Professional Documents
Culture Documents
Chap 002
Chap 002
PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2-2
C1
ANALYZING AND RECORDING
PROCESS
C1
SOURCE DOCUMENTS
Bills from
Checks Suppliers Purchase
Orders
Employee
Earnings
Records
Bank
Statements
Sales
Tickets
2-4
An account is a
record of
increases and The general
decreases in a ledger is a record
specific asset, containing all
liability, equity, accounts used by
revenue, or the company.
expense item.
2-5
Owner, Capital
Owner, Withdrawals
2-6
C2
ASSET ACCOUNTS
Cash
Accounts
Land
Receivable
Buildings
Asset Notes
Receivable
Accounts
Prepaid
Equipment
Accounts
Supplies
2-7
C2
LIABILITY ACCOUNTS
Accounts Notes
Payable Payable
Liability
Accounts
Accrued Unearned
Liabilities Revenue
2-8
C2
EQUITY ACCOUNTS
Owner’s Owner’s
Capital Withdrawals
Equity
Accounts
Revenues Expenses
2-9
C3
LEDGER AND CHART OF
ACCOUNTS
The ledger is a collection of all accounts for an
information system. A company’s size and diversity
of operations affect the number of accounts needed.
C4
Account Title
(Left side) (Right side)
Debit Credit
2 - 12
C4
DOUBLE-ENTRY ACCOUNTING
C4
DOUBLE-ENTRY ACCOUNTING
Equity
Owner’s _ Owner's _ Expenses
Capital Withdrawals + Revenues
C4
DOUBLE-ENTRY ACCOUNTING
An account balance is the difference between the increases
and decreases in an account. Notice the T-Account.
2 - 15
P1
JOURNALIZING &
POSTING TRANSACTIONS
Assets = Liabilities + Equity
T- Account
(Left side) (Right side)
Debit Credit
P1 JOURNALIZING
TRANSACTIONS
Transaction Titles of Affected
Date Accounts
P1
P1
P1
P1
P1
P1
P1
A1
ANALYZING TRANSACTIONS
Analysis:
Posting:
Cash 101 C. Taylor, Capital 301 301
(1) 30,000 (1) 30,000
2 - 25
A1
ANALYZING TRANSACTIONS
Analysis:
Double entry:
(2) Supplies 126 2,500
Cash 101 2,500
Posting:
Supplies 126 Cash 101
(2) 2,500 (1) 30,000 (2) 2,500
2 - 26
A1
ANALYZING TRANSACTIONS
Analysis:
Double entry:
(3) Equipment 167 26,000
Cash 101 26,000
Posting:
Equipment 167 Cash 101
(3) 26,000 (1) 30,000 (2) 2,500
(3) 26,000
2 - 27
A1
ANALYZING TRANSACTIONS
Analysis:
Double entry:
(4) Supplies 126 7,100
Accounts payable 201 7,100
Posting:
Supplies 126 Accounts Payable 201
(2) 2,500 (4) 7,100
(4) 7,100
2 - 28
A1
ANALYZING TRANSACTIONS
Analysis:
Double entry:
(5) Cash 101 4,200
Consulting Revenue 403 4,200
Posting:
Cash 101
403 Consulting Revenue 101
403
(1) 30,000 (2) 2,500 (5) 4,200
(5) 4,200 (3) 26,000
2 - 29
FastForward
Trial Balance The trial balance
December 31, 2011 lists all account
Debits Credits balances in the
Cash $ 4,350
Accounts receivable - general ledger. If
Supplies 9,720 the books are in
Prepaid Insurance 2,400
Equipment 26,000 balance, the total
Accounts payable $ 6,200 debits will equal the
Unearned consulting revenue 3,000
C. Taylor, Capital 30,000 total credits.
Owner's Withdrawals 200
Consulting revenue 5,800
Rental revenue 300
Salaries expense 1,400
Rent expense 1,000
Utilities expense 230
Total $ 45,300 $ 45,300
PREPARING A TRIAL
2 - 30
P2
BALANCE
P2
SEARCHING FOR AND
CORRECTING ERRORS
If the trial balance does not balance, the
error(s) must be found and corrected.
P3
USING A TRIAL BALANCE TO PREPARE
FINANCIAL STATEMENTS
2 - 33
P3
INCOME STATEMENT
FASTFORWARD
Income Statement
For the Month Ended December 31, 2011
Revenues:
Consulting revenue $ 5,800
Rental revenue 300
Total revenues $ 6,100
Expenses:
Rent expense 1,000
Salaries expense 1,400
Utilities expense 230
Total expenses 2,630
Net income $ 3,470
2 - 34
P3 STATEMENT OF OWNER'S
EQUITY
FASTFORWARD
Statement of Owner's Equity
For the Month Ended December 31, 2011
C. Taylor, Capital 12/1/11 $ -
Connections
Net income for December 3,470
Plus: Investments by Owner 30,000
33,470
Less: Owner Withdrawals 200
C. Taylor, Capital, 12/31/11 $ 33,270
FASTFORWARD
Income Statement
For the Month Ended December 31, 2011
Revenues:
Consulting revenue $ 5,800
Rental revenue 300
Total revenues $ 6,100
Expenses:
Rent expense 1,000
Salaries expense 1,400
Utilities expense 230
Total expenses 2,630
Net income $ 3,470
2 - 35
P3
BALANCE SHEET
FASTFORWARD
Statement of Owner's Equity
For the Month Ended December 31, 2011
FASTFORWARD
C. Taylor, Capital 12/1/11 $ -
Balance Sheet
December 31, 2011
Net income for December 3,470
Assets
Plus: Investments by Owner 30,000
Cash $ 4,350
33,470
Supplies 9,720
Less: Owner Withdrawals 200
Prepaid insurance 2,400
C. Taylor, Capital, 12/31/11 $ 33,270
Equipment 26,000
Total assets $ 42,470
Liabilities
Accounts payable $ 6,200
Connections
Unearned revenue 3,000
Total liabilities 9,200
Equity
P3
PRESENTATION ISSUES
1. Dollar signs are not used in journals and ledgers.
2. Dollar signs appear in financial statements and other
reports such as trial balances. The usual practice is to
put dollar signs beside only the first and last numbers
in a column.
3. When amounts are entered in the journal, ledger, or
trial balance, commas are optional to indicate
thousands, millions, and so forth.
4. Commas are always used in financial statements.
5. Companies commonly round amounts in reports to the
nearest dollar, or even to a higher level.
2 - 37
Chapter Exercises:
QS 2-10, 2-11
Priority
Ex 2-4, 2-7, 2-8, 2-13, 2-14, 2-15
1
Pr 2-1A
Priority
Pr 2-2A, 2-3A, 2-4 A
2
2 - 38
END OF CHAPTER 02