Professional Documents
Culture Documents
Definition of Accounting
Accounting is the process of recording financial transaction pertaining to a business.
Basic
Assets = Liabilities + Owner's Equity
Equation:
Extended Cash + Equipment + Spplies + Account Payable + Owner's Capital - Owner's
= +
Equation: Account Receivable Note Payable Drawing's + Revenues-Expenses
-
+Account +Account +Notes +Owner's
tnx. Cash +Equipment +Supplies = Owner's
Receivable Payable payable Capital
Drawing
1. +$25000 +$2500
2. +$7000 +$7000
3. +$8000
4. -$850
5. -$1000 -$1000
Owner's
Assets=$38150 Liabilities=$7000
Equity=$31150
Financial Statement:
Companies prepare four financial statements from the summarized accounting data.
1. Income statement:
The income statement reports the revenues and expenses for resulting net income or net loss for a specifi c
period of time.
2. Owner's equity statement:
The owner's equity statement reports the changes in owner's equity for a specific period of time.
3. Balance sheet:
The balance sheet reports the assets, liabilities, and owner’s equity for a specific period of timee.
4. Statement of cash flows :
The statement of cash flows summarizes information about the cash inflows (receipts) and outflows (payments)
for a specific period of time.
Practice problem:
-
+Account +Account +Notes +Owner's
tnx. Cash +Equipment +Supplies = Owner's
Receivable Payable payable Capital
Drawing
1. +$11000 +$11000
2. -$800
3. +$3000 +$3000
4. +$1500
5. +$700 +$700
6. +$2000
7. -$500
-$300
-$100
8. -$1000 -$1000
Owner's
Assets=$15500 Liabilities=$3700
Equity=$11,800
JOAN ROBINSON,ATTORNEY
Income Statement
For the Month Ended July 31, 2017
Rvenues
Service revinues $3500
Expenses
Rent expense $800
Salaries and wages expense $500
Utilities expense $300
Advirtising expense $100
Total expenses = $1700
Net income = $1800
JOAN ROBINSON,ATTORNEY
Owner's Equity statement
For the Month Ended July 31, 2017
Owner's Capital, July 1
Owner's Capital $11000
Net income $1800
Owner's Drawings $1000
Owner's Capital, July 31 $11,800
JOAN ROBINSON,ATTORNEY
Balance Sheet
For the Month Ended July 31, 2017
Assets:
Cash $10500
Equipment $3000
Account receivable $2000
Total Assets =$15500
Liabilities and Owner's equity
Account Payable $3000
Notes payable $700
Total Liabilities =$3700
Owner's Capital $11,800
Total Liabilities and Owner's equity =$15500
Journalizing:
Debits and credits indicate where value is flowing into and out of a business. They must be equal to keep a company’s
books in balance.
Practice problem:
JOAN ROBINSON,ATTORNEY
General Journal
For the Month Ended July 31,
Date Account Titles & Explanation Ref Debit Credit
Oct.1 Cash $30,000
Owner's Capital $30,000
2 Rent Expense $700
Cash $700
3 Equipment $2,800
Account Payable $2,800
6 Account Receivable $4,400
Service Revenue $4,400
27 Account Payable $1,100
Cash $1,100
30 Utilities Expense 130
Accounts Payable 130
Practice problem:
Bob Sample opened the Campus Laundromat on September 1, 2017. During the fi rst month
of operations, the following transactions occurred.
Sept.
1.Bob invested $20,000 cash in the business.
2.The company paid $1,000 cash for store rent for September.
3.Purchased washers and dryers for $25,000, paying $10,000 in cash and signing a $15,000, 6-month, 12% note
payable.
4.Paid $1,200 for a one-year accident insurance policy.
10.Received a bill from the Daily News for online advertising of the opening of the laundromat $200.
20.Bob withdrew $700 cash for personal use.
30.The company determined that cash receipts for laundry services for the month were $6,200.
Bob Sample
General Journal
For the Month Ended Sept. 30
Cash $700
(Withdraw cash for personal use)
30 Cash $6,200
Service Revenue $6,200
(Received cash for services performed)
Bob Sample
General Ledger
For the Month Ended Sept. 30
Cash
Owner's Capital
Rent Expense
Equipment
Date Account Titles Ref Debit Credit Balance
Sept.3 Equipment $25,000 $25,000
Notes Payable
Prepaid Insurance
Advertising Expense
Accounts Payable
Owner's Drawing
Service Revenue
Bob Sample
Trial Balance
For the Month Ended Sept. 30