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Chapter 4. The Simple Ledger. * Ledger Accounts *. A Ledger is a group/file of Accounts Each Account has a page in the ledger Transactions that affect the account are recorded on each account’s page T-accounts (beginner format). 4.1. * The T account *. Left Side DEBIT DR or Dr

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chapter 4

Chapter 4

The Simple Ledger

ledger accounts
* Ledger Accounts *
  • A Ledger is a group/file of Accounts
  • Each Account has a page in the ledger
  • Transactions that affect the account are recorded on each account’s page
  • T-accounts (beginner format)

4.1

the t account
* The T account *
  • Left Side
  • DEBIT
  • DR or Dr
  • Assets beginning value
  • Debit = Left
  • Right Side
  • CREDIT
  • CR or Cr
  • Liabilities & Equity beginning value
  • Credit = Right

4.1

opening accounts
* Opening Accounts *
  • Record name at top of account
  • Record Beginning balances on correct side
  • Assets on Debit Side (left)
  • Liabilities & Equity on Credit Side (right)

Assets = Liabilities + Equity

+

+

+

Dr

Cr

Cr

4.1

slide5

A/P

Capital

Cash

Supplies

7,400

3,100

45,800

6,600

Debit = Credit

Left = Right

4.1

4 1 homework
~ 4.1 Homework ~
  • Page 82 (wb33-34)
    • Exercises 1-3
    • Review questions 1-7
  • http://www.youtube.com/watch?v=j71Kmxv7smk

4.1

assets liabilities equity
Assets = Liabilities + Equity

-

-

-

+

+

+

Assets increase with a Debit

- Left side of equation and balance sheet

Liabilities increase with a Credit

- Right side of equation and balance sheet

Equity increases with a Credit

-Right side of equation and balance sheet

4.2

purchased 200 supplies on credit
Purchased $200 supplies on credit
  • Increase in Supplies
      • Asset
      • Debit (left side)
  • Increase in A/P
      • Liability
      • Credit (right side)
  • Left side = Right Side
      • Debits = Credits

Supplies

 200

A/P

200 

4.2

made 50 payment on account

Cash

700

A/P

200 

Made $50 payment on Account
  • Decrease in Cash
      • Asset
      • Credit
  • Decrease in A/P
      • Liability
      • Debit
  • Debits = Credits

50 

 50

4.2

4 2 homework
~ 4.2 Homework ~
  • Page 90 (wb34-36)
    • Exercises 1-4
    • Review questions 1-12

4.2

calculating account balances
* Calculating Account Balances *
  • Add the two sides separately
  • Record pin totals
  • Subtract the smaller total from the larger
  • Write the result beneath the larger pin total
  • Circle this final amount

Cash

3265

500 

2500 

 200

 400

650 

3865

3650

215

3865-3650 = 215

4.3

normal account balances
* Normal Account Balances *

+

  • Assets
      • Debit
  • Liabilities
      • Credit
  • Equity
      • Credit

Dr

+

Cr

+

Cr

4.3

exceptional balances
* Exceptional Balances *
  • Occasionally accounts have opposite balances
  • Credit balance for Cash/Bank
    • Overdrawn, took out more money than we have
  • Credit balance for A/R
    • Customer overpaid us (we now owe them)
    • Customer returned merchandise but has no balance
  • Debit balance for A/P
    • We overpaid a creditor (they now owe us)
    • We returned products but have no balance owing
  • These do not last long

4.3

4 3 homework
~ 4.3 Homework ~
  • Text page 96-97
    • Review Questions 1-9
    • Exercises 1, 2,3

4.3

trial balance
* Trial Balance *
  • Checks the accuracy of the ledger
  • Informal Document
  • Listing of the account balances
  • Check if debits = credits
  • If not equal, then at least ONE error
  • ALL errors must be found
  • If in balance, still MAY have errors

4.4

creating a trial balance
* Creating a Trial Balance *
  • Heading: Who, What, When
  • List all Assets first, in order of liquidity
    • Record their values in the Debit Column
  • List the Liabilities, in order of maturity
    • Record their values in the Credit column
  • List the Equity account(s) -- Capital
    • Record the value in the Credit column
  • Total up the two columns
    • Debits = Credits

4.4

common errors
* Common Errors!!!! *
  • Make sure account balances are in the correct column
  • Find the difference between the totals
  • Find that value in a transaction
    • Missed an entry
  • Divide difference by two and find
    • Double entry
  • Difference divisible by 9
    • Transposition error (wrote 45 instead of 54)
  • Difference divisible by 10
    • Addition Error (forgot to carry the one)

4.4

4 4 homework
~ 4.4 Homework ~
  • Page 101-102 (wb 38-40)
    • Exercises 1, 2 & 3
    • Review Questions 1-7

4.4

slide19

~ Homework: Ch4 Review~

  • Text Pages 109-110 (wb 43-45)
  • Exercises 1-4
  • Page 112, Questions for Further Thought
  • Prepare for chapter 5  Print notes and workbook pages
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