Accounting Week 2 Notes
Accounting Week 2 Notes ACCT 2013
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This 4 page Class Notes was uploaded by Riley Goodman on Tuesday February 2, 2016. The Class Notes belongs to ACCT 2013 at University of Arkansas taught by James Meyers in Winter 2016. Since its upload, it has received 18 views. For similar materials see Principles of Accounting 1 in Accounting at University of Arkansas.
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Date Created: 02/02/16
Accounting Cycle Tuesday, January 26, 2016 6:06 PM Accounting Equation: Assets = Liabilities + Stockholders' Equity Systematic way of recording transactions during a period Assets = Resources owned by the company Liabilities = Amounts owed Stockholders' Equity = Common Stock + Retained Earnings o Common Stock - Initial investment o Retained Earnings - All of the earnings over the life of the company minus payments to owners (Internally generated value) Beginning Retained Earnings + Net Income for Year - Dividends for Year Dividends - Payment to owners Net Income = Revenue - Expenses Revenue = Sale of Goods or Services Balance Sheet: Assets = Liabilities + Stockholders' Equity Statement of Stockholders' Equity: Common Stock + Retained Earnings Income Statement: Revenue - Expenses Transactions and Accounts: Transactions: External - Between business and another party Internal - Within the business Accounts: Accumulated dollar effect of similar transactions Examples - Asset accounts, liability accounts, etc… Double Entry Book Keeping: System used for keeping track of all the transactions for a business At least two effects for each transaction Entries noted with dollar signs $ on the left will always equal $ on the right Debit = Left o D = Dividends o E = Expenses o A = Assets Credit = Right o L = Liabilities o O = Owners' Equity o R = Revenue All debits on top, all credits on bottom and indented When things make the left side > right side we Debit (record on the left) When things make the right side > left side we Credit (record on the right) Examples: o Sale of Goods = Increased assets and Revenue o Purchase of Equipment = Increased assets and decreased assets o Car Loan = Increased assets, and increased liability T-Account: Method used to measure flow in any account Balance Sheet Recording a Transaction: Debit Debit Name Amount Credit Credit Name Amount Cash 1000 (+Asset) Notes Payable 1000 (+Liability) Examples: Supplies (+A) $1500 Accounts Payable $1500 (+L) Accounts Payable (-L) 1500$ Cash (-A) 1500$ Account Receivable $4000 (+A) Service Revenue (+R, $4000 +SE) Cash (+A) $4000 Accounts Receivable $4000 Salaries Expense $3200 (+E, -SE) Cash (-A) $3200 Utilities Expense (+E, $2100 -SE) Utilities Payable $2100 Cash (+A) $10000 Common Stock (+SE) $10000 Dividends (+D, -SE) $1400 Cash (-A) $1400 Income Statement: Six Accounts: Revenue: Liabilities Larger with Credit Stockholders' Equity Smaller with Debit Revenues Expense: Dividends Larger with Debit Expenses Smaller with Credit Assets Net Income - Credit Net Loss - Debit Six Main Increase Decreas Statement Accounts: e Dividends Debit Credit Statement of Stock Equity Expenses Debit Credit Income Statement Assets Debit Credit Balance Sheet Liabilities Credit Debit Balance Sheet Owners' Equity Credit Debit Balance Sheet Revenues Credit Debit Income Statement Two New Accounts: Prepaid Rent - When company pays rent in advance, that prepaid rent becomes an asset o Causes debit to increase Unearned Revenue - When a company's customer pays in advance, this revenue is a liability o Causes credit to increase *Businesses summarize transactions on financial statements, they don't include every transaction*
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