Professional Documents
Culture Documents
Terms
Assets: Tangible and Non-tangible resources
of a business that have future value. Usually
sub-classified as follows:
Unearned revenues
Bonds (usually super long term)
Capital
Corporation:
Example (Simplified)
John Does Business or Personal Records
Balance Sheet
September 10, 2003
Assets:
Current:
Cash at Home
Cash Deposits in Bank
Fixed:
Wardrobe
Equipment
Car
$100
500
2000
1000
5000
Total Assets:
Liabilities:
Current:
Credit Card Payable
Long Term:
Note Payable (on Car)
Total Liabilities
Capital, John Doe:
Total Liabilities & Owners Equity:
$8,600
$500
$2000
$2,500
6,100
$8,600
Other Terms
Temporary Accounts are used in addition to
balance sheet accounts to record changes in
owners equity each reporting period.
$2500
$2000
$ 500
Accounting Cycle
#3 Post from the journal to the individual
ledger accounts. (to keep a running balance of
each account)
Accounting Cycle #4
Adjust the necessary accounts to bring
them up to date.
Accounting Cycle #5
#5 At the end of the period or at any time
(with computers) balance all of the
accounts in a trial balance. (Checks and
balance step to see if all of your journal
entries and posting was correct.)
Income Statement
Statement of Changes in Owners Equity
Balance Sheet
A = L + OE
Assets
Cash
Debit
+
100
75
Credit
50 100
Liabilities
A/P
Debit
-
Credit
+
O.E.
Capital
Debit
+
Credit
-
Dr
+
Cr
-
Dr
+
50
Cr
-
Dr
-
Cr
+
75
Each Transaction in finance has a debit and a credit. The debit amount must
always equal the credit amount. (Checks & Balances)
Example: Invested 100 Cash in my business.
Example: Paid $50 for Advertising Expense.
Example: Earned $75 for performing services
At the end of the day: (Assets = 125) = (Liabilities = 0) + (OE = 125) and
debits = 225 and credits = 225 (Double balance, double witness)
_______________________
______________________
A. Debit(s)
B. Credit(s)
C. Can be either Dr or Cr.
D. Always both Dr & Cr
Entries
PR
DR
Cash
101
$1000
Capital
301
Started business with personal investment.
CR Pg1
1/1
$1000
PR DR
J1 $1000
J1
CR
BAL
$1000
$1000
$1000
2 Transaction
nd
Journal Entry
Date Explanation
1/2
PR
Cash
101
Loan Payable 201
Received cash on credit.
DR
CR
$5000
$5000
Posting
Cash (101)
Date Explanation
1/1
1/2
PR
J1
J1
DR CR BAL
1000
1000
5000
6000
Date Explanation
1/2
PR
J1
DR
CR BAL
5000 5000
Journal Entry
Date
1/3
PR Dr
Equipment
Cash
120
Cr___
$3000
101
$3000
Date
1/1
1/2
1/3
101
PR
J1
J1
J1
Dr
1000
5000
Cr
3000
Equipment
Date
1/3
Bal___
Bal
1000
6000
3000
120
PR
J1
Dr
3000
Cr
Bal__
3000
Assets
Expenses
Revenues
Liabilities
Capital
Drawing
4 Transaction 1/4
th
Journal Entry
Date
PR
1/3 Advertising Expense 601
Cash
101
Purchased ad for business
Dr
200
Cr
200
Postings
Advertising Expense
Date
1/4
601
PR
J2
Dr
200
Cr
Cash
Date
1/1
1/2
1/3
1/4
Bal______
Bal
200
101
PR
J1
J1
J1
J2
Dr
Cr
1000
5000
3000
200
Bal___
Bal
1000
6000
3000
2800
5 Transaction 1/5
th
Journal Entry
Date
PR
Dr
1/5 Cash
101
100
A/R
110
300
Revenue 401
Performed services and received
down payment. Bal due: 1/31
Cr
400
Postings
Cash
Date
1/1
1/2
1/3
1/4
1/5
101
PR
J1
Dr
1000
Cr
Bal___
Bal
1000
J1
5000
J1
3000
J2
200
100
2900
J2
Accounts Receivable
Date
1/5
PR
J2
Dr
300
Service Revenue
Date
1/5
PR
J2
Dr
6000
3000
2800
110
Cr
Bal___
Bal
300
401
Cr
400
Bal___
Bal
400
Transaction #6 #7#8#9&10
Hired my little brother to help me and paid
him $100 in wages
Worked all day on second cleaning job
and was paid $500
Had to spend $300 on cleaning supplies
to be used during the next two months.
Took $200 out of my business to take my
wife on a mini moon.
Allocated 50% use of my truck to my
business. Book price of truck = $6000
Journal Entries
Date
1/6 Wages Expense
Cash
1/7 Cash
Service Revenue
1/8 Cleaning Supplies
Cash
1/9
Drawing
Cash
1/10 Truck
Capital
PR
620
Debit
100
100
101
101
500
500
401
130
300
300
101
320
200
200
101
150
301
Credit
3000
3000
Postings
Wages Expense
Date
1/6
Cash
Date
1/1
1/2
1/3
1/4
1/5
1/6
1/7
1/8
1/9
PR
J2
PR
J1
J1
J1
J2
J2
J2
J2
J2
J2
Dr
1000
5000
Dr
100
Cr
3000
200
100
100
500
300
200
Cr
101
Bal___
Bal
1000
6000
3000
2800
2900
2800
3300
3000
2800
620
Bal
100
Posting Cont.
Service Revenue
Date
1/5
1/7
401
PR
J2
J2
Dr
Cr
400
500
Cleaning Supplies
Date
1/8
130
PR
J2
Dr
300
Cr
Anderson, Drawing
Bal___
Bal
400
900
Bal_____
300
320
Date
PR
Dr
1/9
J2
200
Cr
Bal______
200
Posting Cont.
Truck
Date
1/10
Capital
1/1
1/10
150
PR
J2
J1
J2
Dr
3000
Cr
$1000
$3000
Bal_____
3000
301
$1000
$4000
Adjustments
Cleaning Supplies Expense
Cleaning Supplies
PR
Dr
621
100
Cr__
100
130
1/31
Adjustment
Depreciation Expense/Trk
Truck (Accum Dpr.)
650
151
125
125
1/31
Adjustment
PR
Dr
J2
100
Cleaning Supplies
Date
1/8
1/31
1/31
Adjustment
Truck
Date
1/10
1/31
100
Dr
300
J2
Cr
100
Bal
130
PR
J2
Adjustment
621
Cr
J2
Dr
650
Cr
125
Bal_____
300
200
Bal
125
150
Adjustment
PR
Dr
J2
3000
Cr
125
Bal_____
3000
2875
Debit
Cash
Accounts Receivable
Cleaning Supplies
Equipment
Truck
Loan Payable
Anderson, Capital
Anderson, Drawing
Service Revenue
Advertising Expense
Wages Expense
Cleaning Supplies Expense
Depreciation Expense/Truck
$2800
300
200
3000
2875
Total Balance
$9,900
Credit
5000
4000
200
900
200
100
100
125
$9,900
100
125
$375
$1000
3000
375
(200)
na
$4175
Balance Sheet
Anderson Cleaning
Balance Sheet
January 31, 2204
Assets:
Cash
Accounts Receivable
Cleaning Supplies
Equipment
Truck
Less Accum. Depr.
Total Assets:
$2,800
300
200
3000
3000
125
2875
$9,175
________
Liabilities
Loan Payable
$5,000
Owners Equity
Anderson, Capital
4,175
$9,175
______
8 Steps Reviewed
1.
2.
3.
4.
5.
6.
Verb
Analyze
Enter (Journalize)
Post
Adjust
Balance
Prepare
7.
8.
Close
Analyze
Noun
Source Documents
Journal
Ledger
Internal Entries
Trial Balance
Financial Statements
Temporary Accounts
Data
Owners Equity
Two ways to increase this account:
Step #4 Adjustments
Adjustments are the internal transactions of a
company that a good accountant will make to set
in order each account. They must be journalized
first and then posted to the ledger.
Adjustments are usually made at the end of an
accounting period.
Examples: Depreciation, Use of pre-paid rent
or insurance, interest earned or expensed, use of
supplies and materials, unearned revenues
earned during the period.
#8 Analyze Data
A list of the accounts you start the new
accounting period with.
A check to see if Debits = Credits with
these continuing accounts.
If total DEBITS DO NOT EQUAL total
CREDITS a mistake has been made and
needs correction.
Final Quiz
1. Define:
Asset:
Liability:
Capital:
Expense:
Revenue:
Final Quiz:
3. What is the first accounting book called
that is used to record transactions
chronologically?
4. For any and all transactions Debits
must always equal _______________?
5. If I wanted to know what balance I had
in cash what record/book would I turn to?
6. Cash carries what kind of a balance?
Quiz:
7. The use of a fixed asset over a period
of time is called what?
8. What is ROI and what two figures in
accounting do you use to determine it?
9. The accounting cycle is also known as
the _______________ _____________?
Cash,
Accounts Payable,
Accounts Receivable,
Equipment,
Advertising Expense,
Depreciation Expense,
Service Revenue,
Capital
Mondays Assignment
1. Using the Balance Sheet Format, prepare your own
personalized or family Balance Sheet Report listing at least seven
accounts. (Make it neat (with heading) and type it up)
2. Using the income statement format, complete a cash flow
personalized income statement showing all the revenue (money)
you received in January, and the expenses (money) you spent. The
bottom line would be your net profit or net loss for January. Show at
least seven items in this report. Examples of Revenue: (money
from parents) (money from pell grant) (money from savings)
(money earned from work) (money borrowed from roommates)
(money received from loans) etc. Examples of expenses: (money
paid for tuition) (money paid for books) (food) (entertainment)
(utilities) (phone) etc.
Both Reports need to have headings and both need to be in the
format for balance sheet and income statement that we have
learned in class. Both Need to be typed.
Monday
Turn in your neat & complete accounting
problem with three statements.
Be prepared for a quiz on the basics of
accounting.