Accounting Concepts
(OpenStax 3.1)
https://create.kahoot.it/v2/details/649b5f2d-9f15-4c12-b78e-767df3cb076a
Accounting Equation & Accounts (OpenStax 3.2 3.4)
https://create.kahoot.it/v2/details/ae94a56b-a88c-4179-9824-8801f5d73e67
Analyzing and Recording Transactions (OpenStax Ch 3)
https://quizlet.com/_8se2ke?x=1jqt&i=1uunox
BIG QUESTIONS!
Invest in Zoom? Work at Zoom?
Review Its Financial Statements!
2nd Quarter Press Release:
Expanded Accounting Equation
What is Equation? (HINT: It’s still A = L + E !!!)
Income Statement &
Balance Sheet Problems
Get your Personal Whiteboards out!
“BIG IDEA”: Transactions always affect at least two (2) accounts (this is “double entry accounting”)
Problems PA4-6:
https://docs.google.com/document/d/1gtO-bg6Yr_t5RsRYzLv2O4AJjHENJ9eHdS02aWAQLmY/edit#
Solutions:
https://docs.google.com/document/d/1iyk0vg5zqZG5TwWNygbjA5-crdGeob1P6cxOa_5w5WM/edit
Practice Exercises
https://classroom.google.com/w/MTI2MDQ0MDgwMDE5/t/all
Principles of Accounting, Volume 1:
Financial Accounting
Chapter 2 INTRODUCTION TO FINANCIAL STATEMENTS
Chapter Outline
2.1 Describe the Income Statement, Statement of Owner’s Equity, Balance Sheet, and Statement of Cash Flows, and How They Interrelate
2.2 Define, Explain, and Provide Examples of:
2.3 Prepare an Income Statement, Statement of Owner’s Equity, and Balance Sheet
(SIMPLE STATEMENTS FOR SIMPLE BUSINESSES)
Principles of Accounting, Volume 1:
Financial Accounting
Chapter 3 ANALYZING AND RECORDING TRANSACTIONS
(HANDLING MORE COMPLEX BUSINESSES)
Chapter Outline
3.1 Describe Principles, Assumptions, and Concepts of Accounting and Their Relationship to Financial Statements
3.2 Define and Describe the Expanded Accounting Equation and Its Relationship to Analyzing Transactions
3.3 Define and Describe the Initial Steps in the Accounting Cycle
3.4 Analyze Business Transactions Using the Accounting Equation and Show the Impact of Business Transactions on Financial Statements
3.5 Use Journal Entries to Record Transactions and Post to T-Accounts
3.6 Prepare a Trial Balance
Chapter Outline
3.1 Describe Principles, Assumptions, and Concepts of Accounting and Their Relationship to Financial Statements
3.2 Define and Describe the Expanded Accounting Equation and Its Relationship to Analyzing Transactions
3.3 Define and Describe the Initial Steps in the Accounting Cycle
3.4 Analyze Business Transactions Using the Accounting Equation and Show the Impact of Business Transactions on Financial Statements
3.5 Use Journal Entries to Record Transactions and Post to T-Accounts
3.6 Prepare a Trial Balance
Figure 3.2: Graphic Organizer
GAAP Accounting Standards Connection Tree. (attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
3.1 Describe Principles, Assumptions, and Concepts of Accounting and Their Relationship to Financial Statements
The Conceptual Framework
The conceptual framework is a set of concepts that guide financial reporting. These concepts help ensure information is comparable and reliable to stakeholders.
The Conceptual Framework (continued)
AND … Consistency: accounting methods applied in a like manner, across multiple periods, allow for contract and comparison between periods
EQUIPMENT & DEPRECIATION
What happens when you buy IT gear that
Lasts 10 years? Asset? Expense? Cash Flow?
2nd Quarter Press Release:
What is Asset balance that includes this transaction?
Cash Flow adjustment?
Expense amount?
Figure 3.2: Graphic Organizer
GAAP Accounting Standards Connection Tree. (attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
Accounting Equation
The accounting equation can be thought of from a “sources and claims” perspective. Everything a company owns must equal everything the company owes to creditors (lenders) and owners (individuals for sole proprietors or stockholders for companies or corporations).
For the rest of the text, we switch the structure of the business to a corporation, and instead of owner’s equity, we begin using stockholder’s equity, which includes account titles such as common stock and retained earnings to represent the owners’ interests.
The Expanded Accounting Equation �
Accounting equation with expanded equity side:
(attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
The Expanded Accounting Equation �
Accounting equation with expanded equity side:
(attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
Owner’s Investment
Distributions
Net Income/Loss
Double-Entry Bookkeeping
The basic components of even the simplest accounting system are accounts and a general ledger.
Recording transactions in the general ledger utilizes a double-entry accounting system:
Debits and Credits
In order for companies to record the myriad of transactions they have each year, there is a need for a simple, but detailed, system. Each account can be split into a right side and a left side.
Debits and Credits
Depending on the account type, the sides that increase and decrease will vary.
Debit & Credit can be thought of in terms of Left & Right
On the Left Side, Debits Increase Asset Balances
On the Right Side, Credits Increase Liability & Equity Balances
Debits and Credits
Depending on the account type, the sides that increase and decrease will vary.
Debit & Credit can be thought of in terms of Left & Right
On the Left Side, Debits Increase Asset Balances
On the Right Side, Credits Increase Liability & Equity Balances
Debits and Credits
The normal balance is the expected balance each account type maintains, which is the side that increases.
Account Normal Balances and Increases
Type of Account | Increases With | Normal (Postive) Balance |
Asset | | |
Liability | | |
Common Stock | | |
Dividends | | |
Revenue | | |
Expense | | |
Debits and Credits
The normal balance is the expected balance each account type maintains, which is the side that increases.
Account Normal Balances and Increases
Type of Account | Increases With | Normal (Positive) Balance |
Asset | Debit | Debit |
Liability | Credit | Credit |
Common Stock | Credit | Credit |
Dividends | Debit | Debit |
Revenue | Credit | Credit |
Expense | Debit | Debit |
Module 3.2 Define and Describe the Expanded Accounting Equation �and Its Relationship to Analyzing Transactions
Accounting equation with expanded equity side:
Expanded Accounting Equation. (attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
Debits and Credits
Depending on the account type, the sides that increase and decrease will vary.
Debit & Credit can be thought of as Left & Right
Debits and Credits
In order for companies to record the myriad of transactions they have each year, there is a need for a simple, but detailed, system. Each account can be split into a right side and a left side.
Debits and Credits
Depending on the account type, the sides that increase and decrease will vary.
Debit & Credit can be thought of in terms of Left & Right
On the Left Side, Debits Increase Asset Balances
On the Right Side, Credits Increase Liability & Equity Balances
The Expanded Accounting Equation �
Accounting equation with expanded equity side:
(attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
The Expanded Accounting Equation �
Accounting equation with expanded equity side:
(attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
Owner’s Investment
Distributions
Net Income/Loss
Financial Statement and Accounting Equation Interrelationships �Review
Assets = Liabilities + Stockholders’ Equity
Assets = Liabilities + [Contributed Capital + Retained Earnings]
Assets = Liabilities + [Contributed Capital + {Beg. Retained Earnings + Net Income – Dividends}]
Assets = Liabilities + [Contributed Capital + {Beg. Retained Earnings + (Revenues – Expenses) – Dividends}]
Income Statement
Statement of Stockholders’ (Owners’) Equity
Balance Sheet
Various Asset Accounts (Write down names)
Various Liability Accounts (again, names)
Equity Account Components (yes, names)
Stockholders’ equity is the owner’s (stockholders’) investments in the business and earnings.
Accounting Cycle
1. Income statement 2. Owner’s equity
3. Balance sheet 4. Cash flows
Exercise
EA11. Identify whether each of the following transactions would be recorded with a debit (Dr) or credit (Cr) entry.
| | Debit or Credit? |
A. | Cash increase | |
B. | Supplies decrease | |
C. | Accounts Payable increase | |
D, | Common Stock decrease | |
E. | Interest Payable decrease | |
F. | Notes Payable decrease | |
Exercise
EA11. Identify whether each of the following transactions would be recorded with a debit (Dr) or credit (Cr) entry.
| | Debit or Credit? |
A. | Cash increase | Dr |
B. | Supplies decrease | Cr |
C. | Accounts Payable increase | Cr |
D, | Common Stock decrease | Dr |
E. | Interest Payable decrease | Dr |
F. | Notes Payable decrease | Dr |
Figure 3.5
The Accounting Cycle. (attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
The entire cycle is meant to keep financial data organized and easily accessible to both internal and external users of information.
Figure 3.6
Accounting Cycle. The first four steps in the accounting cycle. Modified for PPT. (attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
The first four steps of the accounting cycle are
This takes information from original sources or activities and translates that information into usable financial data.
This takes analyzed data from Step 1 and organizes it into a comprehensive record of every company transaction.
Posting takes all transactions from the journal during a period and moves the information to a general ledger.
This takes information from the general ledger and transfers it onto a document showing all account balances, and ensures debits = credits.
Figure 3.7: Sample General Journal (Used in Step 2)
General Journal. (attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
The general journal will contain a chronological listing of transactions. A transaction is a business activity or event that has an effect on financial information presented on financial statements and comes from an original source. The journal is where a company can find a record of all transactions that occurred during a given time period, such as a day.
Figure 3.8: Sample General Ledger in T-Account Form (Used in Step 3)
General Ledger in T-Account Form. (attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
The general ledger provides a record of transactions for each individual account in chronological order within that account. The ledger is where a company will find the balance for a specific account. These account balances will make up the trial balance created in Step 4.
Figure 3.9: Sample Trial Balance
Unadjusted Trial Balance. (attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
The trial balance will include all account balances. Those balances will come from the general ledger.
Module 3.4 Analyze Business Transactions Using the Accounting Equation and Show the Impact of Business Transactions on Financial Statements
The first step in the accounting cycle is to identify and analyze transactions.
Each original source must be evaluated for financial implications. Meaning, will the information contained on this original source affect the financial statements? If the answer is yes, the company will then analyze the information for how it affects the financial statements.
One task is to determine the value of the transaction; sometimes this is obvious, and others times it is less clear.
Your Turn: Monetary Value of Transactions
& Accounting Concepts
You are the accountant for a small computer programming company. You must record the following transactions. What values do you think you will use for each transaction?
Your Turn: Monetary Value of Transactions
& Accounting Concepts
C. Your company has performed a task for a customer. The customer agreed to a minimum price of $2,350 for the work, but if the customer has absolutely no issues with the programming for the first month, the customer will pay you $2,500 (which includes a bonus for work well done). The owner of the company is almost 100% sure she will receive $2,500 for the job done. You have to record the revenue earned and need to decide how much should be recorded.
D. The owner of the company believes the most valuable asset for his company is the employees. The service the company provides depends on having intelligent, hardworking, dependable employees who believe they need to deliver exactly what the customer wants in a reasonable amount of time. Without the employees, the company would not be so successful. The owner wants to know if she can include the value of her employees on the balance sheet as an asset.
Recording Transactions: Understanding Impact on the Accounting Equation
Transaction 1: Issues $20,000 shares of common stock for cash.
Analysis: Cash is an asset and common stock is stockholder’s equity. When a company collects cash, this will increase assets because cash is coming into the business. When a company issues common stock, this will increase a stockholder’s equity because he or she is receiving investments from owners.
Transaction 2: Purchases equipment on account for
$3,500, payment due within the month.
Analysis: Equipment is an asset. There is an increase to assets because the company has equipment it did not have before. We also know that the company purchased the equipment on account, meaning it did not pay for the equipment immediately and asked for payment to be billed instead and paid later—this is a liability, specifically labeled as accounts payable. There is also an increase to liabilities because the company now owes money.
Transaction 3: Receives $4,000 cash in advance from a customer for services not yet rendered.
Analysis: We know that the company collected cash, which is an asset. This collection of $4,000 increases assets because money is coming into the business.
Transaction 4: Provides $5,500 in services to a customer who asks to be billed for the services.
Analysis: The company performed a service and therefore earned revenue. However, the customer asked to be billed for the service, meaning the customer did not pay with cash immediately. The customer owes money and has not yet paid, signaling an accounts receivable. Accounts receivable is an asset that is increasing in this case.
Transaction 5: Pays a $300 utility bill with cash.
Analysis: The company paid with cash, an asset. Assets are decreasing by $300 since cash was used to pay for this utility bill. The company no longer has that money.
Transaction 6: Distributed $100 cash in dividends to stockholders.
Analysis: The company paid the distribution with cash, an asset. Assets decrease by $100 as a result. Dividends affect equity and, in this case, decrease equity by $100.
All six transactions summarized:
Module 3.3 Define and Describe the Initial Steps in the Accounting �Cycle
The accounting cycle is a step-by-step process to record business activities and events to keep financial records up to date. The process occurs over one accounting period, and the cycle will begin again in the following period. A period is one operating cycle of a business, which could be a month, quarter, or year.
Figure 3.5
The Accounting Cycle. (attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
The entire cycle is meant to keep financial data organized and easily accessible to both internal and external users of information.
Figure 3.6
Accounting Cycle. The first four steps in the accounting cycle. Modified for PPT. (attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
The first four steps of the accounting cycle are
This takes information from original sources or activities and translates that information into usable financial data.
This takes analyzed data from Step 1 and organizes it into a comprehensive record of every company transaction.
Posting takes all transactions from the journal during a period and moves the information to a general ledger.
This takes information from the general ledger and transfers it onto a document showing all account balances, and ensures debits = credits.
Figure 3.7: Sample General Journal (Used in Step 2)
General Journal. (attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
The general journal will contain a chronological listing of transactions. A transaction is a business activity or event that has an effect on financial information presented on financial statements and comes from an original source. The journal is where a company can find a record of all transactions that occurred during a given time period, such as a day.
Figure 3.8: Sample General Ledger in T-Account Form (Used in Step 3)
General Ledger in T-Account Form. (attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
The general ledger provides a record of transactions for each individual account in chronological order within that account. The ledger is where a company will find the balance for a specific account. These account balances will make up the trial balance created in Step 4.
Figure 3.9: Sample Trial Balance (Created in Step 4)
Unadjusted Trial Balance. (attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
The trial balance will include all account balances. Those balances will come from the general ledger.
Module 3.4 Analyze Business Transactions Using the Accounting �Equation and Show the Impact of Business Transactions on Financial Statements
The first step in the accounting cycle is to identify and analyze transactions.
Each original source must be evaluated for financial implications. Meaning, will the information contained on this original source affect the financial statements? If the answer is yes, the company will then analyze the information for how it affects the financial statements.
One task is to determine the value of the transaction; sometimes this is obvious, and others times it is less clear.
Your Turn: Monetary Value of Transactions
You are the accountant for a small computer programming company. You must record the following transactions. What values do you think you will use for each transaction?
Recording Transactions: Understanding Impact on the Accounting �Equation
Transaction 1: Issues $20,000 shares of common stock for cash.
Analysis: Cash is an asset and common stock is stockholder’s equity. When a company collects cash, this will increase assets because cash is coming into the business. When a company issues common stock, this will increase a stockholder’s equity because he or she is receiving investments from owners.
Transaction 2: Purchases equipment on account for $3,500, payment due within the month.
Analysis: Equipment is an asset. There is an increase to assets because the company has equipment it did not have before. We also know that the company purchased the equipment on account, meaning it did not pay for the equipment immediately and asked for payment to be billed instead and paid later—this is a liability, specifically labeled as accounts payable. There is also an increase to liabilities because the company now owes money.
Transaction 3: Receives $4,000 cash in advance from a customer for services not yet rendered.
Analysis: We know that the company collected cash, which is an asset. This collection of $4,000 increases assets because money is coming into the business.
Transaction 4: Provides $5,500 in services to a customer who asks to be billed for the services.
Analysis: The company performed a service and therefore earned revenue. However, the customer asked to be billed for the service, meaning the customer did not pay with cash immediately. The customer owes money and has not yet paid, signaling an accounts receivable. Accounts receivable is an asset that is increasing in this case.
Transaction 5: Pays a $300 utility bill with cash.
Analysis: The company paid with cash, an asset. Assets are decreasing by $300 since cash was used to pay for this utility bill. The company no longer has that money.
Transaction 6: Distributed $100 cash in dividends to stockholders.
Analysis: The company paid the distribution with cash, an asset. Assets decrease by $100 as a result. Dividends affect equity and, in this case, decrease equity by $100.
All six transactions summarized:
Your Turn: Debbie’s Dairy Farm
Debbie’s Dairy Farm had the following transactions:
Which events will be recorded in the accounting system?
Sample Exercise
EA3. Provide the missing amounts of the accounting equation for each of the following companies.
Debits and Credits
Depending on the account type, the sides that increase and decrease will vary.
Debit & Credit can be thought of in terms of Left & Right
On the Left Side, Debits Increase Asset Balances
On the Right Side, Credits Increase Liability & Equity Balances
Summary Slide
tion
Exercise
EA11. Identify whether each of the following transactions would be recorded with a debit (Dr) or credit (Cr) entry.
| | Debit or Credit? |
A. | Cash increase | Dr |
B. | Supplies decrease | Cr |
C. | Accounts Payable increase | Cr |
D, | Common Stock decrease | Dr |
E. | Interest Payable decrease | Dr |
F. | Notes Payable decrease | Dr |
All six transactions summarized:
Module 3.4 Analyze Business Transactions Using the Accounting Equation and Show the Impact of Business Transactions on Financial Statements
The first step in the accounting cycle is to identify and analyze transactions.
Each original source must be evaluated for financial implications. Meaning, will the information contained on this original source affect the financial statements? If the answer is yes, the company will then analyze the information for how it affects the financial statements.
One task is to determine the value of the transaction; sometimes this is obvious, and others times it is less clear.
Module 3.4 Analyze Business Transactions Using the Accounting Equation and Show the Impact of Business Transactions on Financial Statements
Questions to Consider:
(LEFT SIDE Assets = RIGHT SIDE Liabilities + Equity)
Transaction 6: Distributed $100 cash in dividends to stockholders.
Analysis: The company paid the distribution with cash, an asset. Assets decrease by $100 as a result. Dividends affect equity and, in this case, decrease equity by $100.
Your Turn: Debbie’s Dairy Farm
Debbie’s Dairy Farm had the following transactions:
Which events will be recorded in the accounting system?
Analyze those events using the Accounting Equation
Accounting Cycle
1. Income statement 2. Owner’s equity
3. Balance sheet 4. Cash flows
Module 3.5 Use Journal Entries to Record Transactions
Accountants use special forms called journals to keep track of their business transactions. A journal is the first place information is entered into the accounting system.
Modified for PPT.
Date
Debit Accounts First
Credit Accounts Indented
Description
Dollar Values of Debits Equal Dollar Values of Credits
A compound entry is when there is more than one account listed under the debit and/or credit column of a journal entry.
Putting the Steps of the Accounting Cycle Together
Printing Plus, Inc. had the following transactions for the month of January:
Module 3.4 Analyze Business Transactions Using the Accounting Equation and Show the Impact of Business Transactions on Financial Statements
Questions to Consider:
(LEFT SIDE Assets = RIGHT SIDE Liabilities + Equity)
Summary Slide
tion
Record Transactions in General Journal
Transaction 1: On January 3, 2019, issues $20,000 shares of common stock for cash.
Analysis: Cash, an asset, increases and Common Stock, an equity, increases.
Financial Statement Impact:
Record Transactions in General Journal
Transaction 2: On January 5, 2019, purchases equipment on account for $3,500, payment due within the month.
Analysis: Equipment, an asset, increases and Accounts Payable, a liability, increases.
Financial Statement Impact:
Record Transactions in General Journal
Transaction 3: On January 9, 2019, receives $4,000 cash in advance from a customer for services not yet rendered.
Analysis: Cash, an asset, increases and Unearned Revenue, a liability, increases.
Financial Statement Impact:
Record Transactions in General Journal
Transaction 4: On January 10, 2019, provides $5,500 in services to a customer who asks to be billed for the services.
Analysis: Accounts Receivable, an asset, increases and Service Revenue, which positively impacts equity, increases.
Financial Statement Impact:
Record Transactions in General Journal
Transaction 5: On January 12, 2019, pays a $300 utility bill with cash.
Analysis: Cash, an asset, decreases and Utility Expense, which negatively impacts equity, increases.
Financial Statement Impact:
Record Transactions in General Journal
Transaction 6: On January 14, 2019, distributed $100 cash in dividends to stockholders.
Analysis: Cash, an asset, decreases and Dividends, which negatively impacts equity, increases.
Financial Statement Impact:
Record Transactions in General Journal
Transaction 7: On January 17, 2019, receives $2,800 cash from a customer for services rendered.
Analysis: Cash, an asset, increases and Service Revenue, which positively impacts equity, increases.
Financial Statement Impact:
Record Transactions in General Journal
Transaction 8: On January 18, 2019, paid in full, with cash, for the equipment purchase on January 5.
Analysis: Cash, an asset, decreases and Equipment, an asset, increases.
Financial Statement Impact:
Record Transactions in General Journal
Transaction 9: On January 20, 2019, paid $3,600 cash in salaries expense to employees.
Analysis: Cash, an asset, decreases and Salaries Expense, which negatively impacts equity, increases.
Financial Statement Impact:
Record Transactions in General Journal
Transaction 10: On January 23, 2019, received cash payment in full from the customer on the January 10 transaction.
Analysis: Cash, an asset, increases and Accounts Receivable, an asset, decreases.
Financial Statement Impact:
Record Transactions in General Journal
Transaction 11: On January 27, 2019, provides $1,200 in services to a customer who asks to be billed for the services.
Analysis: Accounts Receivable, an asset, increases and Service Revenue, which positively impacts equity, increases.
Financial Statement Impact:
Record Transactions in General Journal
Transaction 12: On January 30, 2019, purchases supplies on account for $500, payment due within three months.
Analysis: Supplies, an asset, increases and Accounts Payable, a liability, increases.
Financial Statement Impact:
All the transactions as they would appear, chronologically, in the general journal
Sample Exercise
EA15. Journalize for Harper and Co. each of the following transactions or state no entry required and explain why. Be sure to follow proper journal writing rules.
Accounting Cycle
1. Income statement 2. Owner’s equity
3. Balance sheet 4. Cash flows
Accounting Cycle
1. Income statement 2. Owner’s equity
3. Balance sheet 4. Cash flows
Posting Transactions from General Journal to the General Ledger
Modified for PPT.
Posting example:
The January 3 entry entered in the journal is shown here, posted to the general ledger accounts for Cash and Common Stock.
Each account will show the current balance.
These are all the transactions recorded in the journal during the month of January that affected the cash account.
The cash transactions from the general journal would be posted to the Cash account in the general ledger.
Modified for PPT.
Running Balance
Determining Account Balance
Using T-Accounts
Using the same transactions:
Transaction 1: On January 3, 2019, issues $20,000 shares of common stock for cash.
Transaction 2: On January 5, 2019, purchases equipment on account for $3,500, payment due within the month.
Modified for PPT.
Transaction 3: On January 9, 2019, receives $4,000 cash in advance from a customer for services not yet rendered.
Modified for PPT.
Notice the entry from Jan. 3, still appears in the T-account.
Transaction 4: On January 10, 2019, provides $5,500 in services to a customer who asks to be billed for the services.
Modified for PPT.
Transaction 5: On January 12, 2019, pays a $300 utility bill with cash.
Modified for PPT.
Transaction 6: On January 14, 2019, distributed $100 cash in dividends to stockholder.
Modified for PPT.
Transaction 7: On January 17, 2019, receives $2,800 cash from a customer for services rendered.
Modified for PPT.
Transaction 8: On January 18, 2019, paid in full, with cash, for the equipment purchase on January 5.
Modified for PPT.
Transaction 9: On January 20, 2019, paid $3,600 cash in salaries expense to employees.
Modified for PPT.
Transaction 10: On January 23, 2019, received cash payment in full from the customer on the January 10 transaction.
Modified for PPT.
Transaction 11: On January 27, 2019, provides $1,200 in services to a customer who asks to be billed for the services.
Modified for PPT.
Transaction 12: On January 30, 2019, purchases supplies on account for $500, payment due within three months.
Modified for PPT.
Figure 3.10
Summary of T-Accounts for Printing Plus. (attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
Sample Exercise
EA24. Post the following November transactions to T-accounts for Accounts Payable and Inventory, indicating the ending balance (assume no beginning balances in these accounts).
Your Turn: Journalizing Transactions
You have the following transactions the last few days of April.
Apr. 25 | You stop by your uncle’s gas station to refill both gas cans for your company, Watson’s Landscaping. Your uncle adds the total of $28 to your account. |
Apr. 26 | You record another week’s revenue for the lawns mowed over the past week. You earned $1,200. You received cash equal to 75% of your revenue. |
Apr. 27 | You pay your local newspaper $35 to run an advertisement in this week’s paper. |
Apr. 29 | You make a $25 payment on account. |
Figure 3.7: Sample General Journal (Used in Step 2)
General Journal. (attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
The general journal will contain a chronological listing of transactions. A transaction is a business activity or event that has an effect on financial information presented on financial statements and comes from an original source. The journal is where a company can find a record of all transactions that occurred during a given time period, such as a day.
Figure 3.8: Sample General Ledger in T-Account Form (Used in Step 3)
General Ledger in T-Account Form. (attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
The general ledger provides a record of transactions for each individual account in chronological order within that account. The ledger is where a company will find the balance for a specific account. These account balances will make up the trial balance created in Step 4.
Module 3.6 Prepare a Trial Balance (Step 4)
The trial balance is prepared from the general ledger. Each account balance is listed by title and with its current balance in the appropriate debit or credit column. The total of all the amounts in the debit column should equal the total amount in the credit column.
Connection Between Ledger Account Balances �and the Trial Balance
The Final Unadjusted Trial Balance
Your Turn: Completing a Trial Balance
Complete the trial balance for Magnificent Landscaping Service using the following T-account final balance information for April 30, 2018.
Summary
Summary (continued)
This OpenStax ancillary resource is © Rice University under a CC-BY-NC-SA 4.0 International license; it may be reproduced or modified for noncommercial purposes only but must be attributed to OpenStax, Rice University and any changes must be noted. Any adaptation must be shared under the same type of license.