ACC 221 1st Edition Lecture 4Outline of Previous Lecture- Chapters 1 & 2: Additional Facts About Accounting System Accounting Systemo Traditional accounting system routineo Asset, Liability, Owner’s Equity Accounts Additional Factso Entries don’t have to affect different sides to stay in balanceo No set accounting periodsOutline of Current Lecture - Chapter 3 Accounting Systemo Shareholderso Accounting Periods Differences in Assetso Inventory v. Equipment Basic TransactionsCurrent Lecture- Chapter3 Accounting Systemo Shareholders Claims to Assets (Gaining money) is done through selling shares of stock General Ledger Trial Balance Balance Sheeto Accounting Periods Must know accounting period, so you know when to complete financial statement New accounting period: transfer ending balances to beginning balances for new period Differences in assetso Inventory V. Equipment Inventory – what you are selling to customers Equipment – what companies use within the businessThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute. Basic transactionso Sale of inventory to a customer (2 parts):- Sale: selling product to customer in exchange for casho Debit asset cash (Adding money from sale to your cash)o Credit retained earnings (Adding money from sale to your total earnings)- Transaction: giving the product to the customero Debit retained earnings (Price you paid for the car)o Credit inventory (Taking price you paid for car out of inventory)o Paying Rent- Debit retained earnings (Subtract from total earnings)- Credit Cash (Subtract from total cash)o Paying Wages- Debit Retained Earnings - Credit casho Making a sale on credit – affects accounts receivable- Do not count this as a liability, even though you have not actually been paid in cash for the inventory. This is because cash is coming, and must keep transaction within the accounting period. - Sale:o Debit accounts receivableo Credit retained earnings- Transaction: o Debit retained earningso Credit inventoryo Collect cash from accounts receivable- Debit Cash- Credit Accounts Reviewableo Pay interest to bank- Owe Money to banko Even if don’t pay until following month, still write down into account.o Accrual Accounting– record everything that should occur to the company within the accounting period, regardless of when it is actuallypaid. - Increases claims to assets for bank (non-owners, so liability)- Total assets do not changeo Account summary- Summary of the increase in owner’s claim to assets- Given to stockholders so they are able to readily see where the net gain or lossis coming from in an accounting periodo Sale of inventory, minus: The cost of inventory Rent Wages Bank’s claim to
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