1 Key Terms primarily from eBook 232 of 305 paper textbook p 669 some from earlier Net realizable value Normal balance of an account Permanent accounts Posting T account Temporary accounts Trial balance Adjusted trial balance Post closing trial balance Final Exam Review chapters Book value Chart of accounts Closing entries Credit Debit Double entry accounting Fiscal year General journal General ledger Journal 2 Key Concepts Debits and Credits Understand and apply the accounting rules for debits and credits Debit means left credit means right Designate increases or decreases in an account depending on which type of account it is Increased by debits decreased by credits normal debit balance Assets Expenses because they decrease Equity Dividends because they decrease Equity Increased by credits decreased by debits normal credit balance Liabilities Revenues because they increase Equity Other equity accounts Retained Earnings Common Stock Additional Paid in Capital Note Contra assets like Accumulated Depreciation and Allowance for Doubtful Accounts decrease Assets so they are increased with a credit which decreases Assets They will have a normal credit balance 1 Journal Entries Record of transactions in the following format Event Date Date Account Title Account Title of account to be debited Account Title of account to be credited Debits are listed first followed by credits Debit Credit XXX XXX You need to be able to read and understand descriptions of business events that we ve covered this semester and how those events will affect a company s accounts You need to be able to identify and perform any needed calculations e g calculating interest Cost of Goods Sold estimates of uncollectible accounts expense depreciation expense etc Determine the following for each transaction Which accounts are affected at least two for every transaction Are they Assets Liabilities or Equity Do they increase or decrease Use the accounting rules for debits and credits to decide which to record You will need to know how to record transactions using journal entries including Issuing stock Issuing notes payable or bonds payable Interest payments Installment loan payments Repaying bonds payable Purchasing inventory Purchasing other assets Recording prepaid assets Sales and sales tax collected on account or for cash Recording Cost of Goods Sold Receiving payments on account Writing off Accounts Receivable Making payments on account Recording unearned revenue Paying dividends Recording payroll You need to know how to record adjusting journal entries including Recording office supplies used Recording depreciation Recognizing Unearned Revenue earned during the period Recording the expiration of prepaid assets Estimate of uncollectible accounts expense Accruing salaries expense Accruing interest expense 2 You need to know how to record closing journal entries and what effect they have Close revenue accounts to Retained Earnings Close expense accounts to Retained Earnings Close dividends to Retained Earnings What is the effect of these journal entries on Retained Earnings What are temporary accounts Permanent This review does not include journal entry details i e account names which accounts are debited and credited You can find these details in chapter 13 the in class or practice problem sets in the capstone project material and the Review lab material Lab 10 Know how to post Journal entries to the T accounts T Account T accounts are used to keep a record of all of the activity that affects an account i e the effects of all journal entries that included the account during the period The general ledger is the collection of all of a company s T accounts Each account will have a T account where the beginning balance increases and decreases and the ending balance are shown The left side of a T account is the debit side The right side of a T account is the credit side Be able to post journal entries to the T accounts and know how to calculate balances Other Example Cash 60 0003 79 0006 7 1 5 Bal 49 500 74 000 9 500 6 000 Trial Balance A trial balance is a list of all accounts as of a date usually the last day of the accounting period with their debit or credit balance The account balances come from the general ledger i e the ending balances in the T accounts The adjusted trial balance prepared right after adjusting entries are posted is used to prepare the financial statements The post closing trial balance shows remaining permanent account balances right after closing entries are posted Financial Statements Review which accounts are included in each financial statement the format of the financial statements and how they articulate i e how they interrelate see chapter 1 Payroll Calculating gross pay and net pay salaries wage expense payroll tax expense voluntary deductions and employee benefits expense 3 Note the capstone project and the material included in the last lab meeting Lab 10 Review are excellent resources for review 4