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Accounting 2016-2017 P 6011P0148 / PE 6011P0150

This tutorial covers understanding the logical structure of accounts and working with financial statements in accounting. Topics include current and noncurrent assets, liabilities, owners' equity, revenue and expense accounts, and contra accounts.

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Accounting 2016-2017 P 6011P0148 / PE 6011P0150

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  1. Accounting 2016-2017P 6011P0148 / PE 6011P0150 Tutorials Amsterdam Business School

  2. Slides online • katalinbuzasi.weebly.com • Page: Accounting (for students) • Password: ABS2016 Accounting week 45

  3. Where are we? • Last week • Working with financial statements • Understanding the relation between financial stetements • Today (the aim of T2) • Start to work with accounts • Understanding the logical structure of accounts • Going into deep • Current assets • Noncurrent assets Accounting week 45

  4. Contents Today • CH4: P4.21, P4.26 • CH5: P5.29, P5.33 • CH6:E6.18, P6.28 Accounting week 45

  5. The logic of financial accounts • Each line in the balance sheet and income statement has an account where we register the changes (increase and decreas) related to that line • Main account types (how do they work?, what is their relationship with financial statements?) • Asset accounts • Liabilities accounts • Owners equity accounts • Revenue accounts • Expense accounts • Other account types • Contra accounts Accounting week 45

  6. The structure of accounts Accounting week 45

  7. P4.21 (page 125-126) • The aim is to practice how to use accounts to register simple economic events • Understand the logic of accounts based on real examples • Practicing the journal entry method Accounting week 45

  8. P4.21 (page 125-126) • A.) Issued 100,000 shares of $5 par value common stock for $500,000 in cash. Accounting week 45

  9. B.) borrowed $250,000 from Oglesby National Bank and signed 12% note due in three years. Accounting week 45

  10. C.) Incurred and paid $190,000 in salaries for the year. Accounting week 45

  11. D.) Purchased $320,000 of merchandise inventory on account during the year. Accounting week 45

  12. E.) Sold inventory costing $290,000 for a total of $455,000, all on credit. Accounting week 45

  13. F.) Paid rent of $55,000 on the sales facilitiesduringthe first 11 month of theyear. Accounting week 45

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  18. P5.29 (page 176) • Practicing how to register bad debt Accounting week 45

  19. Simple example for bad debts • 1st May 2015-The company sells inventory of $60,000 for $100,000 on account • The company expects that 5% of the sales will not be collectable • 6th August 2015-It turns out that 3% of the sales on 1st May is really uncollectible Accounting week 45

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  22. P5.33 (page 178) – evaluating/costing inventories • Inventory records: FIFO and LIFO method with periodic and perpetual system • Periodic: costs of goods sold are calculated at the end of the period • Perpetual: costs of goods sold are calculated when sales are made Accounting week 45

  23. Information on inventory Accounting week 45

  24. Tasks • Calculate the value of costs of goods sold and the ending inventory under the periodic system with FIFO methods • Calculate the value of costs of goods sold and the ending inventory under the periodic system with LIFO methods • Calculate the value of costs of goods sold and the ending inventory under the perpetual system with FIFO methods • Calculate the value of costs of goods sold and the ending inventory under the perpetual system with LIFO methods Accounting week 45

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  31. E 6.18 – goodwill • Practice example (Book, page 200) • A company bought another company for $1,000,000 cash and assuming a note payable liability of $100,000. The bought company had equipment of $200,000, inventory of $250,000 and the notes payable of $100,000. Record the changes in the buying company’s accounts. Accounting week 45

  32. Solution Dr. Inventory 250,000 Dr. Equipment 200,000 Cr. Cash 1,000,000 Cr. Notes payable 100,000 Dr. Goodwill 650,000 Accounting week 45

  33. E 6.18 Accounting week 45

  34. P6.26 (page 222) • How to record depreciation? • Understanding the methods of depreciation • Straight-line • Accelerated Accounting week 45

  35. Information on equipment Accounting week 45

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