Week 2 (ch. 2)
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This 4 page Class Notes was uploaded by Jenna Sminkey on Friday September 11, 2015. The Class Notes belongs to BMGT220 at University of Maryland taught by Progyan Basu in Summer 2015. Since its upload, it has received 59 views. For similar materials see Principles of Accounting 1 in Business at University of Maryland.
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Date Created: 09/11/15
Week 2 Tuesday September 8 2015 1217 PM Chapter 2 Account 0 An accounting form that is used to record the increases and decreases in each accounting equation element T account ill39itl e Left sidle Right side 6 dm lt9 credit Balance of the account 0 The excess of the debits of an asset account over its credits Ledger 0 Group of accounts for a business 0 A list of the accounts in the ledger is called a chart of accounts Doubleentry accounting system 0 Requires every business transaction to be recorded in at least two accounts 0 Total debits must be equal to total credits 0 The doubleentry accounting system has specific rules of debit and credit based on the type of account 0 For balance sheet accounts Balance Sheet Accounts u ASSETS LIABILITIES STOCKHOLDERS EQUITY Asset Accounts Liability Accounts Stockholders Equity Accounts Debit for Credit for Debit for Credit for Debit for Credit for II39ICIC OSQS l decreases lquot decreases Increases v decreases l rI Increases l O For income statement accounts Imam e Statement Acme rits Revenue Acceur its Expense A ceurits Debit fer Eredit felr lljelbit fer E39redit fer desireeses ji 7 increases i insreeses 1 decreases i o For dividend accounts Divider cis Acmumt Debit fer Credit fer iricreeses le decreeses 1 Normal balance of an account 0 Either a debit or credit balance depending on whether increases in the account are recorded as debits or credits Fall 2015 Page 1 ASSETS LIABILITIES STOCKHOLDERS EQUITY Asset Accounts Liability Accounts Cam 5quot Q nned hmmq out man for Debrt for Debt Or pan Debit m decreases v decreases I i am decreases t i I39m decreases 1 l gt 1 t I Dividends Account Income Statement Accounts quoton m o Revenue Accounts dmmws e Debit or d xwasesl r l t m amp lulla Expense Accounts 39 Duh min for 1K runs4 39 I the sade of the 3ltount Io recording increases 39 I 39 and the normal MWG ls shown In giten Journah 0 The initial record in which the effects of transactions are recorded 0 Example Date Description Posting Reference Debit Credit page number when the time comes Nov 1 Cash 25000 Capital Stock 25000 issued capital stock for cash assets and capital stock increased 25000 on Nov 1 0 Terminology Net Income or net loss uQafAIvgcu v Journal Entry Account Common transaction terminology Debit Credit Received cash for servuces provrded Cash Fees Earned Services provrded on account Accounts Receivable Fees Earned Received cash on account Cash Accounts Receivable Purchased on account Asset account Ford on account Accounts Payable Paid cash Asset or expense account Issued capital stock Cash andor other assets Paid divrdends Dividends Posting Accounts Payable Cash Cash Capital Stock Cash 0 The process of transferring the debits and credits from the journal entries to the accounts Trial balance 0 A summary listing of the titles and balances of accounts in the ledger lLiat the name at the company tllte title wtquot the trial balance and tlhe date the trial balance is prepared list the accounts from the ledger and enter their del ait er credit balance in the Debit Hr Credit l ltlmft of the trial balance thall the Delhit and Credit celurnna of the trial balance Verify that the tetal at the Debit cellth equals the tntall of the ICr39edlit 0 A summary listing of the titles and balances of accounts in the ledger prior to the posting of adjusted entries if called an unadjusted trial Fall 2015 Page 2 column balance Trial balance errors 1 If the difference between the Debit and Credit column totals is 39 i 11 l nut an error in addition may have occurred In case re add the trial balance column totals If the error still exists recompute the account balances 2 If the difference between the Debit and Credit column totals can be enlist the error maI be due to the entering of a debit balance as a credit balance or vice versa in this case review the trial balance for account balances of one half the difference that map have been entered in the wrong column For example if the Debit column total is 20640 and the Credit column total is 2ll2136 the difference of 4M 210640 2fl23 map be due to a credit account balance of 202 that was entered as a debit account balance W trace the account 3 If the difference between the Debit and Credit column totals is east if balances back to the ledger to see if an account balance was incorrectly copied from the ledger Two common types of copying errors are transpositions and slides A tr39aus psitiun occurs when the order of the digits is copied incorrectly such as writing 542 as 1452 or 524 In a slide the entire number is copied incorrectly one or more spaces to the right or the left such as writing 54201 as 5420 or 542ft tl ln both cases the resulting error will be evenly divisible by 9 iii If the difference between the Debit and Credit column totals is It Iquot ledger to see if an account balance in the amount of the error has been omitted from the trial balance If the g review the error is not discovered review the journal postings to see if a posting of a debit or credit may have been omitted U1 If an error is not discovered by the preceding steps the accounting process must be retraced beginning with the last journal entry Correctingjournal entry 0 An entry that is prepared when an error has already been journalized and posted Horizontal analysis 0 Financial analysis that compares an item in a current statement with the same item in prior statements Dr Basu39s video lecture RQQOJUL 39 p gcgcs g nodou39xties Vcommon oderAS 4 reomuuLS txPenxg stood m VC CMOCA 404 r aegg beK C 29 C g P gtbe me 0W 3 c Qou T c oxvu39 acLQQuwxt39 lt scout lt 2 ampCltgtiquot arcAt t oodmnq 3 G39 CV KK 3 r ibg Agbgb boi oqNCA Chat 0399 QCOMW C QQrtQA ixPchascs o Ouom tw vx s ASK o 5 L O b i C Fall 2015 Page 3 O EXP WltI o Ouowcrs 2 RSRbS L WMoi i 39tg D wx 3 RampRM 56b gait beAOK 39b CVtAK Jt 4r Dcvax39c ngavt r a O R L D K bvqb OL K SOWWOKR cm bra Mxi a t 39OOUL ode m t39 cxc xt 5 de t ngx v r Q 0 ewe 9 C agk u Dodti L o Tmms 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