Chart of Accounts

Following is a typical chart of accounts, which is used in several assignments. Every company has its own unique accounts and numbering system.

166 Accumulated depreciation — Store equipment 222 Employee retirement program payable
Assets 167 _______ equipment 223 Employee union dues payable
Current Assets 168 Accumulated depreciation — _______ 224 Federal unemployment taxes payable
equipment 225 FICA taxes payable
101 Cash 169 Machinery 226 Estimated vacation pay liability
102 Petty cash 170 Accumulated depreciation — Machinery
103 Cash equivalents 173 Building _______
104 Short-term investments 174 Accumulated depreciation — Building _______ Unearned Revenues
105 Fair value adjustment, _______ securities (S-T) 175 Building _______ 230 Unearned consulting fees
106 Accounts receivable 176 Accumulated depreciation — Building _______ 231 Unearned legal fees
107 Allowance for doubtful accounts 179 Land improvements _______ 232 Unearned property management fees
108 Legal fees receivable 180 Accumulated depreciation — Land 233 Unearned _______ fees
109 Interest receivable improvements _______ 234 Unearned _______ fees
110 Rent receivable 181 Land improvements _______ 235 Unearned janitorial revenue
111 Notes receivable 182 Accumulated depreciation — Land 236 Unearned _______ revenue
119 Merchandise inventory improvements _______
__________ inventory 238 Unearned rent
120 183 Land
121 __________ inventory
124 Office supplies Notes Payable
125 Store supplies Natural Resources
126 _______ supplies 240 Short-term notes payable
185 Mineral deposit 241 Discount on short-term notes payable
128 Prepaid insurance
186 Accumulated depletion — Mineral deposit 245 Notes payable
129 Prepaid interest
131 Prepaid rent 251 Long-term notes payable
132 Raw materials inventory 252 Discount on long-term notes payable
Intangible Assets
133 Goods in process inventory, _______
134 Goods in process inventory, _______ 191 Patents Long-Term Liabilities
135 Finished goods inventory 192 Leasehold
193 Franchise 253 Long-term lease liability
194 Copyrights 255 Bonds payable
Long-Term Investments 195 Leasehold improvements 256 Discount on bonds payable
196 Licenses 257 Premium on bonds payable
141 Long-term investments 258 Deferred income tax liability
197 Accumulated amortization— _______
142 Fair value adjustment, _______ securities (L-T)
144 Investment in _______
145 Bond sinking fund
Liabilities Equity
Plant Assets Current Liabilities
Owner’s Equity
151 Automobiles 201 Accounts payable
301 ______________, Capital
152 Accumulated depreciation — Automobiles 202 Insurance payable
302 ______________, Withdrawals
153 Trucks 203 Interest payable
303 ______________, Capital
154 Accumulated depreciation — Trucks 204 Legal fees payable
304 ______________, Withdrawals
155 Boats 207 Office salaries payable
305 ______________, Capital
156 Accumulated depreciation — Boats 208 Rent payable
306 ______________, Withdrawals
157 Professional library 209 Salaries payable
158 Accumulated depreciation — Professional 210 Wages payable
library 211 Accrued payroll payable Paid-In Capital
159 Law library 214 Estimated warranty liability
160 Accumulated depreciation — Law library 215 Income taxes payable 307 Common stock, $ _______ par value
161 Furniture 216 Common dividend payable 308 Common stock, no-par value
162 Accumulated depreciation — Furniture 217 Preferred dividend payable 309 Common stock, $ _______ stated value
163 Office equipment 218 State unemployment taxes payable 310 Common stock dividend distributable
164 Accumulated depreciation — Office equipment 219 Employee federal income taxes payable 311 Paid-in capital in excess of par value,
165 Store equipment 221 Employee medical insurance payable Common stock

CA
 Chart of Accounts CA-1

312 Paid-in capital in excess of stated value, Standard Cost Variance Miscellaneous Expenses
No-par common stock
313 Paid-in capital from retirement of common stock 580 Direct material quantity variance 655 Advertising expense
314 Paid-in capital, Treasury stock 581 Direct material price variance 656 Bad debts expense
315 Preferred stock 582 Direct labor quantity variance 657 Blueprinting expense
316 Paid-in capital in excess of par value, 583 Direct labor price variance 658 Boat expense
Preferred stock 584 Factory overhead volume variance 659 Collection expense
585 Factory overhead controllable variance 661 Concessions expense
Retained Earnings 662 Credit card expense
663 Delivery expense
318 Retained earnings Expenses 664 Dumping expense
319 Cash dividends (or Dividends) 667 Equipment expense
Amortization, Depletion, and
320 Stock dividends 668 Food and drinks expense
Depreciation 671 Gas and oil expense
Other Equity Accounts 601 Amortization expense — _______ 672 General and administrative expense
602 Amortization expense — _______ 673 Janitorial expense
321 Treasury stock, Common 674 Legal fees expense
603 Depletion expense — _______
322 Unrealized gain — Equity 676 Mileage expense
604 Depreciation expense — Boats
323 Unrealized loss — Equity 677 Miscellaneous expenses
605 Depreciation expense — Automobiles
606 Depreciation expense — Building _______ 678 Mower and tools expense
607 Depreciation expense — Building _______ 679 Operating expense
Revenues 608 Depreciation expense — Land 680 Organization expense
401 ______________ fees earned improvements _______ 681 Permits expense
402 ______________ fees earned 609 Depreciation expense — Land 682 Postage expense
403 ______________ services revenue improvements _______ 683 Property taxes expense
404 ______________ services revenue 610 Depreciation expense — Law library 684 Repairs expense — _______
405 Commissions earned 611 Depreciation expense — Trucks 685 Repairs expense — _______
406 Rent revenue (or Rent earned) 612 Depreciation expense — _______ equipment 687 Selling expense
407 Dividends revenue (or Dividend earned) 613 Depreciation expense — _______ equipment 688 Telephone expense
408 Earnings from investment in _______ 614 Depreciation expense — _______ 689 Travel and entertainment expense
409 Interest revenue (or Interest earned) 615 Depreciation expense — _______ 690 Utilities expense
410 Sinking fund earnings 691 Warranty expense
413 Sales Employee-Related Expenses 695 Income taxes expense
414 Sales returns and allowances
620 Office salaries expense
415 Sales discounts
621 Sales salaries expense Gains and Losses
622 Salaries expense
623 _______ wages expense 701 Gain on retirement of bonds
Cost of Sales 624 Employees’ benefits expense 702 Gain on sale of machinery
625 Payroll taxes expense 703 Gain on sale of investments
Cost of Goods Sold 704 Gain on sale of trucks
502 Cost of goods sold Financial Expenses 705 Gain on _______
505 Purchases 706 Foreign exchange gain or loss
506 Purchases returns and allowances 630 Cash over and short 801 Loss on disposal of machinery
507 Purchases discounts 631 Discounts lost 802 Loss on exchange of equipment
508 Transportation-in 632 Factoring fee expense 803 Loss on exchange of _______
633 Interest expense 804 Loss on sale of notes
Manufacturing 805 Loss on retirement of bonds
Insurance Expenses 806 Loss on sale of investments
520 Raw materials purchases 807 Loss on sale of machinery
521 Freight-in on raw materials 635 Insurance expense — Delivery equipment 808 Loss on _______
530 Factory payroll 636 Insurance expense — Office equipment 809 Unrealized gain — Income
531 Direct labor 637 Insurance expense — _______ 810 Unrealized loss — Income
540 Factory overhead 811 Impairment gain
541 Indirect materials Rental Expenses 812 Impairment loss
542 Indirect labor 640 Rent expense
543 Factory insurance expired 641 Rent expense — Office space
544 Factory supervision 642 Rent expense — Selling space Clearing Accounts
545 Factory supplies used 643 Press rental expense
546 Factory utilities 901 Income summary
644 Truck rental expense
547 Miscellaneous production costs 902 Manufacturing summary
645 _______ rental expense
548 Property taxes on factory building
549 Property taxes on factory equipment Supplies Expenses
550 Rent on factory building
551 Repairs, factory equipment 650 Office supplies expense
552 Small tools written off 651 Store supplies expense
560 Depreciation of factory equipment 652 _______ supplies expense
561 Depreciation of factory building 653 _______ supplies expense
This page intentionally left blank
 MANAGERIAL ANALYSES AND REPORTS
① Cost Types
Manufacturing Statement
Variable costs: Total cost changes in proportion to volume of activity
For period Ended date
Fixed costs: Total cost does not change in proportion to volume of activity
Mixed costs: Cost consists of both a variable and a fixed element
Direct materials
② Cost Sources Raw materials inventory, Beginning . . . . . . . . . . . . . . . . $ #
Direct materials: Raw materials costs directly linked to finished product Raw materials purchases . . . . . . . . . . . . . . . . . . . . . . . . . #
Direct labor: Employee costs directly linked to finished product Raw materials available for use . . . . . . . . . . . . . . . . . . . #
Overhead: Costs indirectly linked to finished product Raw materials inventory, Ending . . . . . . . . . . . . . . . . . . (#)
Direct materials used . . . . . . . . . . . . . . . . . . . . . . . . . . . #
③ Costing Systems
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . #
Job order costing: Costs assigned to each unique unit or batch of units
Overhead costs
Process costing: Costs assigned to similar products that are mass-produced in Total overhead costs . . . . . . . . . . . . . . . . . . . . . . . . . . . #
a continuous manner Total manufacturing costs . . . . . . . . . . . . . . . . . . . . . . . . . #
④ Costing Ratios Add goods in process inventory, Beginning . . . . . . . . . . . #
Total cost of goods in process . . . . . . . . . . . . . . . . . . . . . #
Contribution margin ratio 5 (Net sales 2 Variable costs)yNet sales Deduct goods in process inventory, Ending . . . . . . . . . . . (#)
Predetermined overhead rate 5 Estimated overhead costsyEstimated activity base Cost of goods manufactured . . . . . . . . . . . . . . . . . . . . . . . $ #
Break-even point in units 5 Total fixed costsyContribution margin per unit
⑤ Planning and Control Metrics
Cost variance 5 Actual cost 2 Standard (budgeted) cost
Sales (revenue) variance 5 Actual sales 2 Standard (budgeted) sales
⑥ Capital Budgeting Contribution Margin Income Statement
Payback period 5 Time expected to recover investment cost For period Ended date
Accounting rate of return 5 Expected annual net incomeyAverage annual investment
Net present value (NPV) 5 Present value of future cash flows 2 Investment cost Net sales (revenues) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ #
NPV rule: 1. Compute net present value (NPV in $) Total variable costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . #
2. If NPV $ 0, then accept project; If NPV , 0, then reject project Contribution margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . #
Internal rate 1. Compute internal rate of return (IRR in %) Total fixed costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . #
of return rule: 2. If IRR $ hurdle rate, accept project; If IRR , hurdle rate, reject project Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ #
⑦ Costing Terminology
Relevant range: Organization’s normal range of operating activity.
Direct cost: Cost incurred for the benefit of one cost object.
Indirect cost: Cost incurred for the benefit of more than one cost object. Flexible Budget
Product cost: Cost that is necessary and integral to finished products. For period Ended date
Period cost: Cost identified more with a time period than with finished products. Flexible Budget Flexible
Overhead cost: Cost not separately or directly traceable to a cost object. Budget
Relevant cost: Cost that is pertinent to a decision. Variable for Unit
Opportunity cost: Benefit lost by choosing an action from two or more alternatives. Amount Fixed Sales of
Sunk cost: Cost already incurred that cannot be avoided or changed. per Unit Cost #
Standard cost: Cost computed using standard price and standard quantity.
Budget: Formal statement of an organization’s future plans. Sales (revenues) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ # $ #
Break-even point: Sales level at which an organization earns zero profit. Variable costs
Incremental cost: Cost incurred only if the organization undertakes a certain action. Examples: Direct materials, Direct labor, . . . . . . . . .
Transfer price: Price on transactions between divisions within a company. Other variable costs . . . . . . . . . . . . . . . . . . . . . . . # #
⑧ Standard Cost Variances Total variable costs . . . . . . . . . . . . . . . . . . . . . . . . . . # #
Contribution margin . . . . . . . . . . . . . . . . . . . . . . . . . . . $ # #
Materials Materials Fixed costs
Total materials variance 5 price   1   quantity Examples: Depreciation, Manager . . . . . . . . . . . . . . . $ # #
variance variance salaries, Administrative salaries . . . . . . . . . . . . . . . # #
Total fixed costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ # #
Labor Labor efficiency Income from operations . . . . . . . . . . . . . . . . . . . . . . . . $ #
Total labor variance 5 (rate)   1   (quantity)
variance variance

Overhead Fixed overhead

Total overhead variance 5 controllable  1   volume Fixed Budget Performance Report
variance variance For period Ended date
Fixed Actual
Overhead controllable 5 Actual total 2 Applied total overhead Budget Performance Variances†
variance overhead from flexible budget
Fixed overhead volume 5 Budgeted fixed 2 Applied fixed Sales: In units . . . . . . . . . . . . . . . . . . . . . . . . # #
variance overhead overhead In dollars . . . . . . . . . . . . . . . . . . . . . . . $ # $ # $ # F or U
Variable overhead variance 5 Variable overhead 1 Variable overhead ⎫ Cost of sales
spending variance efficiency variance ⎪ Total overhead Direct costs . . . . . . . . . . . . . . . . . . . . . . . # # # F or U

Fixed overhead variance 5 Fixed overhead 1 Fixed overhead ⎬ 5 variance Indirect costs . . . . . . . . . . . . . . . . . . . . . . # # # F or U

spending variance volume variance

Materials price variance
Materials quantity variance
Labor (rate) variance
⎪ Selling expenses
⎭ Examples: Commissions, . . . . . . . . . . . . . # # # F or U
5 [AQ 3 AP] 2 [AQ 3 SP] Shipping expenses . . . . . . . . . . . . . . . . . # # # F or U
General and administrative expenses
5 [AQ 3 SP] 2 [SQ 3 SP] Examples: Administrative salaries . . . . . . # # # F or U
Total expenses . . . . . . . . . . . . . . . . . . . . . . . $ # $ # $ # F or U
5 [AH 3 AR] 2 [AH 3 SR] Income from operations . . . . . . . . . . . . . . . $ # $ # $ # F or U

Labor efficiency (quantity) variance 5 [AH 3 SR] 2 [SH 3 SR] †

F 5 Favorable variance; U 5 Unfavorable variance.
Variable overhead spending variance 5 [AH 3 AVR] 2 [AH 3 SVR]
Variable overhead efficiency variance 5 [AH 3 SVR] 2 [SH 3 SVR] Master Budget Sequence
Fixed overhead spending variance 5 Actual fixed overhead 2 Budgeted fixed overhead Consolidate
operating and capital
where AQ is actual q_uantity of materials; AP is actual _price of materials; AH is actual hours of Prepare expenditures budgets
Prepare
labor; AR is actual rate of wages; AVR is actual variable rate of overhead; SQ is standard q_uan- Prepare Develop manufacturing, into financial budgets:
capital
sales production selling, and general • Cash budget
tity of materials; SP is standard p_rice of materials; SH is standard hours of labor; SR is standard expenditures
budget budget and administrative • Budgeted income
budget
rate of wages; SVR is standard variable rate of overhead. expense budgets statement
• Budgeted balance
⑨ Sales Variances sheet

Sales price variance 5 [AS 3 AP] 2 [AS 3 BP]

Operating Budgets Capital Expenditures Financial Budgets
Budget
Sales volume variance 5 [AS 3 BP] 2 [BS 3 BP]
where AS 5 actual sales units; AP 5 actual sales price; BP 5 budgeted sales price;
BS 5 budgeted sales units (fixed budget)
 FUNDAMENTALS ANALYSES
① Accounting Equation ① Liquidity and Efficiency
Assets 5 Liabilities 1 Equity
Current assets
↑ ↓ ↓ ↑ ↓ ↑ Current ratio 5 p. 148
Current liabilities
Debit for Credit for Debit for Credit for Debit for Credit for
increases decreases decreases increases decreases increases Working capital 5 Current assets 2 Current liabilities p. 697
↑
Cash 1 Short-term investments 1 Current receivables
⎫
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎬
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎪
⎭
Owner’s Owner’s Acid-test ratio 5 p. 196
Capital* 2 Withdrawals* 1 Revenues 2 Expenses Current liabilities
↓ ↑ ↑ ↓ ↓ ↑ ↑ ↓ Net sales
Accounts receivable turnover 5 p. 375
Dr. for Cr. for Dr. for Cr. for Dr. for Cr. for Dr. for Cr. for Average accounts receivable, net
decreases increases increases decreases decreases increases increases decreases
Allowance for doubtful accounts
Credit risk ratio 5 p. 375
Indicates normal balance. Accounts receivable, net
*Comparable corporate accounts are Common Stock (Paid-In Capital) and Dividends.
Cost of goods sold
② Accounting Cycle Inventory turnover 5 p. 241
4.
Average inventory
1. 2. 3.
Prepare unadjusted
Analyze transactions Journalize Post
trial balance Accounts receivable, net
Days’ sales uncollected 5 3 365* p. 335
Net sales
10.
Accounting 5.
Reverse
(Optional) Cycle Adjust Ending inventory
Days’ sales in inventory 5 3 365* p. 241
Cost of goods sold
9. 6.
8. 7.
Prepare post- Prepare adjusted
closing trial balance
Close Prepare statements
trial balance Net sales
Total asset turnover 5 p. 413
Average total assets
③ Adjustments and Entries
Plant asset cost
Plant asset useful life 5 p. 413
Type Adjusting Entry Depreciation expense

Prepaid Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dr. Expense Cr. Asset* Accumulated depreciation

Plant asset age 5 p. 413
Unearned Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dr. Liability Cr. Revenue Depreciation expense
Accrued Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dr. Expense Cr. Liability
Accrued Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dr. Asset Cr. Revenue Cash and cash equivalents
Days’ cash expense coverage 5 p. 322
Average daily cash expenses
*For depreciation, credit Accumulated Depreciation (contra asset).
④ 4-Step Closing Process *360 days is also commonly used.
1. Transfer revenue and gain account balances to Income Summary.
2. Transfer expense and loss account balances to Income Summary. ② Solvency
3. Transfer Income Summary balance to Owner’s Capital. Total liabilities Total equity
4. Transfer Withdrawals balance to Owner’s Capital. Debt ratio 5 Equity ratio 5 pp. 69 & 701
Total assets Total assets
⑤ Accounting Concepts
Total liabilities
Characteristics Assumptions Principles Constraints Debt-to-equity 5 p. 567
Total equity
Relevance Business entity Historical cost Cost-benefit
Reliability Going concern Revenue recognition Materiality Income before interest expense and income taxes
Times interest earned 5 p. 450
Comparability Monetary unit Expense recognition Industry practice Interest expense
Consistency Periodicity Full disclosure Conservatism
Cash flow from operations
⑥ Ownership of Inventory Cash coverage of growth 5 p. 651
Cash outflow for plant assets
Ownership Transfers Transportation Costs Cash flow from operations
When Goods Passed To Paid By Cash coverage of debt 5 p. 646
Total noncurrent liabilities
FOB Shipping Point . . . . . . . . . . . Carrier Buyer
FOB Destination . . . . . . . . . . . . . Buyer Seller ③ Profitability
Net income
⑦ Inventory Costing Methods Profit margin ratio 5
Net sales p. 109
• Specific Identification • Weighted-Average
• First-In, First-Out (FIFO) • Last-In, First-Out (LIFO) Net sales 2 Cost of goods sold
Gross margin ratio 5 p. 196
⑧ Depreciation and Depletion Net sales

Cost 2 Salvage value Net income

Straight-Line: 3 Periods expired Return on total assets 5 p. 22
Useful life in periods Average total assets
Cost 2 Salvage value 5 Profit margin ratio 3 Total asset turnover p. 703
Units-of-Production: 3 Units produced
Useful life in units Net income 2 Preferred dividends
Return on common stockholders’ equity 5 p. 703
Declining-Balance: Rate* 3 Beginning-of-period book value Average common stockholders’ equity
*Rate is often double the straight-line rate, or 2 3 (1yUseful life)
Stockholders’ equity applicable to common shares
Cost 2 Salvage value Book value per common share 5 p. 528
Depletion: 3 Units extracted Number of common shares outstanding
Total capacity in units
Net income 2 Preferred dividends
⑨ Interest Computation Basic earnings per share 5 p. 527
Weighted-average common shares outstanding
Interest 5 Principal (face) 3 Rate 3 Time
⑩ Accounting for Investment Securities Cash flow from operations
Cash flow on total assets 5 p. 650
Average total assets
Classification* Accounting
Cash dividends declared on common stock
Payout ratio 5 p. 528
Short-Term Investment in Securities Net income
Held-to-maturity (debt) securities . . . . . . . . . . . . Cost (without any discount or premium
amortization)
④ Market
Trading (debt and equity) securities. . . . . . . . . . . Fair value (with fair value adjustment to
income) Market value (price) per share
Price-earnings ratio 5 p. 527
Available-for-sale (debt and equity) securities . . . Fair value (with fair value adjustment to equity) Earnings per share
Long-Term Investment in Securities
Held-to-maturity (debt) securities . . . . . . . . . . . . Cost (with any discount or premium Annual cash dividends per share
Dividend yield 5 p. 528
amortization) Market price per share
Available-for-sale (debt and equity) securities . . . Fair value (with fair value adjustment to equity)
Equity securities with significant influence . . . . . . Equity method Residual income 5 Net income 2 Target net income
Equity securities with controlling influence . . . . . Equity method (with consolidation)

*A fair value option allows companies to report HTM and AFS securities much like trading securities.
 FINANCIAL REPORTS
Income Statement* Statement of Owner’s Equity*
For period Ended date For period Ended date

Net sales (revenues) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ # Owner, Capital, beginning . . . . . . . . . . . . . . . . . $ #

Cost of goods sold (cost of sales) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . # Add: Investments by owner. . . . . . . . . . . . . . . . $ #
Gross margin (gross profit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . # Net income . . . . . . . . . . . . . . . . . . . . . . . . # #
Operating expenses #
Examples: Depreciation, salaries, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ # Less: Withdrawals by owner . . . . . . . . . . . . . . . #
wages, rent, utilities, interest, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . # Owner, Capital, ending . . . . . . . . . . . . . . . . . . . $ #
amortization, advertising, taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . #
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . # * For a corporation, statement of owner’s equity becomes statement of retained earnings with these changes: “owner,
Nonoperating gains and losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . # capital” is retained earnings; “investments by owner” is deleted; and “withdrawals by owner” is dividends.
Net income (net profit or earnings) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ #

* A typical chart of accounts is at the end of the book and classifies all accounts by financial statement categories.
Premium Bond Amortization (Straight-Line) Table†
Balance Sheet Semiannual Period-End Unamortized Bond Premium* Bond Carrying Value**
Date
Bond life-start . . . . . . . . . . . . . . $# $ #
..........................

.....

.....
ASSETS ..........................
Current assets Bond life-end . . . . . . . . . . . . . . . 0 par
Examples: Cash, Cash equivalents, Short-term investments,
†
Accounts receivable, Current portion of notes . . . . . . . . . . . . . . . . . . . $ # Bond carrying value is adjusted to par and its amortized premium to zero over the bond life (note: carrying value
receivable, Inventory, Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . # less unamortized bond premium equals par).
* Equals total bond premium less its accumulated amortization.
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ # ** Equals bond par value plus its unamortized bond premium.
Long-term investments
Examples: Investment in stock, Investment in bonds, . . . . . . . . . . . . . . #
Land for expansion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . #
Total long-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . #
Plant assets Discount Bond Amortization (Straight-Line) Table†
Examples: Equipment, Machinery, Buildings, Land . . . . . . . . . . . . . . . . . # Semiannual Period-End Unamortized Bond Discount* Bond Carrying Value**
Total plant assets, net of depreciation . . . . . . . . . . . . . . . . . . . . . . . . . #
Bond life-start . . . . . . . . . . . . . . $# $ #
Intangible assets
..........................

.....

.....
Examples: Patent, Trademark, Copyright, License, Goodwill . . . . . . . . #
..........................
Total intangible assets, net of amortization . . . . . . . . . . . . . . . . . . . . . . #
Bond life-end . . . . . . . . . . . . . . . 0 par
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ #
LIABILITIES AND EQUITY †
Bond carrying value is adjusted to par and its amortized discount to zero over the bond life (note: unamortized
Current liabilities bond discount plus carrying value equals par).
Examples: Accounts payable, Wages payable, Salaries . . . . . . . . . . . . . . $ # * Equals total bond discount less its accumulated amortization.
** Equals bond par value less its unamortized bond discount.
payable, Current notes payable, Taxes payable, . . . . . . . . . . . . . . . . #
Interest payable, Unearned revenues . . . . . . . . . . . . . . . . . . . . . . . . . #
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ #
Long-term liabilities
Examples: Notes payable, Bonds payable, Lease liability . . . . . . . . . . . . # Effective Interest Amortization Table for Bonds with
Total long-term liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . # Semiannual Interest Payment
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . #
Semiannual Cash Bond Discount Unamortized
Equity*
Interest Interest Interest or Premium Discount or Carrying
Owner, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . #
Period-End PaidA ExpenseB AmortizationC PremiumD ValueE
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ #
# # # # # #
.. .. .. .. .. ..
* A corporation’s equity consists of: Paid-In Capital and Retained Earnings (less any treasury stock). . . . . . .
A
Par value multiplied by the semiannual contract rate.
B
Statement of Cash Flows Prior period’s carrying value multiplied by the semiannual market rate.
C
The difference between interest paid and bond interest expense.
For period Ended date D
Prior period’s unamortized discount or premium less the current period’s discount or premium amortization.
E
Par value less unamortized discount or plus unamortized premium.
Cash flows from operating activities
[Prepared using the indirect (see below)† or direct method]
Net cash provided (used) by operating activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ #
Cash flows from investing activities
[List of individual investing inflows and outflows] Installment Notes Payment Table
Net cash provided (used) by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . # Payments
Cash flows from financing activities Period Debit Debit Credit
[List of individual financing inflows and outflows] Ending Beginning Interest Notes Ending
Net cash provided (used) by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . # Date Balance Expense 1 Payable 5 Cash Balance
Net increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ #
Cash (and equivalents) balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . # # # # # # #
.. .. .. .. .. ..
Cash (and equivalents) balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ # . . . . . .

Attach separate schedule or note disclosure of “Noncash investing and financing transactions.”

†
Indirect Method: Cash Flows from Operating Activities
Bank Reconciliation
Cash flows from operating activities Date
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ #
Add: Decreases in noncash current assets . . . . . . . . . . . . . . . . . . . . . . . . $ # Bank statement balance. . . . . . . . . . . $# Book balance . . . . . . . . . . . . . . . . . . . . $#
Increases in current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . # Add: Unrecorded deposits. . . . . . . . # Add: Unrecorded bank credit
Expenses with no cash outflows (examples: depreciation, memoranda . . . . . . . . . . . . . . $#
and amortization of both intangibles and bond discounts) . . . . . # Bank errors understating Book errors understating
Nonoperating losses (examples: losses from asset sales the balance . . . . . . . . . . . . . # the balance. . . . . . . . . . . . . . . $#
and from debt retirements) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . # # # $#
Less: Increases in noncash current assets . . . . . . . . . . . . . . . . . . . . . . . . . # Less: Outstanding checks . . . . . . . . . # Less: Unrecorded bank debit
Decreases in current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . # memoranda . . . . . . . . . . . . . . $#
Revenues with no cash inflows (examples: Bank errors overstating Book errors overstating
amortization of bond premiums) . . . . . . . . . . . . . . . . . . . . . . . . . # the balance . . . . . . . . . . . . . # the balance. . . . . . . . . . . . . . . $#
Nonoperating gains (examples: gains from asset sales Adjusted bank balance. . . . . . . . . $# Adjusted book balance . . . . . . . . . . $#
and from debt retirements) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . # #
Net cash provided (used) by operating activities . . . . . . . . . . . . . . . . . . . $ # Balances are equal (reconciled)
 SELECTED TRANSACTIONS AND RELATIONS
① Merchandising Transactions Summary ② Merchandising Cash Flows

Merchandising Transactions Merchandising Entries Dr. Cr.

Beginning Net cost From
inventory of purchases supplier
⎭ Purchasing merchandise for • Merchandise Inventory . . . . . . . . . . . . . . . . #
⎪ resale. Cash or Accounts Payable . . . . . . . . . . . #
⎪
Paying freight costs on • Merchandise Inventory . . . . . . . . . . . . . . . . #

Period 1
⎪ Merchandise
⎬ purchases; FOB shipping point. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . # available for sale
Purchases ⎪ Paying within discount period. • Accounts Payable . . . . . . . . . . . . . . . . . . . . #
⎪ Merchandise Inventory . . . . . . . . . . . . . . #
⎪ Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . # Ending Cost of
To Income Statement
⎫ Recording purchase returns or • Cash or Accounts Payable . . . . . . . . . . . . . # inventory goods sold

⎭ allowances. Merchandise Inventory . . . . . . . . . . . . . # To Balance Sheet

⎪ Selling merchandise. • Cash or Accounts Receivable . . . . . . . . . . #
⎪ Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . # Beginning Net cost From
inventory of purchases supplier
⎪ • Cost of Goods Sold. . . . . . . . . . . . . . . . . . . #
⎪ Merchandise Inventory . . . . . . . . . . . . . . #
⎪⎪ Receiving payment within • Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . #

Period 2
⎬ discount period. Sales Discounts . . . . . . . . . . . . . . . . . . . . . . # Merchandise
Sales Accounts Receivable . . . . . . . . . . . . . . . . # available for sale
⎪⎪
Granting sales returns or • Sales Returns and Allowances. . . . . . . . . . . #
⎪ allowances. Cash or Accounts Receivable . . . . . . . . #
⎪ Ending Cost of
• Merchandise Inventory . . . . . . . . . . . . . . . . # To Income Statement
⎪ inventory goods sold
⎪ Cost of Goods Sold . . . . . . . . . . . . . . . . #
⎫ Paying freight costs on sales; • Delivery Expense . . . . . . . . . . . . . . . . . . . . # To Balance Sheet
FOB destination. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . #

Merchandising Events Adjusting and Closing Entries

③ Credit Terms and Amounts
⎭ Credit period
⎬ Adjusting due to shrinkage Cost of Goods Sold . . . . . . . . . . . . . . . . . . . . # Credit
Adjusting ⎫ (occurs when recorded amount Merchandise Inventory . . . . . . . . . . . . . . # Terms Discount* period
larger than physical inventory).
⎭ Date of
⎪ Closing temporary accounts Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . # invoice
⎪⎪ with credit balances. Income Summary . . . . . . . . . . . . . . . . . . #
Closing temporary accounts Income Summary . . . . . . . . . . . . . . . . . . . . . . # Time
⎬ with debit balances. Sales Returns and Allowances . . . . . . . . #
Closing Amount Due: Invoice price Due: Invoice price
⎪⎪ Sales Discounts . . . . . . . . . . . . . . . . . . . . # Due minus discount*

⎪ Cost of Goods Sold . . . . . . . . . . . . . . . . # *Discount refers to a purchase discount for a buyer and a sales discount for a seller.

⎫ Delivery Expense . . . . . . . . . . . . . . . . . . #
“Other Expenses” . . . . . . . . . . . . . . . . . #
⑤ Bond Valuation
④ Bad Debts Estimation
Bad Debts Estimation
Bond Sets Market Sets Bond Price Determined
or Contract rate Market rate Contract rate > Market rate Bond sells at Premium

Contract rate = Market rate Bond sells at Par

Income Statement Focus Balance Sheet Focus
d
n
o
B

Contract rate < Market rate Bond sells at Discount

or

Percent of Sales Percent of Receivables Aging of Receivables

[Emphasis on Matching] [Emphasis on Realizable Value] [Emphasis on Realizable Value] ⑦ Dividend Transactions

Sales × Rate = Bad Debts Expense Accounts Allowance Accounts Allowance Type of Dividend
× Rate = Rates
Receivable for Doubtful Receivable × = for Doubtful
(by Age)
Accounts (by Age) Accounts Account Cash Stock Stock
Affected Dividend Dividend Split
⑥ Stock Transactions Summary
Cash . . . . . . . . . . . . . Decrease — —
Stock Transactions Stock Entries Dr. Cr. Common Stock . . . . — Increase —
⎭ Retained Earnings . . Decrease Decrease —
⎪ Issue par value common stock at par Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . #
⎪ (par stock recorded at par). Common Stock . . . . . . . . . . . . . . . . #
⎪ Issue par value common stock at premium Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . #
⎪ (par stock recorded at par). Common Stock . . . . . . . . . . . . . . . . # ⑧ A Rose by Any Other Name
⎪
⎪⎪ Paid-In Capital in Excess of The same financial statement sometimes receives different titles.
Par Value, Common Stock . . . . . # Following are some of the more common aliases.*
Issue
Issue no-par value common stock Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . #
⎬
Common ⎪⎪ (no-par stock recorded at amount received). Common Stock . . . . . . . . . . . . . . . . #
Stock
⎪ Issue stated value common stock at stated value Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . # Balance Sheet Statement of Financial Position
⎪ (stated stock recorded at stated value). Common stock . . . . . . . . . . . . . . . . # Statement of Financial Condition
⎪ Issue stated value common stock at premium Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . #
⎪ Income Statement Statement of Income
⎪ (stated stock recorded at stated value). Common stock . . . . . . . . . . . . . . . . # Operating Statement
⎫ Paid-In Capital in Excess of Statement of Operations
Stated Value, Common Stock . . . . # Statement of Operating Activity
⎭⎪ Issue par value preferred stock at par Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . # Earnings Statement
⎪ Statement of Earnings
(par stock recorded at par). Preferred Stock . . . . . . . . . . . . . . . . #
Issue Profit and Loss (P&L) Statement
Issue par value preferred stock at premium Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . #
⎬
Preferred
⎪⎪ (par stock recorded at par). Preferred Stock . . . . . . . . . . . . . . . . # Statement of Statement of Cash Flow
Stock ⎫ Paid-In Capital in Excess of Cash Flows Cash Flows Statement
⎭ Par Value, Preferred Stock . . . . . # Statement of Changes in Cash Position
Reacquire ⎬ Reacquire its own common stock Treasury Stock, Common . . . . . . . . . . . # Statement of Changes in Financial Position
Common
(treasury stock recorded at cost). Cash . . . . . . . . . . . . . . . . . . . . . . . . . #
⎫
Stock ⎭⎪ Statement of Statement of Changes in Owner’s Equity
Reissue its treasury stock at cost Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . # Owner’s Equity Statement of Changes in Owner’s Capital
⎪ (treasury stock removed at cost). Treasury Stock, Common . . . . . . . #
⎪⎪ Statement of Shareholders’ Equity†
Reissue its treasury stock above cost Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . # Statement of Changes in Shareholders’ Equity†
Reissue ⎬ (treasury stock removed at cost). Treasury Stock, Common . . . . . . . . # Statement of Stockholders’ Equity and
Common Paid-In Capital, Treasury . . . . . . . . . # Comprehensive Income†
Statement of Changes in Capital Accounts†
Stock
⎪⎪ Reissue its treasury stock below cost Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . #
⎪
⎪ (treasury stock removed at cost; if paid-in capital Paid-In Capital, Treasury . . . . . . . . . #
⎫ is insufficient to cover amount below cost, Treasury Stock, Common . . . . . . . # * The term Consolidated often precedes or follows these statement titles to reflect
retained earnings is debited for remainder). Retained Earnings (if necessary) . . . # the combination of different entities, such as a parent company and its subsidiaries.
†
Corporation only.
 A Rose by Any Other Name
The same financial statement sometimes receives different titles.
Following are some of the more common aliases.*

Balance Sheet Statement of Financial Position

Statement of Financial Condition

Income Statement Statement of Income

Operating Statement
Statement of Operations
Statement of Operating Activity
Earnings Statement
Statement of Earnings
Profit and Loss (P&L) Statement

Statement of Statement of Cash Flow

Cash Flows Cash Flows Statement
Statement of Changes in Cash Position
Statement of Changes in Financial Position

Statement of Statement of Changes in Owner’s Equity

Owner’s Equity Statement of Changes in Owner’s Capital
Statement of Shareholders’ Equity†
Statement of Changes in Shareholders’ Equity†
Statement of Stockholders’ Equity and
Comprehensive Income†
Statement of Changes in Capital Accounts†

* The term Consolidated often precedes or follows these statement titles to reflect
the combination of different entities, such as a parent company and its subsidiaries.
†
For corporations only.

We thank Dr. Louella Moore from Arkansas State University for suggesting this listing.