* Equipment:* $2,350 Less* Accumulated* Depreciation:* C50 Delivery*Van*$4,200 =Net* Delivery* Van:*$4,130* Less* accumulated* depreciation:* $70 Total*PPE:*$6,480 TOTAL*ASSETS:* $17,230 LIABILITIES: Unearned* Fees:* $3,600
Accrued*Wages:* $900
Accounts* Payable:* $2250
Current: Total*currently* liabilities:* $6,750 Christine*Smith*Capital:* $10,400 Owner's*Equity TOTAL*LIABILITIES:* $17,230 Assets Liabilities*+*equities* EXPENSES REVENUES Debit*increases Credit*decreases* Normal*debit*balance* Debit*decreases Credit*increases Normal*credit*balance* Note:*balance*is*noted*as**<___>* when*the*normal*balance*is*on* the*wrong*side* Accounting)Study)Guide) Sunday,*September* 25,*2016 3:30*PM
background image Definitions:* "language*we*use*to*tell*the*story"* ! Need*to*be*able*to*compare*stores*(of*company*A*to*company*B);*need*same* criteria*prepared*by*a*set*of*standards/rulebook*that*everybody*shares* Important*because*every*userCgroup*are*all*trying*to*make*decisions;*decision* usefulness*is*the*overarching*reason*that*we*exist*as*storytellers! ! Accounting:*Special*language*used*to*communicate*financial*information*about* economic*entities*to*interested*parties GAAP:*"Generally*Accepted*Accounting*Standards"*a*set*of*accounting*standards* that has*been*adopted*by*nearly*all*publicly*traded*U.S.*companies. International0Financial0Reporting0Standards0(IFRS):*standards*used*by*all*other*"Level*1"* country*economies* Internal0users:*interested*parties*within*the*economic*entity*(firm);*ex:*CEOs,*CPAs,* shareholders,*employees External0users:*interested*parties*outside*the*economic*entity;*ex:*competitors,* creditors,*potential*investors* Economic0Entity0Assumption:0we,*as*storytellers,*are*going*to*identify,*measure,*record,* and*communicate*all*of*the*financial*information*about*this*economic*entity*as*if*that* economic*entity*is*separate*and*apart*from*its*owners*(whether*or*not,*legally,*that*is*the* case)* Monetary0Unit0Assumption:*that*we*are*going*to*capture*and*record*these*financial* transactions*in*terms*of*some*monetary*unit*aka*dollars* Unnamed0Assumption:*that,*in*the*forCprofit*world*of*storytelling,*we*assume*that* people*go*into*business*to*make*money*and*profit– not*a*bad*assumption! Assets:*future*economic*benefit;*an*unused*cost;*things*you*own,*things*that*are*owed*to* you Equities:*claims*to*the*assets;*broken*down*into*two*categories*to*represent*the*source* of*the*asset*(who*has*a*claim*to*the*asset)* Liabilities:*nonCowners*equity* Assets–Liabilities=Owners*Equity ! Contributed0capital:*the*owner*putting*assets*directly*into*the*business* ! Earned0capital:*When*you*make*profit*so*assets*increase!*The*owners*have*claim* to*these*assets*because*they*took*the*financial*risk* ! Owner's0equity/shareholders0equity:*owners'*equity;*claims*arise*from*either* contributed*capital*or*earned*capital* SoleIproprietorship:*one*owner*who*takes*complete*risks*for*the*entity Accounts0Receivable:*claim*to*cash*against*the*customer*because*they*purchased*goods* and*haven't*yet*paid*the*company Drawing/capital0withdrawn0(if*a*corporation,*it*would*be*dividends):*a*returning*of*the* assets*of*the*business*to*the*owners) that*we*will*record*revenues*and*expenses*when*we've*earned*them,*we*will*find* that,*at*this*point,*someone*needs*to*look*at*the*Trial*Balance*and*ask:*In*light*of* everything*we*know*about*this*business,*do*these*amounts*reflect*reality? ! Accrual0Method of*accounting:*WE*USE;*Under*GAF,*we*tell*stories*under*this*method,* saying*that*we*will*record*all*of*the*changes,*regardless*of*the*movement*of*cash* Cash0Basis0of*accounting:*only*records*accounting*when*there*is*a*movement*of*cash;* does*not*show*the*whole*story Businesses*cannot*spend*this;*this*money*does*not*exist* ! You*can't*spend*earnings!!* ! "measurement*of*success"* ! Net0income:0SalesCExpenses;*Net*increase*in*owner's*claims*of*assets*that*were* generated*during*this*period*due*to*successfully*operating*the*business Created*in*1492*by*an*Italian*priest*who*documented*and*wrote*on*accounting ! Double0entry0bookkeeping0system0of0accounting:* Any*business*has*had/does*have/will*have*only*one*general*ledger*in*the*life*of*the* business* ! General0ledger:*the*sum*of*all*of*the*individual*accounts*of*any*entity*that*we*are* keeping*score*of* Debit*≠ increase*or*decrease,*good*or*bad* ! INCREASES*assets,*decreases*owner's*equity*and*liability ! Debit:*means*left;*if*we*debit*any*account,*we*are*affected*the*left*side* INCREASES*owner's*equity*and*liability,*decreases*assets* ! Credit:*means*right Journalisation:*first*step*of*accounting*cycle;*we*go*to*the*general*journal General0Journal:*record,*every*day,*in*chronological*order,*the*economic*events*of*the* business* Expenses:*caused*by*operations*of*the*business Not*seen*by*company ! Even*if*debits=credits,*it*does*not*mean*everything*was*done*right* ! Trial0Balance0sheet:0Needed*to*make*sure*we*followed*the*laws*of*debit*and*credit*in*our* process*of*recording*all*these*transactions;*means*that*the*debits*mathematically*equals* the*credits* Period*of*time*when*we*analyze*transaction*and*organize*it*into*our*story! ! Accounting0cycle:*time*it*takes*to*be*introduced*to*the*accounting*events*in*terms*of*an* artificially*induced*time*period* Revenue0Recognition0Principle:*you*cannot*credit*revenue*until*you've*earned*it Revenue:*a*temporary*owner's*equity*account;*We*can*recognize*revenue*after* completing*the*service* Analyze*the*business* event(s) 1. Record*the*event(s)* (the*transactions)* in*the*appropriate* journal0 2. Periodically*(i.e.* instantly,* daily,*weekly,* monthly)* post*transactions* to*the*general0ledger
(book*of*accounts)
3. Determine* the*balance* in*each* and*every*general* ledger*account a. Prepare*the*unadjusted0trial0balance b. If*and*when*it*is*time* to*prepare*financial* statements* (usually*at*the*end*of*the*accounting*
period*C end*of*month,* end*of*quarter,* end*of*year):
4. Analyze*each* and*every*account* balance* in*light*of*everything*that* we*know*about*the*
business*and*information*we*have*to*develop*and:
5. Post*entries*to*the*general*ledger a. Obtain*new*balances* in*each* and*every*general* ledger*account b. Prepare*the*adjusted0trial0balance c. Prepare*any*necessary* adjusting*entries* in*the*general* journal 6. Income* Statement a. Statement* of*Owner’s*Equity*or*Statement* of*Stockholders’* Equity/*Retained*
Earnings,*if*a*corporation
b. Balance* Sheet c. Statement* of*Cash*Flows d. Footnotes e. Prepare*a*complete* set* of*classified* financial* statements 7. Prepare*closing*entries* in*the*general* journal* a. Post*entries*to*the*general*ledger b. Obtain*new*balances* in*each* and*every*general* ledger*account c. Prepare*PostCclosing* trial*balance d. If*it*is*the*end*of*the*accounting* year: 8. Accounting0 Cycle00(JournalI>0 LedgerI>0Trial0 balanceI>0 AdjustmentsI>0New0trial0balanceI>0
Statements)0
The*cycle* starts* anew….repeat* process* with*Step*I General0Journal:0record*transaction*#,*account*name,*and*whether*it*is*debited*or* credited* Transaction*# Accounts Debit Credit 1 Cash Beau's*capital $1000 C C $1000 2 Cash Inventory Accounts*Payable C $10,000 C $600 C $9400 3a Cash Accounts*Receivable Sales*Revenue $200 $4000 C C C $4200 3b Inventory COGS C $3000 $3000 C 4 Cash Accounts*Receivable $2500 C C $2500 5 Cash Accounts*Payable C $2700 $2700 C 6 Cash Beau*Parent*Drawing C $250 $250 C 7 Account's*Payable Rent*Expense C $50 ! $50 ! Balance0Sheet:*Above*the*double*horizontal*lines:*permanent*or*real*accounts;* continue*as*long*as*the*business*is*in*business ! temporary0or0nominal0accounts:0Below*the*double*horizontal*lines;*once*you* measure*the*success*for*a*given*period,**you*start*over*and*start*measuring*again ! Normal:*subtract*smaller*from*the*larger;*whatever*the*larger*side*is*will*be*the* normal*balance ! Use*TIaccounts General0Ledger:0 Trial0Balance:0to*make*sure*everything*is*mathematically*balanced;*Trial*balance*has* three*columns:*name*of*account,*debt,*and*credit* CCS Trial*Balance* **July*31st,*2016 Account Debit Credit Cash $150 Equipment 2,400 Delivery 4,200 Supplies 3,300 Prepaid*Rent 4,000 Accounts* Receivable 5,300 Prepaid*insurance* 1,200 Unearned* Catering*fees $5400 Accounts* Payable 2,250 C*Smith*Capital 10,000 Drawing <750> Fees* Earned 9200 Wage*Expense 5,100 Delivery*Van*Expense* 450 Totals $26,850 $26,850 Income0Statement:0tells*you*Net*Income*of*the*business* CCS Income* Statement For*the*Month*Ended*July*31st,*2016 Fees* Earned:*$11,000 REVENUES:* Wages:* $600
Supplies:* $2100
Maintenance:* $450
Rent:* $400
Insurance:* $100
Depreciation* delivery*van:*70
Depreciation* equipment:* 50*
Total*expenses:* $9,770 EXPENSES: NET0INCOME:0SalesCExpenses=* $1,230 Statement0of0Owner's0Equity:0tells*you*the*balance*of*the*Owner's*Equity*at*the*end*of* the*month;*includes*beginning*capital,*contributed*capital,*net*income,*and*capital* withdrawn* CCS Statement* of*Owner's*Equity For*the*Month*Ended*July*31st,*2016 Christine's*Capital,* 7/1 $0* Contributed:* * $10,000 Net* Income:* $1,230 Capital*Withdrawal/* Christine's*Drawing: <$750> Christine's*Capital* July*31st,*2016:***************$10,480 Balance0Sheet:*totals*everything*up*to*make*sure*assets=liabilities;*divided*into*Assets* and*Liabilities EX*1*(simple)* BBBB Balance* Sheet January*31st,*2016 Cash:*$150
Inventory:* $7,000
Accounts* Receivable:* $1,500
Assets: Total*Assets:* $8,650 Accounts* Payable*$6,750 Liabilities: Beau's*Capital:* $1,900 Owner's*Equity: Total*Liabilities:* $8,650 EX*2*(complex)* CCS Balance* Sheet July*31st,*2016 ASSETS: Cash:*$150
Inventory:* $2100
Supplies:* $1200
Prepaid*Rent:* $3000
Prepaid*insurance:* $1100
AIR:*$5300
Current:* Total*Current*Assets:* $10,750 Long*Term:*
Property,*Plant,*Equipment:* $2,350
Equipment:* $2400
=Net* Equipment:* $2,350 Less* Accumulated* Depreciation:* C50 Delivery*Van*$4,200 =Net* Delivery* Van:*$4,130* Less* accumulated* depreciation:* $70 Total*PPE:*$6,480 TOTAL*ASSETS:* $17,230 LIABILITIES: Unearned* Fees:* $3,600
Accrued*Wages:* $900
Accounts* Payable:* $2250
Current: Total*currently* liabilities:* $6,750 Christine*Smith*Capital:* $10,400 Owner's*Equity TOTAL*LIABILITIES:* $17,230 Assets Liabilities*+*equities* EXPENSES REVENUES Debit*increases Credit*decreases* Normal*debit*balance* Debit*decreases Credit*increases Normal*credit*balance* Note:*balance*is*noted*as**<___>* when*the*normal*balance*is*on* the*wrong*side* Accounting)Study)Guide) Sunday,*September* 25,*2016 3:30*PM
background image Definitions:* "language*we*use*to*tell*the*story"* ! Need*to*be*able*to*compare*stores*(of*company*A*to*company*B);*need*same* criteria*prepared*by*a*set*of*standards/rulebook*that*everybody*shares* Important*because*every*userCgroup*are*all*trying*to*make*decisions;*decision* usefulness*is*the*overarching*reason*that*we*exist*as*storytellers! ! Accounting:*Special*language*used*to*communicate*financial*information*about* economic*entities*to*interested*parties GAAP:*"Generally*Accepted*Accounting*Standards"*a*set*of*accounting*standards* that has*been*adopted*by*nearly*all*publicly*traded*U.S.*companies. International0Financial0Reporting0Standards0(IFRS):*standards*used*by*all*other*"Level*1"* country*economies* Internal0users:*interested*parties*within*the*economic*entity*(firm);*ex:*CEOs,*CPAs,* shareholders,*employees External0users:*interested*parties*outside*the*economic*entity;*ex:*competitors,* creditors,*potential*investors* Economic0Entity0Assumption:0we,*as*storytellers,*are*going*to*identify,*measure,*record,* and*communicate*all*of*the*financial*information*about*this*economic*entity*as*if*that* economic*entity*is*separate*and*apart*from*its*owners*(whether*or*not,*legally,*that*is*the* case)* Monetary0Unit0Assumption:*that*we*are*going*to*capture*and*record*these*financial* transactions*in*terms*of*some*monetary*unit*aka*dollars* Unnamed0Assumption:*that,*in*the*forCprofit*world*of*storytelling,*we*assume*that* people*go*into*business*to*make*money*and*profit– not*a*bad*assumption! Assets:*future*economic*benefit;*an*unused*cost;*things*you*own,*things*that*are*owed*to* you Equities:*claims*to*the*assets;*broken*down*into*two*categories*to*represent*the*source* of*the*asset*(who*has*a*claim*to*the*asset)* Liabilities:*nonCowners*equity* Assets–Liabilities=Owners*Equity ! Contributed0capital:*the*owner*putting*assets*directly*into*the*business* ! Earned0capital:*When*you*make*profit*so*assets*increase!*The*owners*have*claim* to*these*assets*because*they*took*the*financial*risk* ! Owner's0equity/shareholders0equity:*owners'*equity;*claims*arise*from*either* contributed*capital*or*earned*capital* SoleIproprietorship:*one*owner*who*takes*complete*risks*for*the*entity Accounts0Receivable:*claim*to*cash*against*the*customer*because*they*purchased*goods* and*haven't*yet*paid*the*company Drawing/capital0withdrawn0(if*a*corporation,*it*would*be*dividends):*a*returning*of*the* assets*of*the*business*to*the*owners) that*we*will*record*revenues*and*expenses*when*we've*earned*them,*we*will*find* that,*at*this*point,*someone*needs*to*look*at*the*Trial*Balance*and*ask:*In*light*of* everything*we*know*about*this*business,*do*these*amounts*reflect*reality? ! Accrual0Method of*accounting:*WE*USE;*Under*GAF,*we*tell*stories*under*this*method,* saying*that*we*will*record*all*of*the*changes,*regardless*of*the*movement*of*cash* Cash0Basis0of*accounting:*only*records*accounting*when*there*is*a*movement*of*cash;* does*not*show*the*whole*story Businesses*cannot*spend*this;*this*money*does*not*exist* ! You*can't*spend*earnings!!* ! "measurement*of*success"* ! Net0income:0SalesCExpenses;*Net*increase*in*owner's*claims*of*assets*that*were* generated*during*this*period*due*to*successfully*operating*the*business Created*in*1492*by*an*Italian*priest*who*documented*and*wrote*on*accounting ! Double0entry0bookkeeping0system0of0accounting:* Any*business*has*had/does*have/will*have*only*one*general*ledger*in*the*life*of*the* business* ! General0ledger:*the*sum*of*all*of*the*individual*accounts*of*any*entity*that*we*are* keeping*score*of* Debit*≠ increase*or*decrease,*good*or*bad* ! INCREASES*assets,*decreases*owner's*equity*and*liability ! Debit:*means*left;*if*we*debit*any*account,*we*are*affected*the*left*side* INCREASES*owner's*equity*and*liability,*decreases*assets* ! Credit:*means*right Journalisation:*first*step*of*accounting*cycle;*we*go*to*the*general*journal General0Journal:*record,*every*day,*in*chronological*order,*the*economic*events*of*the* business* Expenses:*caused*by*operations*of*the*business Not*seen*by*company ! Even*if*debits=credits,*it*does*not*mean*everything*was*done*right* ! Trial0Balance0sheet:0Needed*to*make*sure*we*followed*the*laws*of*debit*and*credit*in*our* process*of*recording*all*these*transactions;*means*that*the*debits*mathematically*equals* the*credits* Period*of*time*when*we*analyze*transaction*and*organize*it*into*our*story! ! Accounting0cycle:*time*it*takes*to*be*introduced*to*the*accounting*events*in*terms*of*an* artificially*induced*time*period* Revenue0Recognition0Principle:*you*cannot*credit*revenue*until*you've*earned*it Revenue:*a*temporary*owner's*equity*account;*We*can*recognize*revenue*after* completing*the*service* Analyze*the*business* event(s) 1. Record*the*event(s)* (the*transactions)* in*the*appropriate* journal0 2. Periodically*(i.e.* instantly,* daily,*weekly,* monthly)* post*transactions* to*the*general0ledger
(book*of*accounts)
3. Determine* the*balance* in*each* and*every*general* ledger*account a. Prepare*the*unadjusted0trial0balance b. If*and*when*it*is*time* to*prepare*financial* statements* (usually*at*the*end*of*the*accounting*
period*C end*of*month,* end*of*quarter,* end*of*year):
4. Analyze*each* and*every*account* balance* in*light*of*everything*that* we*know*about*the*
business*and*information*we*have*to*develop*and:
5. Post*entries*to*the*general*ledger a. Obtain*new*balances* in*each* and*every*general* ledger*account b. Prepare*the*adjusted0trial0balance c. Prepare*any*necessary* adjusting*entries* in*the*general* journal 6. Income* Statement a. Statement* of*Owner’s*Equity*or*Statement* of*Stockholders’* Equity/*Retained*
Earnings,*if*a*corporation
b. Balance* Sheet c. Statement* of*Cash*Flows d. Footnotes e. Prepare*a*complete* set* of*classified* financial* statements 7. Prepare*closing*entries* in*the*general* journal* a. Post*entries*to*the*general*ledger b. Obtain*new*balances* in*each* and*every*general* ledger*account c. Prepare*PostCclosing* trial*balance d. If*it*is*the*end*of*the*accounting* year: 8. Accounting0 Cycle00(JournalI>0 LedgerI>0Trial0 balanceI>0 AdjustmentsI>0New0trial0balanceI>0
Statements)0
The*cycle* starts* anew….repeat* process* with*Step*I General0Journal:0record*transaction*#,*account*name,*and*whether*it*is*debited*or* credited* Transaction*# Accounts Debit Credit 1 Cash Beau's*capital $1000 C C $1000 2 Cash Inventory Accounts*Payable C $10,000 C $600 C $9400 3a Cash Accounts*Receivable Sales*Revenue $200 $4000 C C C $4200 3b Inventory COGS C $3000 $3000 C 4 Cash Accounts*Receivable $2500 C C $2500 5 Cash Accounts*Payable C $2700 $2700 C 6 Cash Beau*Parent*Drawing C $250 $250 C 7 Account's*Payable Rent*Expense C $50 ! $50 ! Balance0Sheet:*Above*the*double*horizontal*lines:*permanent*or*real*accounts;* continue*as*long*as*the*business*is*in*business ! temporary0or0nominal0accounts:0Below*the*double*horizontal*lines;*once*you* measure*the*success*for*a*given*period,**you*start*over*and*start*measuring*again ! Normal:*subtract*smaller*from*the*larger;*whatever*the*larger*side*is*will*be*the* normal*balance ! Use*TIaccounts General0Ledger:0 Trial0Balance:0to*make*sure*everything*is*mathematically*balanced;*Trial*balance*has* three*columns:*name*of*account,*debt,*and*credit* CCS Trial*Balance* **July*31st,*2016 Account Debit Credit Cash $150 Equipment 2,400 Delivery 4,200 Supplies 3,300 Prepaid*Rent 4,000 Accounts* Receivable 5,300 Prepaid*insurance* 1,200 Unearned* Catering*fees $5400 Accounts* Payable 2,250 C*Smith*Capital 10,000 Drawing <750> Fees* Earned 9200 Wage*Expense 5,100 Delivery*Van*Expense* 450 Totals $26,850 $26,850 Income0Statement:0tells*you*Net*Income*of*the*business* CCS Income* Statement For*the*Month*Ended*July*31st,*2016 Fees* Earned:*$11,000 REVENUES:* Wages:* $600
Supplies:* $2100
Maintenance:* $450
Rent:* $400
Insurance:* $100
Depreciation* delivery*van:*70
Depreciation* equipment:* 50*
Total*expenses:* $9,770 EXPENSES: NET0INCOME:0SalesCExpenses=* $1,230 Statement0of0Owner's0Equity:0tells*you*the*balance*of*the*Owner's*Equity*at*the*end*of* the*month;*includes*beginning*capital,*contributed*capital,*net*income,*and*capital* withdrawn* CCS Statement* of*Owner's*Equity For*the*Month*Ended*July*31st,*2016 Christine's*Capital,* 7/1 $0* Contributed:* * $10,000 Net* Income:* $1,230 Capital*Withdrawal/* Christine's*Drawing: <$750> Christine's*Capital* July*31st,*2016:***************$10,480 Balance0Sheet:*totals*everything*up*to*make*sure*assets=liabilities;*divided*into*Assets* and*Liabilities EX*1*(simple)* BBBB Balance* Sheet January*31st,*2016 Cash:*$150
Inventory:* $7,000
Accounts* Receivable:* $1,500
Assets: Total*Assets:* $8,650 Accounts* Payable*$6,750 Liabilities: Beau's*Capital:* $1,900 Owner's*Equity: Total*Liabilities:* $8,650 EX*2*(complex)* CCS Balance* Sheet July*31st,*2016 ASSETS: Cash:*$150
Inventory:* $2100
Supplies:* $1200
Prepaid*Rent:* $3000
Prepaid*insurance:* $1100
AIR:*$5300
Current:* Total*Current*Assets:* $10,750 Long*Term:*
Property,*Plant,*Equipment:* $2,350
Equipment:* $2400
=Net* Equipment:* $2,350 Less* Accumulated* Depreciation:* C50 Delivery*Van*$4,200 =Net* Delivery* Van:*$4,130* Less* accumulated* depreciation:* $70 Total*PPE:*$6,480 TOTAL*ASSETS:* $17,230 LIABILITIES: Unearned* Fees:* $3,600
Accrued*Wages:* $900
Accounts* Payable:* $2250
Current: Total*currently* liabilities:* $6,750 Christine*Smith*Capital:* $10,400 Owner's*Equity TOTAL*LIABILITIES:* $17,230 Assets Liabilities*+*equities* EXPENSES REVENUES Debit*increases Credit*decreases* Normal*debit*balance* Debit*decreases Credit*increases Normal*credit*balance* Note:*balance*is*noted*as**<___>* when*the*normal*balance*is*on* the*wrong*side* Accounting)Study)Guide) Sunday,*September* 25,*2016 3:30*PM
background image Definitions:* "language*we*use*to*tell*the*story"* ! Need*to*be*able*to*compare*stores*(of*company*A*to*company*B);*need*same* criteria*prepared*by*a*set*of*standards/rulebook*that*everybody*shares* Important*because*every*userCgroup*are*all*trying*to*make*decisions;*decision* usefulness*is*the*overarching*reason*that*we*exist*as*storytellers! ! Accounting:*Special*language*used*to*communicate*financial*information*about* economic*entities*to*interested*parties GAAP:*"Generally*Accepted*Accounting*Standards"*a*set*of*accounting*standards* that has*been*adopted*by*nearly*all*publicly*traded*U.S.*companies. International0Financial0Reporting0Standards0(IFRS):*standards*used*by*all*other*"Level*1"* country*economies* Internal0users:*interested*parties*within*the*economic*entity*(firm);*ex:*CEOs,*CPAs,* shareholders,*employees External0users:*interested*parties*outside*the*economic*entity;*ex:*competitors,* creditors,*potential*investors* Economic0Entity0Assumption:0we,*as*storytellers,*are*going*to*identify,*measure,*record,* and*communicate*all*of*the*financial*information*about*this*economic*entity*as*if*that* economic*entity*is*separate*and*apart*from*its*owners*(whether*or*not,*legally,*that*is*the* case)* Monetary0Unit0Assumption:*that*we*are*going*to*capture*and*record*these*financial* transactions*in*terms*of*some*monetary*unit*aka*dollars* Unnamed0Assumption:*that,*in*the*forCprofit*world*of*storytelling,*we*assume*that* people*go*into*business*to*make*money*and*profit– not*a*bad*assumption! Assets:*future*economic*benefit;*an*unused*cost;*things*you*own,*things*that*are*owed*to* you Equities:*claims*to*the*assets;*broken*down*into*two*categories*to*represent*the*source* of*the*asset*(who*has*a*claim*to*the*asset)* Liabilities:*nonCowners*equity* Assets–Liabilities=Owners*Equity ! Contributed0capital:*the*owner*putting*assets*directly*into*the*business* ! Earned0capital:*When*you*make*profit*so*assets*increase!*The*owners*have*claim* to*these*assets*because*they*took*the*financial*risk* ! Owner's0equity/shareholders0equity:*owners'*equity;*claims*arise*from*either* contributed*capital*or*earned*capital* SoleIproprietorship:*one*owner*who*takes*complete*risks*for*the*entity Accounts0Receivable:*claim*to*cash*against*the*customer*because*they*purchased*goods* and*haven't*yet*paid*the*company Drawing/capital0withdrawn0(if*a*corporation,*it*would*be*dividends):*a*returning*of*the* assets*of*the*business*to*the*owners) that*we*will*record*revenues*and*expenses*when*we've*earned*them,*we*will*find* that,*at*this*point,*someone*needs*to*look*at*the*Trial*Balance*and*ask:*In*light*of* everything*we*know*about*this*business,*do*these*amounts*reflect*reality? ! Accrual0Method of*accounting:*WE*USE;*Under*GAF,*we*tell*stories*under*this*method,* saying*that*we*will*record*all*of*the*changes,*regardless*of*the*movement*of*cash* Cash0Basis0of*accounting:*only*records*accounting*when*there*is*a*movement*of*cash;* does*not*show*the*whole*story Businesses*cannot*spend*this;*this*money*does*not*exist* ! You*can't*spend*earnings!!* ! "measurement*of*success"* ! Net0income:0SalesCExpenses;*Net*increase*in*owner's*claims*of*assets*that*were* generated*during*this*period*due*to*successfully*operating*the*business Created*in*1492*by*an*Italian*priest*who*documented*and*wrote*on*accounting ! Double0entry0bookkeeping0system0of0accounting:* Any*business*has*had/does*have/will*have*only*one*general*ledger*in*the*life*of*the* business* ! General0ledger:*the*sum*of*all*of*the*individual*accounts*of*any*entity*that*we*are* keeping*score*of* Debit*≠ increase*or*decrease,*good*or*bad* ! INCREASES*assets,*decreases*owner's*equity*and*liability ! Debit:*means*left;*if*we*debit*any*account,*we*are*affected*the*left*side* INCREASES*owner's*equity*and*liability,*decreases*assets* ! Credit:*means*right Journalisation:*first*step*of*accounting*cycle;*we*go*to*the*general*journal General0Journal:*record,*every*day,*in*chronological*order,*the*economic*events*of*the* business* Expenses:*caused*by*operations*of*the*business Not*seen*by*company ! Even*if*debits=credits,*it*does*not*mean*everything*was*done*right* ! Trial0Balance0sheet:0Needed*to*make*sure*we*followed*the*laws*of*debit*and*credit*in*our* process*of*recording*all*these*transactions;*means*that*the*debits*mathematically*equals* the*credits* Period*of*time*when*we*analyze*transaction*and*organize*it*into*our*story! ! Accounting0cycle:*time*it*takes*to*be*introduced*to*the*accounting*events*in*terms*of*an* artificially*induced*time*period* Revenue0Recognition0Principle:*you*cannot*credit*revenue*until*you've*earned*it Revenue:*a*temporary*owner's*equity*account;*We*can*recognize*revenue*after* completing*the*service* Analyze*the*business* event(s) 1. Record*the*event(s)* (the*transactions)* in*the*appropriate* journal0 2. Periodically*(i.e.* instantly,* daily,*weekly,* monthly)* post*transactions* to*the*general0ledger
(book*of*accounts)
3. Determine* the*balance* in*each* and*every*general* ledger*account a. Prepare*the*unadjusted0trial0balance b. If*and*when*it*is*time* to*prepare*financial* statements* (usually*at*the*end*of*the*accounting*
period*C end*of*month,* end*of*quarter,* end*of*year):
4. Analyze*each* and*every*account* balance* in*light*of*everything*that* we*know*about*the*
business*and*information*we*have*to*develop*and:
5. Post*entries*to*the*general*ledger a. Obtain*new*balances* in*each* and*every*general* ledger*account b. Prepare*the*adjusted0trial0balance c. Prepare*any*necessary* adjusting*entries* in*the*general* journal 6. Income* Statement a. Statement* of*Owner’s*Equity*or*Statement* of*Stockholders’* Equity/*Retained*
Earnings,*if*a*corporation
b. Balance* Sheet c. Statement* of*Cash*Flows d. Footnotes e. Prepare*a*complete* set* of*classified* financial* statements 7. Prepare*closing*entries* in*the*general* journal* a. Post*entries*to*the*general*ledger b. Obtain*new*balances* in*each* and*every*general* ledger*account c. Prepare*PostCclosing* trial*balance d. If*it*is*the*end*of*the*accounting* year: 8. Accounting0 Cycle00(JournalI>0 LedgerI>0Trial0 balanceI>0 AdjustmentsI>0New0trial0balanceI>0
Statements)0
The*cycle* starts* anew….repeat* process* with*Step*I General0Journal:0record*transaction*#,*account*name,*and*whether*it*is*debited*or* credited* Transaction*# Accounts Debit Credit 1 Cash Beau's*capital $1000 C C $1000 2 Cash Inventory Accounts*Payable C $10,000 C $600 C $9400 3a Cash Accounts*Receivable Sales*Revenue $200 $4000 C C C $4200 3b Inventory COGS C $3000 $3000 C 4 Cash Accounts*Receivable $2500 C C $2500 5 Cash Accounts*Payable C $2700 $2700 C 6 Cash Beau*Parent*Drawing C $250 $250 C 7 Account's*Payable Rent*Expense C $50 ! $50 ! Balance0Sheet:*Above*the*double*horizontal*lines:*permanent*or*real*accounts;* continue*as*long*as*the*business*is*in*business ! temporary0or0nominal0accounts:0Below*the*double*horizontal*lines;*once*you* measure*the*success*for*a*given*period,**you*start*over*and*start*measuring*again ! Normal:*subtract*smaller*from*the*larger;*whatever*the*larger*side*is*will*be*the* normal*balance ! Use*TIaccounts General0Ledger:0 Trial0Balance:0to*make*sure*everything*is*mathematically*balanced;*Trial*balance*has* three*columns:*name*of*account,*debt,*and*credit* CCS Trial*Balance* **July*31st,*2016 Account Debit Credit Cash $150 Equipment 2,400 Delivery 4,200 Supplies 3,300 Prepaid*Rent 4,000 Accounts* Receivable 5,300 Prepaid*insurance* 1,200 Unearned* Catering*fees $5400 Accounts* Payable 2,250 C*Smith*Capital 10,000 Drawing <750> Fees* Earned 9200 Wage*Expense 5,100 Delivery*Van*Expense* 450 Totals $26,850 $26,850 Income0Statement:0tells*you*Net*Income*of*the*business* CCS Income* Statement For*the*Month*Ended*July*31st,*2016 Fees* Earned:*$11,000 REVENUES:* Wages:* $600
Supplies:* $2100
Maintenance:* $450
Rent:* $400
Insurance:* $100
Depreciation* delivery*van:*70
Depreciation* equipment:* 50*
Total*expenses:* $9,770 EXPENSES: NET0INCOME:0SalesCExpenses=* $1,230 Statement0of0Owner's0Equity:0tells*you*the*balance*of*the*Owner's*Equity*at*the*end*of* the*month;*includes*beginning*capital,*contributed*capital,*net*income,*and*capital* withdrawn* CCS Statement* of*Owner's*Equity For*the*Month*Ended*July*31st,*2016 Christine's*Capital,* 7/1 $0* Contributed:* * $10,000 Net* Income:* $1,230 Capital*Withdrawal/* Christine's*Drawing: <$750> Christine's*Capital* July*31st,*2016:***************$10,480 Balance0Sheet:*totals*everything*up*to*make*sure*assets=liabilities;*divided*into*Assets* and*Liabilities EX*1*(simple)* BBBB Balance* Sheet January*31st,*2016 Cash:*$150
Inventory:* $7,000
Accounts* Receivable:* $1,500
Assets: Total*Assets:* $8,650 Accounts* Payable*$6,750 Liabilities: Beau's*Capital:* $1,900 Owner's*Equity: Total*Liabilities:* $8,650 EX*2*(complex)* CCS Balance* Sheet July*31st,*2016 ASSETS: Cash:*$150
Inventory:* $2100
Supplies:* $1200
Prepaid*Rent:* $3000
Prepaid*insurance:* $1100
AIR:*$5300
Current:* Total*Current*Assets:* $10,750 Long*Term:*
Property,*Plant,*Equipment:* $2,350
Equipment:* $2400
=Net* Equipment:* $2,350 Less* Accumulated* Depreciation:* C50 Delivery*Van*$4,200 =Net* Delivery* Van:*$4,130* Less* accumulated* depreciation:* $70 Total*PPE:*$6,480 TOTAL*ASSETS:* $17,230 LIABILITIES: Unearned* Fees:* $3,600
Accrued*Wages:* $900
Accounts* Payable:* $2250
Current: Total*currently* liabilities:* $6,750 Christine*Smith*Capital:* $10,400 Owner's*Equity TOTAL*LIABILITIES:* $17,230 Assets Liabilities*+*equities* EXPENSES REVENUES Debit*increases Credit*decreases* Normal*debit*balance* Debit*decreases Credit*increases Normal*credit*balance* Note:*balance*is*noted*as**<___>* when*the*normal*balance*is*on* the*wrong*side* Accounting)Study)Guide) Sunday,*September* 25,*2016 3:30*PM
background image Definitions:* "language*we*use*to*tell*the*story"* ! Need*to*be*able*to*compare*stores*(of*company*A*to*company*B);*need*same* criteria*prepared*by*a*set*of*standards/rulebook*that*everybody*shares* Important*because*every*userCgroup*are*all*trying*to*make*decisions;*decision* usefulness*is*the*overarching*reason*that*we*exist*as*storytellers! ! Accounting:*Special*language*used*to*communicate*financial*information*about* economic*entities*to*interested*parties GAAP:*"Generally*Accepted*Accounting*Standards"*a*set*of*accounting*standards* that has*been*adopted*by*nearly*all*publicly*traded*U.S.*companies. International0Financial0Reporting0Standards0(IFRS):*standards*used*by*all*other*"Level*1"* country*economies* Internal0users:*interested*parties*within*the*economic*entity*(firm);*ex:*CEOs,*CPAs,* shareholders,*employees External0users:*interested*parties*outside*the*economic*entity;*ex:*competitors,* creditors,*potential*investors* Economic0Entity0Assumption:0we,*as*storytellers,*are*going*to*identify,*measure,*record,* and*communicate*all*of*the*financial*information*about*this*economic*entity*as*if*that* economic*entity*is*separate*and*apart*from*its*owners*(whether*or*not,*legally,*that*is*the* case)* Monetary0Unit0Assumption:*that*we*are*going*to*capture*and*record*these*financial* transactions*in*terms*of*some*monetary*unit*aka*dollars* Unnamed0Assumption:*that,*in*the*forCprofit*world*of*storytelling,*we*assume*that* people*go*into*business*to*make*money*and*profit– not*a*bad*assumption! Assets:*future*economic*benefit;*an*unused*cost;*things*you*own,*things*that*are*owed*to* you Equities:*claims*to*the*assets;*broken*down*into*two*categories*to*represent*the*source* of*the*asset*(who*has*a*claim*to*the*asset)* Liabilities:*nonCowners*equity* Assets–Liabilities=Owners*Equity ! Contributed0capital:*the*owner*putting*assets*directly*into*the*business* ! Earned0capital:*When*you*make*profit*so*assets*increase!*The*owners*have*claim* to*these*assets*because*they*took*the*financial*risk* ! Owner's0equity/shareholders0equity:*owners'*equity;*claims*arise*from*either* contributed*capital*or*earned*capital* SoleIproprietorship:*one*owner*who*takes*complete*risks*for*the*entity Accounts0Receivable:*claim*to*cash*against*the*customer*because*they*purchased*goods* and*haven't*yet*paid*the*company Drawing/capital0withdrawn0(if*a*corporation,*it*would*be*dividends):*a*returning*of*the* assets*of*the*business*to*the*owners) that*we*will*record*revenues*and*expenses*when*we've*earned*them,*we*will*find* that,*at*this*point,*someone*needs*to*look*at*the*Trial*Balance*and*ask:*In*light*of* everything*we*know*about*this*business,*do*these*amounts*reflect*reality? ! Accrual0Method of*accounting:*WE*USE;*Under*GAF,*we*tell*stories*under*this*method,* saying*that*we*will*record*all*of*the*changes,*regardless*of*the*movement*of*cash* Cash0Basis0of*accounting:*only*records*accounting*when*there*is*a*movement*of*cash;* does*not*show*the*whole*story Businesses*cannot*spend*this;*this*money*does*not*exist* ! You*can't*spend*earnings!!* ! "measurement*of*success"* ! Net0income:0SalesCExpenses;*Net*increase*in*owner's*claims*of*assets*that*were* generated*during*this*period*due*to*successfully*operating*the*business Created*in*1492*by*an*Italian*priest*who*documented*and*wrote*on*accounting ! Double0entry0bookkeeping0system0of0accounting:* Any*business*has*had/does*have/will*have*only*one*general*ledger*in*the*life*of*the* business* ! General0ledger:*the*sum*of*all*of*the*individual*accounts*of*any*entity*that*we*are* keeping*score*of* Debit*≠ increase*or*decrease,*good*or*bad* ! INCREASES*assets,*decreases*owner's*equity*and*liability ! Debit:*means*left;*if*we*debit*any*account,*we*are*affected*the*left*side* INCREASES*owner's*equity*and*liability,*decreases*assets* ! Credit:*means*right Journalisation:*first*step*of*accounting*cycle;*we*go*to*the*general*journal General0Journal:*record,*every*day,*in*chronological*order,*the*economic*events*of*the* business* Expenses:*caused*by*operations*of*the*business Not*seen*by*company ! Even*if*debits=credits,*it*does*not*mean*everything*was*done*right* ! Trial0Balance0sheet:0Needed*to*make*sure*we*followed*the*laws*of*debit*and*credit*in*our* process*of*recording*all*these*transactions;*means*that*the*debits*mathematically*equals* the*credits* Period*of*time*when*we*analyze*transaction*and*organize*it*into*our*story! ! Accounting0cycle:*time*it*takes*to*be*introduced*to*the*accounting*events*in*terms*of*an* artificially*induced*time*period* Revenue0Recognition0Principle:*you*cannot*credit*revenue*until*you've*earned*it Revenue:*a*temporary*owner's*equity*account;*We*can*recognize*revenue*after* completing*the*service* Analyze*the*business* event(s) 1. Record*the*event(s)* (the*transactions)* in*the*appropriate* journal0 2. Periodically*(i.e.* instantly,* daily,*weekly,* monthly)* post*transactions* to*the*general0ledger
(book*of*accounts)
3. Determine* the*balance* in*each* and*every*general* ledger*account a. Prepare*the*unadjusted0trial0balance b. If*and*when*it*is*time* to*prepare*financial* statements* (usually*at*the*end*of*the*accounting*
period*C end*of*month,* end*of*quarter,* end*of*year):
4. Analyze*each* and*every*account* balance* in*light*of*everything*that* we*know*about*the*
business*and*information*we*have*to*develop*and:
5. Post*entries*to*the*general*ledger a. Obtain*new*balances* in*each* and*every*general* ledger*account b. Prepare*the*adjusted0trial0balance c. Prepare*any*necessary* adjusting*entries* in*the*general* journal 6. Income* Statement a. Statement* of*Owner’s*Equity*or*Statement* of*Stockholders’* Equity/*Retained*
Earnings,*if*a*corporation
b. Balance* Sheet c. Statement* of*Cash*Flows d. Footnotes e. Prepare*a*complete* set* of*classified* financial* statements 7. Prepare*closing*entries* in*the*general* journal* a. Post*entries*to*the*general*ledger b. Obtain*new*balances* in*each* and*every*general* ledger*account c. Prepare*PostCclosing* trial*balance d. If*it*is*the*end*of*the*accounting* year: 8. Accounting0 Cycle00(JournalI>0 LedgerI>0Trial0 balanceI>0 AdjustmentsI>0New0trial0balanceI>0
Statements)0
The*cycle* starts* anew….repeat* process* with*Step*I General0Journal:0record*transaction*#,*account*name,*and*whether*it*is*debited*or* credited* Transaction*# Accounts Debit Credit 1 Cash Beau's*capital $1000 C C $1000 2 Cash Inventory Accounts*Payable C $10,000 C $600 C $9400 3a Cash Accounts*Receivable Sales*Revenue $200 $4000 C C C $4200 3b Inventory COGS C $3000 $3000 C 4 Cash Accounts*Receivable $2500 C C $2500 5 Cash Accounts*Payable C $2700 $2700 C 6 Cash Beau*Parent*Drawing C $250 $250 C 7 Account's*Payable Rent*Expense C $50 ! $50 ! Balance0Sheet:*Above*the*double*horizontal*lines:*permanent*or*real*accounts;* continue*as*long*as*the*business*is*in*business ! temporary0or0nominal0accounts:0Below*the*double*horizontal*lines;*once*you* measure*the*success*for*a*given*period,**you*start*over*and*start*measuring*again ! Normal:*subtract*smaller*from*the*larger;*whatever*the*larger*side*is*will*be*the* normal*balance ! Use*TIaccounts General0Ledger:0 Trial0Balance:0to*make*sure*everything*is*mathematically*balanced;*Trial*balance*has* three*columns:*name*of*account,*debt,*and*credit* CCS Trial*Balance* **July*31st,*2016 Account Debit Credit Cash $150 Equipment 2,400 Delivery 4,200 Supplies 3,300 Prepaid*Rent 4,000 Accounts* Receivable 5,300 Prepaid*insurance* 1,200 Unearned* Catering*fees $5400 Accounts* Payable 2,250 C*Smith*Capital 10,000 Drawing <750> Fees* Earned 9200 Wage*Expense 5,100 Delivery*Van*Expense* 450 Totals $26,850 $26,850 Income0Statement:0tells*you*Net*Income*of*the*business* CCS Income* Statement For*the*Month*Ended*July*31st,*2016 Fees* Earned:*$11,000 REVENUES:* Wages:* $600
Supplies:* $2100
Maintenance:* $450
Rent:* $400
Insurance:* $100
Depreciation* delivery*van:*70
Depreciation* equipment:* 50*
Total*expenses:* $9,770 EXPENSES: NET0INCOME:0SalesCExpenses=* $1,230 Statement0of0Owner's0Equity:0tells*you*the*balance*of*the*Owner's*Equity*at*the*end*of* the*month;*includes*beginning*capital,*contributed*capital,*net*income,*and*capital* withdrawn* CCS Statement* of*Owner's*Equity For*the*Month*Ended*July*31st,*2016 Christine's*Capital,* 7/1 $0* Contributed:* * $10,000 Net* Income:* $1,230 Capital*Withdrawal/* Christine's*Drawing: <$750> Christine's*Capital* July*31st,*2016:***************$10,480 Balance0Sheet:*totals*everything*up*to*make*sure*assets=liabilities;*divided*into*Assets* and*Liabilities EX*1*(simple)* BBBB Balance* Sheet January*31st,*2016 Cash:*$150
Inventory:* $7,000
Accounts* Receivable:* $1,500
Assets: Total*Assets:* $8,650 Accounts* Payable*$6,750 Liabilities: Beau's*Capital:* $1,900 Owner's*Equity: Total*Liabilities:* $8,650 EX*2*(complex)* CCS Balance* Sheet July*31st,*2016 ASSETS: Cash:*$150
Inventory:* $2100
Supplies:* $1200
Prepaid*Rent:* $3000
Prepaid*insurance:* $1100
AIR:*$5300
Current:* Total*Current*Assets:* $10,750 Long*Term:*
Property,*Plant,*Equipment:* $2,350
Equipment:* $2400
=Net* Equipment:* $2,350 Less* Accumulated* Depreciation:* C50 Delivery*Van*$4,200 =Net* Delivery* Van:*$4,130* Less* accumulated* depreciation:* $70 Total*PPE:*$6,480 TOTAL*ASSETS:* $17,230 LIABILITIES: Unearned* Fees:* $3,600
Accrued*Wages:* $900
Accounts* Payable:* $2250
Current: Total*currently* liabilities:* $6,750 Christine*Smith*Capital:* $10,400 Owner's*Equity TOTAL*LIABILITIES:* $17,230 Assets Liabilities*+*equities* EXPENSES REVENUES Debit*increases Credit*decreases* Normal*debit*balance* Debit*decreases Credit*increases Normal*credit*balance* Note:*balance*is*noted*as**<___>* when*the*normal*balance*is*on* the*wrong*side* Accounting)Study)Guide) Sunday,*September* 25,*2016 3:30*PM
background image Definitions:* "language*we*use*to*tell*the*story"* ! Need*to*be*able*to*compare*stores*(of*company*A*to*company*B);*need*same* criteria*prepared*by*a*set*of*standards/rulebook*that*everybody*shares* Important*because*every*userCgroup*are*all*trying*to*make*decisions;*decision* usefulness*is*the*overarching*reason*that*we*exist*as*storytellers! ! Accounting:*Special*language*used*to*communicate*financial*information*about* economic*entities*to*interested*parties GAAP:*"Generally*Accepted*Accounting*Standards"*a*set*of*accounting*standards* that has*been*adopted*by*nearly*all*publicly*traded*U.S.*companies. International0Financial0Reporting0Standards0(IFRS):*standards*used*by*all*other*"Level*1"* country*economies* Internal0users:*interested*parties*within*the*economic*entity*(firm);*ex:*CEOs,*CPAs,* shareholders,*employees External0users:*interested*parties*outside*the*economic*entity;*ex:*competitors,* creditors,*potential*investors* Economic0Entity0Assumption:0we,*as*storytellers,*are*going*to*identify,*measure,*record,* and*communicate*all*of*the*financial*information*about*this*economic*entity*as*if*that* economic*entity*is*separate*and*apart*from*its*owners*(whether*or*not,*legally,*that*is*the* case)* Monetary0Unit0Assumption:*that*we*are*going*to*capture*and*record*these*financial* transactions*in*terms*of*some*monetary*unit*aka*dollars* Unnamed0Assumption:*that,*in*the*forCprofit*world*of*storytelling,*we*assume*that* people*go*into*business*to*make*money*and*profit– not*a*bad*assumption! Assets:*future*economic*benefit;*an*unused*cost;*things*you*own,*things*that*are*owed*to* you Equities:*claims*to*the*assets;*broken*down*into*two*categories*to*represent*the*source* of*the*asset*(who*has*a*claim*to*the*asset)* Liabilities:*nonCowners*equity* Assets–Liabilities=Owners*Equity ! Contributed0capital:*the*owner*putting*assets*directly*into*the*business* ! Earned0capital:*When*you*make*profit*so*assets*increase!*The*owners*have*claim* to*these*assets*because*they*took*the*financial*risk* ! Owner's0equity/shareholders0equity:*owners'*equity;*claims*arise*from*either* contributed*capital*or*earned*capital* SoleIproprietorship:*one*owner*who*takes*complete*risks*for*the*entity Accounts0Receivable:*claim*to*cash*against*the*customer*because*they*purchased*goods* and*haven't*yet*paid*the*company Drawing/capital0withdrawn0(if*a*corporation,*it*would*be*dividends):*a*returning*of*the* assets*of*the*business*to*the*owners) that*we*will*record*revenues*and*expenses*when*we've*earned*them,*we*will*find* that,*at*this*point,*someone*needs*to*look*at*the*Trial*Balance*and*ask:*In*light*of* everything*we*know*about*this*business,*do*these*amounts*reflect*reality? ! Accrual0Method of*accounting:*WE*USE;*Under*GAF,*we*tell*stories*under*this*method,* saying*that*we*will*record*all*of*the*changes,*regardless*of*the*movement*of*cash* Cash0Basis0of*accounting:*only*records*accounting*when*there*is*a*movement*of*cash;* does*not*show*the*whole*story Businesses*cannot*spend*this;*this*money*does*not*exist* ! You*can't*spend*earnings!!* ! "measurement*of*success"* ! Net0income:0SalesCExpenses;*Net*increase*in*owner's*claims*of*assets*that*were* generated*during*this*period*due*to*successfully*operating*the*business Created*in*1492*by*an*Italian*priest*who*documented*and*wrote*on*accounting ! Double0entry0bookkeeping0system0of0accounting:* Any*business*has*had/does*have/will*have*only*one*general*ledger*in*the*life*of*the* business* ! General0ledger:*the*sum*of*all*of*the*individual*accounts*of*any*entity*that*we*are* keeping*score*of* Debit*≠ increase*or*decrease,*good*or*bad* ! INCREASES*assets,*decreases*owner's*equity*and*liability ! Debit:*means*left;*if*we*debit*any*account,*we*are*affected*the*left*side* INCREASES*owner's*equity*and*liability,*decreases*assets* ! Credit:*means*right Journalisation:*first*step*of*accounting*cycle;*we*go*to*the*general*journal General0Journal:*record,*every*day,*in*chronological*order,*the*economic*events*of*the* business* Expenses:*caused*by*operations*of*the*business Not*seen*by*company ! Even*if*debits=credits,*it*does*not*mean*everything*was*done*right* ! Trial0Balance0sheet:0Needed*to*make*sure*we*followed*the*laws*of*debit*and*credit*in*our* process*of*recording*all*these*transactions;*means*that*the*debits*mathematically*equals* the*credits* Period*of*time*when*we*analyze*transaction*and*organize*it*into*our*story! ! Accounting0cycle:*time*it*takes*to*be*introduced*to*the*accounting*events*in*terms*of*an* artificially*induced*time*period* Revenue0Recognition0Principle:*you*cannot*credit*revenue*until*you've*earned*it Revenue:*a*temporary*owner's*equity*account;*We*can*recognize*revenue*after* completing*the*service* Analyze*the*business* event(s) 1. Record*the*event(s)* (the*transactions)* in*the*appropriate* journal0 2. Periodically*(i.e.* instantly,* daily,*weekly,* monthly)* post*transactions* to*the*general0ledger
(book*of*accounts)
3. Determine* the*balance* in*each* and*every*general* ledger*account a. Prepare*the*unadjusted0trial0balance b. If*and*when*it*is*time* to*prepare*financial* statements* (usually*at*the*end*of*the*accounting*
period*C end*of*month,* end*of*quarter,* end*of*year):
4. Analyze*each* and*every*account* balance* in*light*of*everything*that* we*know*about*the*
business*and*information*we*have*to*develop*and:
5. Post*entries*to*the*general*ledger a. Obtain*new*balances* in*each* and*every*general* ledger*account b. Prepare*the*adjusted0trial0balance c. Prepare*any*necessary* adjusting*entries* in*the*general* journal 6. Income* Statement a. Statement* of*Owner’s*Equity*or*Statement* of*Stockholders’* Equity/*Retained*
Earnings,*if*a*corporation
b. Balance* Sheet c. Statement* of*Cash*Flows d. Footnotes e. Prepare*a*complete* set* of*classified* financial* statements 7. Prepare*closing*entries* in*the*general* journal* a. Post*entries*to*the*general*ledger b. Obtain*new*balances* in*each* and*every*general* ledger*account c. Prepare*PostCclosing* trial*balance d. If*it*is*the*end*of*the*accounting* year: 8. Accounting0 Cycle00(JournalI>0 LedgerI>0Trial0 balanceI>0 AdjustmentsI>0New0trial0balanceI>0
Statements)0
The*cycle* starts* anew….repeat* process* with*Step*I General0Journal:0record*transaction*#,*account*name,*and*whether*it*is*debited*or* credited* Transaction*# Accounts Debit Credit 1 Cash Beau's*capital $1000 C C $1000 2 Cash Inventory Accounts*Payable C $10,000 C $600 C $9400 3a Cash Accounts*Receivable Sales*Revenue $200 $4000 C C C $4200 3b Inventory COGS C $3000 $3000 C 4 Cash Accounts*Receivable $2500 C C $2500 5 Cash Accounts*Payable C $2700 $2700 C 6 Cash Beau*Parent*Drawing C $250 $250 C 7 Account's*Payable Rent*Expense C $50 ! $50 ! Balance0Sheet:*Above*the*double*horizontal*lines:*permanent*or*real*accounts;* continue*as*long*as*the*business*is*in*business ! temporary0or0nominal0accounts:0Below*the*double*horizontal*lines;*once*you* measure*the*success*for*a*given*period,**you*start*over*and*start*measuring*again ! Normal:*subtract*smaller*from*the*larger;*whatever*the*larger*side*is*will*be*the* normal*balance ! Use*TIaccounts General0Ledger:0 Trial0Balance:0to*make*sure*everything*is*mathematically*balanced;*Trial*balance*has* three*columns:*name*of*account,*debt,*and*credit* CCS Trial*Balance* **July*31st,*2016 Account Debit Credit Cash $150 Equipment 2,400 Delivery 4,200 Supplies 3,300 Prepaid*Rent 4,000 Accounts* Receivable 5,300 Prepaid*insurance* 1,200 Unearned* Catering*fees $5400 Accounts* Payable 2,250 C*Smith*Capital 10,000 Drawing <750> Fees* Earned 9200 Wage*Expense 5,100 Delivery*Van*Expense* 450 Totals $26,850 $26,850 Income0Statement:0tells*you*Net*Income*of*the*business* CCS Income* Statement For*the*Month*Ended*July*31st,*2016 Fees* Earned:*$11,000 REVENUES:* Wages:* $600
Supplies:* $2100
Maintenance:* $450
Rent:* $400
Insurance:* $100
Depreciation* delivery*van:*70
Depreciation* equipment:* 50*
Total*expenses:* $9,770 EXPENSES: NET0INCOME:0SalesCExpenses=* $1,230 Statement0of0Owner's0Equity:0tells*you*the*balance*of*the*Owner's*Equity*at*the*end*of* the*month;*includes*beginning*capital,*contributed*capital,*net*income,*and*capital* withdrawn* CCS Statement* of*Owner's*Equity For*the*Month*Ended*July*31st,*2016 Christine's*Capital,* 7/1 $0* Contributed:* * $10,000 Net* Income:* $1,230 Capital*Withdrawal/* Christine's*Drawing: <$750> Christine's*Capital* July*31st,*2016:***************$10,480 Balance0Sheet:*totals*everything*up*to*make*sure*assets=liabilities;*divided*into*Assets* and*Liabilities EX*1*(simple)* BBBB Balance* Sheet January*31st,*2016 Cash:*$150
Inventory:* $7,000
Accounts* Receivable:* $1,500
Assets: Total*Assets:* $8,650 Accounts* Payable*$6,750 Liabilities: Beau's*Capital:* $1,900 Owner's*Equity: Total*Liabilities:* $8,650 EX*2*(complex)* CCS Balance* Sheet July*31st,*2016 ASSETS: Cash:*$150
Inventory:* $2100
Supplies:* $1200
Prepaid*Rent:* $3000
Prepaid*insurance:* $1100
AIR:*$5300
Current:* Total*Current*Assets:* $10,750 Long*Term:*
Property,*Plant,*Equipment:* $2,350
Equipment:* $2400
=Net* Equipment:* $2,350 Less* Accumulated* Depreciation:* C50 Delivery*Van*$4,200 =Net* Delivery* Van:*$4,130* Less* accumulated* depreciation:* $70 Total*PPE:*$6,480 TOTAL*ASSETS:* $17,230 LIABILITIES: Unearned* Fees:* $3,600
Accrued*Wages:* $900
Accounts* Payable:* $2250
Current: Total*currently* liabilities:* $6,750 Christine*Smith*Capital:* $10,400 Owner's*Equity TOTAL*LIABILITIES:* $17,230 Assets Liabilities*+*equities* EXPENSES REVENUES Debit*increases Credit*decreases* Normal*debit*balance* Debit*decreases Credit*increases Normal*credit*balance* Note:*balance*is*noted*as**<___>* when*the*normal*balance*is*on* the*wrong*side* Accounting)Study)Guide) Sunday,*September* 25,*2016 3:30*PM

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School: Tulane University
Department: Accounting
Course: Financial Accounting
Professor: Christine Smith
Term: Fall 2016
Tags:
Name: Accounting Final Study guide
Description: compilation of the 3 study guides from the 3 exams
Uploaded: 12/12/2016
50 Pages 83 Views 66 Unlocks
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