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Financial Accounting Week 4 Notes

by: Emily Green

Financial Accounting Week 4 Notes ACC 2013

Marketplace > Mississippi State University > Accounting > ACC 2013 > Financial Accounting Week 4 Notes
Emily Green
GPA 3.44

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About this Document

These cover credits and debits, the last of what is on exam 1 as well as more definitions and a few notes from one book example to help with homework.
Principles of financial accounting
Nathan Berglund
Class Notes
Accounting, financial accounting
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This 4 page Class Notes was uploaded by Emily Green on Friday February 5, 2016. The Class Notes belongs to ACC 2013 at Mississippi State University taught by Nathan Berglund in Summer 2015. Since its upload, it has received 16 views. For similar materials see Principles of financial accounting in Accounting at Mississippi State University.


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Date Created: 02/05/16
Debits Credits Assets = Liabilities + Equity Assets Liabilities Equity (Common) and (Retained) Stock Earnings normal debit balance normal credit balance normal credit balance debits increase assetss credits increase liabilities credits increase CS & RE credits decrease assets debits decrease liabilities debits decrease CS & RE Temporary Accounts Revenue has normal credit balance credits increase revenue expenses & dividends have normal debit balance debits increase expense & dividends credits decrease incurred = used accrued = something someone owes to you or something you owe DEA LOR Dividends Expenses Assets Liabilities Owner's equity Revenues exhibit 3.3 • cash is included in assets and considered debit • positive accounts in equity or common stock is added credit • on account- when something is bought but not paid for yet (increases credit) • supplies- increases debit • accounts payable- increases credit • unearned revenue is a liability- increases credit • accounts receivable increases debit • increasing land is debit under land and credit under cash • revenues, expenses, and dividends are all temporary accounts that eventually move into retained earnings • recognized means putting the event into the statements • debits = credits • at the bottom of each T-chart, find the subtotals of each side ◦ find out which side is higher and state the difference on the higher side • credits and debits may be displayed in a different format than the T-charts ◦ show the account and how much is being debited ◦ show the account being credited below and how much ◦ page 160 • for both formats, debits are always on the left, credits are always on the right Owner's Equity • Retained Earnings *permanent account* ◦ temporary accounts ‣ revenues + (credit) ‣ expenses - (debit) ‣ dividends - (debit) Closing: • for each RED Account ◦ Debit/Credit to bring balance to $0 ◦ The other side (debit/credit) goes to retained earnings Return on Assets Ratio • evaluating performance requires considering the size of the investment base used to produce the income ◦ net income/total assets • "standardize" • allows you to compare small to large companies • measures efficiency Return on Equity Ratio • owners are interested in this ration to determine their investment in the company ◦ net income/stockholder's equity Debt to Assets Ratio • borrowing money is risky business, this ratio helps evaluate the level of debt risk ◦ total debt/total assets Trial Balance • ending balance including temporary accounts ◦ balance before the closing process and financial statements • receivable accounts are always asset accounts • payable accounts are always liabilities • unearned revenue is a liability, different from all other revenues *what is on the income statement* revenue and expenses NO DIVIDENDS OR UNEARNED REVENUE (LIABILITY) dividends show up in the statement of stockholder's equity


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