Accounting is a system that identifies record communicates info that is relevant reliable comparable about organization business activities External Investors consumer Shareholders Regulatory bodies Lenders customers Internal Managers Sales staff Officers Controllers Financial accounting standards board FASB Generally Accepted Accounting procedures GAAP International accounting standards board IASB IFRS International financial reporting standards U S SEC registrants GAAP Non U S SEC registrants IFRS Source document Record accounting books Communicated accounting system financial statements 1 sole proprietorship unlimited 2 partnership at least liability two people a unlimited partners b c general partner GP limited partner silent partner 3 corporation limited liability articles of incorporation IPO initial public offering UC s unlimited liability company Partnership unlimited liability no shares CPA certified public accountant CMA certified manageable account EA enrolled agent Conceptual framework provide useful info to investors Balance sheet double taxation owners shareholders shares of stock corporate veil not allowed Assets Liabilities Equity Matching Principle Inventory 70 Expense 70 Revenue 100 1 1 12 31 calendar year 6 30 5 30 fiscal year Balance Sheet as of 12 31 2014 100 Assets 80 Liabilities Equity 180 100 120 140 80 100 180 Accounting constraints Materiality Cost benefit Conservatism Industry practices ASSETS LIABILITIES EQUITY Eqity net income Dividends Stock retained earnings accounts recievable what you own contributed capital dividends revenues expenses retained earnings 5 27 15 assets liabilities equity what you own what you owe equity revenue expenses dividends stock net income retained earnings income statement period ending 12 31 14 revenues expenses net income statement of retained earnings beginning reraned earnings net incomes dividends end retained earnings balance sheet as of 12 31 14 assets liabilities equity retained earnings classified balance sheets separated current assets and not current assets listed in order of liquidity return on assets net income average total assets profitability measure the higher the better statement of cash flows operating investing financing Statement of RE Beginning RE O Plus net income Less dividends End retained earnings 2110 2000 110 11360 14000 3250 46000 18000 92610 Balance sheet Assets Cash A R Office supplies Land Equip Assets Liabilities A P 8500 Liabilities 8500 Equity Owners investment 84 000 RE 110 84 110 Liability Equip 92610 Chapter 2 Expernal Transaction Recording process Source documents journal trail balance ledger accounts General journal Debit supplies 1000 Credit A P 100 Bought supplies on account Asset Normal Debit Balance debit asset account increase credit asset account decrease Liabilities Equity normal credit balance credit account increase debit accounts decrease A P Debit 1000 Credit 6000 1000 7000 6000 Cash 10 000 2000 12000 A P Debit Credit 7000 10000 17000 Inventory Debit 3000 1000 Credit 2000 Furniture Debit 2500 10000 33000 34000 Credit 1000 Common Stock Credit Debit 50 000 10 000 60 000 Cash Debit 20 000 10 000 30 000 Credit GL General Ledger Matching principle recognizing revenues and expenses together 6 1 15 Chapter 2 General Journal Journal entry Date supplies materials 1000 6 1 accounts payable 1000 bought materials on credit Reference GL 307 First step is journal entry GL Accounts payable Acct 307 Date Post Debit Credit Balance 1 1 6 1 1000 10 000 9000 Trial Balance Debits Credits Cash A R Inu A P Note payable Common stock RE 2000 1000 8000 10 000 500 500 11 000 11 000 Building 500 000 Cash 200 000 Note payable 300 000 Cash Dr Cr 200 000 Building Cr Dr 500 000 Dr Notes Payable Cr 300 000 307 Sold 10 pairs of sneakers for 100 each Cost you 50 each to produce Dr Revenue Cr 1000 100 x 10 Expense cost of goods sold costs Cr 307 Dr 500 50 x 10 Cash Cr Dr 1000 Dr Inventory Cr 500 Asset Normal Debit Normal Credit Liability Equity Revenue Expense Dividends Retained Earnings 1 Cost of good sold 500 Inventory 500 2 Cash 1000 Revenue 1000 Cash Date Dr 1 1 6 1 1000 Cr Cost of Goods sold Date Dr Cr 1 1 6 1 500 Balance 8 000 9 000 Balance 7 000 7 500 Revenue Date Dr 1 1 6 1 Inventory Date Dr 1 1 6 1 Cr Balance 30 000 1000 31 000 Cr 500 Balance 18 000 17 500 Acct 101 Acct 437 Acct 506 Acct 107 Permanent Real Assets Liabilities Equity Temporary Nominal Revenue Expense Dividend Measured at a point in time Measured for a period of time Ending balance at year end becomes beginning balance next period closed out at year end new period measures these accounts from 0 debt ratio total liabilities total assets High debt ratio is bad Measures company s solvency ability to pay off long term debt Liquidity ability to meet short term obligations current ratio current assets currents liabilities Current Asset Cash cash equivalent Account relievable Inventory Current Liabilities Accounts payable Short term notes payable Increases an account is a normal balance Equity Normal Credit balance Homework 2 Question 9 Common Stock Revenues expenses dividends Normal credit balance Normal debit balance Retained Earnings Increase cr these elements equity Bay Building 200 000 Land Pay 100 000 300 000 cash Homework 2 Question 10 on credit 400 000 Building 200 000 Land 300 000 Cash 100 000 Mortgage payable 400 000 Account payable short term Notes payable loan literal signed informal note long term Homework 2 1 Analysis of business transactions and events 2 Analyze record post and prepare 3 Ledgers 4 Account 5 Liabilities 6 General Ledger 7 The left hand side of a T account 8 The normal balance of an expense account is a credit 9 An increase in an unearned revenue account 10 Difference between debits and credits 11 Sales Salaries payable 12 Decreases asset and expense accounts 13 B 14 2900 15 900 a 375 d 1275 16 110 total liability 425 total assets 25 9 17 Debit to telephone expense for 300 18 Credit to accounts payable 19 C 20 Debit dividends credit cash 21 Service revenue and utilities expense 22 C 7500 8600 1800 6 2 15 Adjusting Entry 8 1 supplies 880 Cash 880 12 31 280 supplies remaining Supplies expense 600 Supplies 600 Spade Company Question a Cash 100 750 Common stock 100 750 b Office supplies 1250 Cash 1250 c Office Equipment 10050 A P 10050 d Cash 15000 Fees Revenue 15000 e Accounts payable 10050 Cash 1050 f Accounts receivable 2700 Fees Revenue 2700 g Rent Expense 1225 Cash 1225 h Cash 1225 A R 1225 i Dividend 10 000
View Full Document
Unlocking...