chapter 5 – the expanded ledger l draft | accounting 1, 7 th edition1 chapter 5 the expanded...

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition1

Chapter 5The Expanded Ledger

Ch5

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition2

The Expanded Ledger

This tutorial guides you through the expanded ledger system.

Up to Chapter 4, only the capital account is used for owner’s equity. In Chapter 5, you learn that there are several other equity accounts.

For more detailed instructions, refer to Section 5.1 of the Accounting 1 textbook.

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition3

The Expanded Ledger

In the old Chapter 4 system, there is only a single equity account.

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition4

The Expanded Ledger

The Chapter 5 ledger expands upon the old version.

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition5

The Expanded Ledger

The Chapter 5 ledger expands upon the old version.

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition6

The Expanded Ledger

To begin expanding the ledger, extract the beginning capital amount.

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition7

The Expanded Ledger

To begin expanding the ledger, extract the beginning capital amount.

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition8

The Expanded Ledger

Next, extract drawings (withdrawals of money from the company for personal use).

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition9

The Expanded Ledger

Next, extract drawings (withdrawals of money from the company for personal use).

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition10

The Expanded Ledger

Extract the revenue amounts (known as “fees earned” if the company sells a service, or “sales” if the company sells a product).

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition11

The Expanded Ledger

Extract the revenue amounts (known as “fees earned” if the company sells a service, or “sales” if the company sells a product).

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition12

The Expanded Ledger

Finally, extract the individual expense amounts into their own separate accounts.

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition13

The Expanded Ledger

With the expanded ledger accounts, you can create a more informative trial balance and balance sheet.

You are now also able to generate an income statement.

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition14

The Expanded Ledger

The new trial balance shows the expanded equity accounts. It is possible to determine net income and the balance of capital using the balances of these accounts.

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition15

The Expanded Ledger

Another view of the trial balance.

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition16

The Expanded Ledger

Another view of the trial balance. The expanded ledger accounts can be used to generate the income statement.

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition17

The Expanded Ledger

Another view of the trial balance. The expanded ledger accounts can be used to generate the income statement.

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition18

The Expanded Ledger

Another view of the trial balance. The expanded ledger accounts can be used to generate the income statement.

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition19

The Expanded Ledger

The income statement consists of all revenue and expense accounts, which are part of the expanded ledger.

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition20

The Expanded Ledger

The expanded ledger also makes the balance sheet more informative.

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition21

The Expanded Ledger

Asset and liability accounts remain unchanged.

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition22

The Expanded Ledger

Owner’s equity accounts are expanded.

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition23

The Expanded Ledger

The new calculation looks at beginning capital, plus net income, less drawings, plus increase in capital.

Chapter 5 – The Expanded Ledger l DRAFT | Accounting 1, 7th Edition24

The Expanded Ledger

Once you have calculated the total owner’s equity you can rule and total and complete the balance sheet.