ACC 221 1st Edition Lecture 5 Outline of Previous Lecture Chapter 3 Basic Transactions in Accounting System Accounting System o Shareholders o Accounting Periods Differences in Assets o Inventory v Equipment Basic Transactions Outline of Current Lecture Chapter 4 Accounts in Accounting Cycle Detailing Accounts o Revenue and expense accounts begin at zero each period o New asset accounts o New liability accounts o New owner s equity accounts Current Lecture Chapter4 Detailing Accounts o Revenue and expense accounts always begin at zero for each new accounting period Closing accounts accounts that end at the end of accounting cycle amounts do not roll over to next cycle accounts begin at zero Ending balances for each revenue and expense account always tells total transactions of the month Numbers used to produce the changes report account summary At end of the month the ending balances of each revenue and expense account is translated into the retained earnings account whose balance rolls over to the next cycle o New Assets Accounts Cash Accounts Receivable used when customers pay on credit Inventory Equipment These 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 o New Liability Accounts Note Payable money leaned from bank Interest Payable interest owed to bank o New Owner s Equity Accounts Common Stock money that owners put into business Retained Earnings money resulting from the operations of the business Sales Revenue add all credit entries in retained earnings that relate to customer sales put into sales revenue rather than retained earnings Cost of Goods Sold add all debits in retained earnings related to cost of inventory items sold to customers place here instead of Retained Earnings Rent all debit entries retained earnings resulting from paying rent place here instead of retained earnings Wages all debit entries in retained earnings resulting from paying wages place here instead of retained earnings Interest all debit entries in retained earnings resulting from paying interest to bank place here instead of retained earnings
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