1 / 15

Chapter 3

Chapter 3. Applying Double-Entry Accounting. LO1. Learning Objective 1 Describe a T-account and its use in recording transactions. An account is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense item.

stacy-potts
Download Presentation

Chapter 3

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Chapter 3 Applying Double-Entry Accounting

  2. LO1 Learning Objective 1Describe a T-account and its use in recording transactions. An account is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense item. The general ledger is a record containing all accounts used by the company. Cash Expenses Supplies

  3. An account balance is the difference between the increases and decreases in an account. LO1 Double-Entry Accounting $15,000 – 5,850 = $9,150

  4. LO1 – – + + Owner’s Capital Owner's Withdrawals Revenues Expenses Expanded Accounting Equation Remember we must always consider the accounting equation when recording transactions. = + Assets Liabilities Equity

  5. A T-account represents a ledger account and is a tool used to understand the effects of one or more transactions. LO2 Learning Objective 2Define debits and credits and explain their role in double-entry accounting. Account title such as cash or supplies

  6. LO2 = + Assets Liabilities Equity EQUITIES ASSETS LIABILITIES Debit Credit Debit Credit Debit Credit +- -+ -+ Double-Entry Accounting Remember whenever we record a transaction debits will always equal credits.

  7. LO2 _ _ Owner’s Capital Owner's Withdrawals + Revenues Expenses Owner’sCapital Owner's Withdrawals Revenues Expenses Debit Credit Debit Credit Debit Credit Debit Credit -+ +- -+ +- Double-Entry Accounting Equity Notice that we must always consider the effect that an increase or decrease has on equity.

  8. LO3 Analysis: Assets increase with a debit. Capital increases with a credit. Posting: 301 Learning Objective 3Post transactions in T-accounts.

  9. LO3 Analysis: Assets increase with a debit. Assets decrease with a credit. Posting: Analyzing Transactions

  10. LO3 Analysis: Assets increase with a debit. Liabilities increase with a credit. Posting: Analyzing Transactions

  11. LO4 FastForward Trial Balance December 31, 2010 Cash $ 4,350 Accounts receivable - Supplies 9,720 Prepaid insurance 2,400 Equipment 26,000 Accounts payable $ 6,200 Unearned consulting revenue 3,000 C. Taylor, Capital 30,000 C. Taylor, 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 Learning Objective 4Prepare and explain the use of a trial balance. • On the trial balance we list all the accounts in our general ledger. • The total of all our debit account balances must equal all our credit account balances. • If this is not the case, we may have made an error posting one or more journal entries into the ledger. • We cannot prepare the financial statement until the books are in balance as determined by the trial balance. Debit Credit

  12. LO5 Learning Objective 5Prepare Financial Statements from a trail Balance • The income statement contains the revenues and expenses from the accounting period. • This information will enable the owner to determine if they had a profit or loss. In this case there was a $3,470 profit.

  13. LO5 Statement of Owner's Equity • We now are able to see how the owner’s equity has changed over the period. • Take the beginning capital then add any investments made by the owner. • Next we add the net income from the period (which we can get from the income statement). • Then subtract any withdrawals the owner had made. • You should now have the new capital balance.

  14. LO5 Balance Sheet • The balance sheet reports the financial position of a company at a particular point in time, usually at the end of a month, quarter or year. • Notice that we get the new capital balance from the statement of owners equity.

  15. End of Chapter 3

More Related