ACCOUNTG 221 1st Edition Lecture 7 Outline of Last Lecture I Lab Help and Test Review II Accrual and Deferral Review III Introduction to Chapter 3 a Debits and Credits b Examples Outline of Current Lecture I DEAD II Interest a Expense and revenue b Note payable c How to calculate interest Current Lecture DEAD These accounts have regular debit balances all others have regular credit balances D Debit E Expenses A Assets D Dividends Interest Expense or revenue Note payable has interest expense Note receivable has interest income later chapter Calculated as Principal x Rate x Time Where rate is always ANNUAL or over 12 months Where time is months outstanding over 12 Ex If 6 months have occurred time 6 months 12 months 5 Ex 3 month note payable accrued 1 month Principal x Rate x Time 1 month accrued 1 month 12 months in the year Ex Prepaid Insurance 24 months in advance used 6 months NOT INTEREST PROBLEM PREPAID PROBLEM Prepaid s are over how many months you paid for total 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 6 months 24 months When you accrue interest you debit interest expense expense RE credit interest payable liability Cash Flows Principal Financing Activity Interest Expense Operating Activity General Journal Accountants initially record data from source documents into a journal booking transaction when it happens matching principle
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