ACCT 23020 Introduction to Financial Accounting Chapter 2 Transactions The building blocks for financial statements financial impact reliability Always two sides Give and Receive Records of all changes in a particular asset liability and equity during the period Liabilities Debts i e notes payable loans Equity i e common stock dividends retained earnings LO 1 Transactions measured LO 2 Accounts Assets Long term 1 year Current 1 year i e inventory i e building land vehicle insurance LO 4 Debits and Credits on T accounts Debit the left side of a T account Credit the right side of a T account T Account Model Account Title Credit Debit decrease increase Side 1 Give up money Side 2 Get cash Liabilities Common Stock Retained Earnings Revenue Credits Increase liabilities common stock retained earnings and revenue Dividends Expenses Assets Debits Increase assets dividends and expenses LO 5 Journals Chronological entry with date account and explanation Always start with debits before credits Credits are always indented Problem 1 Find the cash balance using a t account April 1 Invest 27 000 Purchase supplies on account 8800 April 2 Office rent 3 500 April 3 Recorded 8300 in revenue Received 2200 cash Cash 3 500 Bal 27 000 2 200 25 700 ACCT 23020 Introduction to Financial Accounting Chapter 2 Transactions Problem 2 Explain the change in asset liability and equity 1 Purchase a building for cash Increase an asset decrease another asset 2 Pay dividends to owners Decrease an asset decrease equity 3 Issue stock for cash Increase an asset increase equity 4 Purchase office supplies on account Increase an asset increase a liability 5 Pay amount owed to company for invoice Decrease an asset decrease a liability Problem 3 Write the journal entry for each entry March 15 Borrowed 31 000 from bank note payable March 22 Performed service on account for 8 900 March 28 Received 56 000 cash on account March 29 Received utility bill of 900 on accounts payable that will be paid in April March 31 Monthly salary of 2 600 to employee Service Revenue Date Account Explanation 3 15 Cash Note Payable 3 22 Account Receivable 3 28 Cash 3 29 Utility Expense 3 31 Salary Expense Accounts Receivable Accounts Payable Cash Debit 31 000 8 900 5600 900 2600 Credit 31 000 8 900 5600 900 2600
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