ACC1002/ACC1701

Tutorial Class
Week 4

Tutor: GUO, Kai

guok@u.nus.edu
Overview of Accounting Cycle
Identify the transaction

What events should be recorded?

No.1: When they have a financial impact on business

(When A=L+E is affected)

No.2: Can be measured reliably

Company announces a new product

The owner invests $ 45,000 cash in his company for ordinary

shares.
Transaction analysis
Which accounts are affected?

The accounting equation MUST remain in balance after each transaction:

• Assets Assets

• Assets Equity The owner invests $ 45,000

cash in his company for
• Assets Liability ordinary shares.

• Assets Liability/Equity
Record Transactions
The owner invests $ 45,000 cash in his company for ordinary shares.
• Assets (cash) Equity (share capital)

How to do journal entry for this transaction? (Debit vs Credit)

Account Title
(Left side) (Right side)
Debit Credit

Assets + Expenses + Dividends = Liabilities + Share capital + Revenues

Record Transactions——post
The owner invests $ 1,000 cash in his company for ordinary shares.

Cash Share Captal

(Left side) (Right side) (Left side) (Right side)
Prepare a trial balance
How and Why?
The trial balance : 1) summarizes all the account balances for the financial
statements and 2) shows whether debits = credits
Q1: S2-8 P94
Q1: S2-8 P94
Q2: P2-65A P108
Q2: P2-65A P108
Q2: P2-65A P108
Why does Murphy need to beef up the owners’ equity to get a loan ?
1. The stakeholders are Scruffy Murphy, the bank, potential new
creditors, and the friend who may become a shareholder.

Option 1 Option 2

Scruffy Murphy Get the loan and loses some Might be caught (litigation risk
control and reputation loss)
Bank complete and truthful Inaccurate information and
information excess risk
Potential new creditors
Friend An ownership in the business N/A