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Chapter 4

วัฎจักรทางการบัญชี – ภาคแรก (THE ACCOUNTING CYCLE 1). Chapter 4. THE BASIC ACCOUNTING EQUATION. สมการบัญชี : สินทรัพย์ = หนี้สิน + ส่วนของเจ้าของ. Assets. Liabilities. Stockholders’ Equity. =. +. claims against those assets. resources owned by a business. owners’

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Chapter 4

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  1. วัฎจักรทางการบัญชี – ภาคแรก (THE ACCOUNTING CYCLE 1) Chapter4

  2. THE BASIC ACCOUNTING EQUATION สมการบัญชี: สินทรัพย์ = หนี้สิน + ส่วนของเจ้าของ Assets Liabilities Stockholders’ Equity = + claims against those assets resources owned by a business owners’ residual claim on total assets

  3. HOW BUSINESS TRANSACTIONS AFFECT THE ACCOUNTING EQUATION • Every transaction must have a dual effect on the accounting equation. Thus, if an asset is increased, there must be a corresponding: • Decrease in another asset, or • Increase in a liability, or • Increase in stockholders’ equity

  4. Don’t Record Record TRANSACTION IDENTIFICATION PROCESS Is the financial position (assets, liabilities, and stockholders’ equity) of the company changed? Purchase computer Answer telephone Pay rent Yes No

  5. การวิเคราะห์รายการค้าการวิเคราะห์รายการค้า Let’s analyze some transactions for JJ’s Lawn Care Service.

  6. TRANSACTION ANALYSISTRANSACTION 1 On May 1, 20XX, Jill Jones and her family invested $8,000 in JJ’s Lawn Care Service and received 800 shares of stock. The asset Cash is increased $8,000 and the Common Stock is increased $8,000.

  7. On May 1, 20XX, Jill Jones and her family invested $8,000 in JJ’s Lawn Care Service and received 800 shares of stock.

  8. TRANSACTION ANALYSISTRANSACTION 2 On May 2, JJ’s purchased a riding lawn mower for $2,500 cash. The asset Cash is decreased $2,500 and the asset Tool & Equipment is increased $2,500.

  9. On May 2, JJ’s purchased a riding lawn mower for $2,500 cash.

  10. TRANSACTION ANALYSISTRANSACTION 3 On May 8, JJ’s purchased a $15,000 truck.JJ’s paid $2,000 down in cash and issued a note payable for the remaining $13,000.

  11. On May 8, JJ’s purchased a $15,000 truck. JJ’s paid $2,000 down in cash and issued a note payable for the remaining $13,000.

  12. TRANSACTION ANALYSISTRANSACTION 4 On May 11, JJ’s purchased some repair parts for $300 on account.

  13. On May 11, JJ’s purchased some repair parts for $300 on account.

  14. TRANSACTION ANALYSISTRANSACTION 5 On May 18, JJ’s was able to sell half of the repair parts for $150, a price equal to cost. JJ’s will receive the cash within 30 days.

  15. Jill realized she had purchased more repair parts than needed. On May 18, JJ’s was able to sell half of the repair parts to ABC Lawns for $150, a price equal to JJ’s cost. JJ’s will receive the cash within 30 days.

  16. TRANSACTION ANALYSISTRANSACTION 6 On May 25, ABC Lawns pays JJ’s $75 as a partial settlement of its accounts receivable.

  17. On May 25, ABC Lawns pays JJ’s $75 as a partial settlement of its accounts receivable.

  18. TRANSACTION ANALYSISTRANSACTION 7 On May 28, JJ’s pays $150 of its accounts payable.

  19. On May 28, JJ’s pays $150 of its accounts payable.

  20. TRANSACTION ANALYSISTRANSACTION 8 On May 29, JJ’s recorded lawn care services provided during May of $750. All clients paid in cash.

  21. On May 29, JJ’s recorded lawn care services provided during May of $750. All clients paid in cash.

  22. TRANSACTION ANALYSISTRANSACTION 9 On May 31, JJ’s purchased gasoline for the lawn mower and the truck for $50 cash

  23. On May 31, JJ’s purchased gasoline for the lawn mower and the truck for $50 cash.

  24. May 31 $21,850 = $21,850

  25. These transactions impact the Statement of Cash Flows. These transactions impact the Income Statement. Let’s prepare the Income Statement and Statement of Cash Flows for JJ’s Lawn Care Service for the month ending May 31, 20XX.

  26. Investments by and payments to the owners are not included on the Income Statement.

  27. Operating activities include the cash effects of revenue and expense transactions.

  28. Investing activities include the cash effects of purchasing and selling assets.

  29. The Ledger Accounts are individual records showing increases and decreases. Cash Accounts Payable The entire group of accounts is kept together in an accounting record called a ledger. Capital Stock

  30. The general ledger contains all the assets, liabilities, and stockholders’ equity accounts for a given company THE LEDGER Individual Stockholders’ Equity Individual Assets Individual Liabilities Equipment Interest Payable Salaries Payable Fees Earned Land Salaries Payable Common Stock Supplies Accounts Payable Retained Earnings Cash Notes Payable

  31. Title of Account Left or debit side Right or credit side Debit balance Credit balance THE ACCOUNT • An account is an individual record of increases and decreases in a specific asset, liability, or owner’s equity item. • Commonly referred to as “T-Accounts.”

  32. Increases are recorded on one side of the T-account, and decreases are recorded on the other side. The Use of Accounts Title of Account Left or Debit Side Right or Credit Side

  33. Assets Liabilities Equity DOUBLE-ENTRY SYSTEM • In a double-entry system, equal debits and credits are made in the accounts for each transaction. • Thus, the accounting equation will always stay in balance.

  34. ASSETS LIABILITIES EQUITIES Debit for Increase Credit for Decrease Debit for Decrease Credit for Increase Debit for Decrease Credit for Increase Debit and Credit Rules Debits and credits affect accounts as follows: A=L+OE

  35. Double Entry AccountingThe Equality of Debits and Credits A=L+OE = Debit balances Credit balances In the double-entry accounting system, every transaction is recorded by equal dollar amounts of debits and credits.

  36. DEBIT & CREDIT EFFECTS ON ASSETS & LIABILITIES Increase assets Decrease assets Decrease liabilities Increase liabilities Debits Credits

  37. DEBIT & CREDIT EFFECTS ON STOCKHOLDERS’ EQUITY Decrease equity Increase equity COMMON STOCK/RETAINED EARNINGS Debits Credits

  38. What is Net Income? Net income is not an asset it’s an increase in owners’ equity from profits of the business. A=L+OE Increase Decrease Increase Either (or both) of these effects occur as net income is earned . . . . . . but this is what “net income” really means.

  39. Retained Earnings A=L+OE Retained Earnings-Revenues -Expenses Capital Stock The balance in the Retained Earnings account represents the total net income of the corporation over the entire lifetime of the business, less all amounts which have been distributed to the stockholders as dividends.

  40. DEBIT & CREDIT EFFECTS ON REVENUES & EXPENSES Decrease revenues Increase revenues Increase expenses Decrease expenses Debits Credits

  41. EQUITIES Debit for Decrease Credit for Increase EXPENSES REVENUES Debit for Increase Credit for Decrease Debit for Decrease Credit for Increase Debits and Credits for Revenue and Expense Expenses decrease owner’s equity. Revenues increase owner’s equity.

  42. EQUITIES Debit for Decrease Credit for Increase CAPITAL STOCK Debit for Decrease Credit for Increase Investments by and Payments to Owners Payments to owners decrease owners’ equity. Owners’ investments increase owners’ equity. DIVIDENDS Debit for Increase Credit for Decrease

  43. Liabilities Assets Stockholders’ Equity Common Stock Dividends Assets Liabilities Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. + - - + - + + - Revenues Expenses Dr. Cr. Dr. Cr. - + + - EXPANDED ACCOUNTING EQUATION = + = + - + -

  44. CHART OF ACCOUNTS Most companies have a chart of accounts that lists the accounts and the account numbers which identify their location in the ledger.

  45. Chart of Account ผังบัญชี : ตัวอย่าง • สินทรัพย์ เลขประจำกลุ่มเป็นเลข 1 • หนี้สิน เลขประจำกลุ่มเป็นเลข 2 • ส่วนของเจ้าของ เลขประจำกลุ่มเป็นเลข 3 • รายได้ เลขประจำกลุ่มเป็นเลข 4 • ค่าใช้จ่าย เลขประจำกลุ่มเป็นเลข 5

  46. CHART OF ACCOUNTS • ตัวอย่างผังบัญชี

  47. Let’s record selected transactions for JJ’s Lawn Care Service in the accounts.

  48. May 1: Jill Jones and her family invested $8,000 in JJ’s Lawn Care Service and received 800 shares of stock. Will Capital Stock increase or decrease? Will Cash increase or decrease?

  49. Capital Stock increases $8,000 with a credit. Cash increases $8,000 with a debit. • May 1: Jill Jones and her family invested $8,000 in JJ’s Lawn Care Service and received 800 shares of stock.

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