the accounting information system
DESCRIPTION
The Accounting Information SystemTRANSCRIPT
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Account Name
Debit / Dr.
Credit / Cr.
Chapter 3-*
Debits and CreditsAccount NameDebit / Dr. Credit / Cr. If Debit entries are greater than Credit entries, the account will have a debit balance.LO 2 Explain double-entry rules.$10,000Transaction #2$3,000$15,0008,000Transaction #3BalanceTransaction #1
Chapter 3-*
Debits and CreditsIf Credit entries are greater than Debit entries, the account will have a credit balance.LO 2 Explain double-entry rules.$10,000Transaction #2$3,000$1,0008,000Transaction #3BalanceTransaction #1
-
Account Name
Debit / Dr.
Credit / Cr.
Chapter 3-*
Debits and Credits SummaryNormal Balance CreditNormal Balance DebitLO 2 Explain double-entry rules.
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Assets
Debit / Dr.
Credit / Cr.
Normal Balance
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Debit / Dr.
Credit / Cr.
Normal Balance
Expense
Chapter 3-*
Liabilities
Debit / Dr.
Credit / Cr.
Normal Balance
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Debit / Dr.
Credit / Cr.
Normal Balance
Equity
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Debit / Dr.
Credit / Cr.
Normal Balance
Revenue
Chapter 3-*
Debits and Credits Summary Balance Sheet Income Statement=+=-AssetLiabilityEquityRevenueExpenseDebitCreditLO 2 Explain double-entry rules.
Chapter 3-*
Basic Accounting EquationRelationship among the assets, liabilities and stockholders equity of a business: LO 2 Explain double-entry rules.The equation must be in balance after every transaction. For every Debit there must be a Credit.Illustration 3-3
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Double-Entry System ExerciseAssetsLiabilitiesStockholders Equity=+1. Invested $32,000 cash and equipment valued at $14,000 in the business.+ 32,000+ 14,000+ 46,000LO 2 Explain double-entry rules.
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Double-Entry System ExerciseAssetsLiabilitiesStockholders Equity=+2. Paid office rent of $600 for the month.- 600- 600 (expense)LO 2 Explain double-entry rules.
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Double-Entry System ExerciseAssetsLiabilitiesStockholders Equity=+3. Received $3,200 advance on a management consulting engagement.+ 3,200+ 3,200LO 2 Explain double-entry rules.
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Double-Entry System ExerciseAssetsLiabilitiesStockholders Equity=+4. Received cash of $2,300 for services completed for Shuler Co.+ 2,300+ 2,300 (revenue)LO 2 Explain double-entry rules.
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Double-Entry System ExerciseAssetsLiabilitiesStockholders Equity=+5. Purchased a computer for $6,100.+ 6,100- 6,100LO 2 Explain double-entry rules.
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Double-Entry System ExerciseAssetsLiabilitiesStockholders Equity=+6. Paid off liabilities of $7,000.- 7,000- 7,000LO 2 Explain double-entry rules.
Chapter 3-*
Double-Entry System ExerciseAssetsLiabilitiesStockholders Equity=+7. Declared a cash dividend of $10,000.+ 10,000- 10,000Note that the accounting equation equality is maintained after recording each transaction.LO 2 Explain double-entry rules.
Chapter 3-*
Ownership StructureOwnership structure dictates the types of accounts that are part of the equity section.Proprietorship or Partnership
Corporation
Capital AccountDrawing Account
Common StockAdditional Paid-in CapitalDividends DeclaredRetained EarningsLO 2 Explain double-entry rules.
Chapter 3-*
Corporation Ownership StructureLO 2 Explain double-entry rules.Stockholders EquityBalance SheetStatement of Retained EarningsNet income or Net loss (Revenues less expenses)Income StatementDividendsRetained Earnings (Net income retained in business)Common Stock (Investment by stockholders)Illustration 3-4
Chapter 3-*
The Accounting CycleLO 3 Identify steps in the accounting cycle.Transactions1. Journalization6. Financial Statements7. Closing entries8. Post-closing trail balance9. Reversing entries3. Trial balance2. Posting5. Adjusted trial balance4. AdjustmentsWork SheetIllustration 3-6
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Transactions and EventsWhat to Record?FASB states, transactions and other events and circumstances that affect a business enterprise.LO 3 Identify steps in the accounting cycle.Types of Events:External between a business and its environment. Internal event occurring entirely within a business.
Chapter 3-*
Review Transactions and EventsA supplier of a companys raw material is paid an amount owed on account.ExternalNot Recorded2.A customer pays its open account.External3.A new chief executive officer is hired.Not Recorded4.The biweekly payroll is paid.5.Raw materials are entered into production.InternalExternal6.A new advertising agency is hired.Not Recorded7.The accountant determines the federal income taxes owed based on the income earned.InternalLO 3 Identify steps in the accounting cycle.ExternalInternal
Chapter 3-*
1. JournalizingGeneral Journal a chronological record of transactions. Journal Entries are recorded in the journal. LO 4 Record transactions in journals, post to ledger accounts, and prepare a trial balance.General Journal
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Trial Balance
Acct. No.AccountDebitCredit
100Cash140,000
105Accounts receivable35,000
110Inventory30,000
130Building150,000
200Accounts payable60,000
220Note payable150,000
300Common stock100,000
330Retained earnings
400Sales75,000
500Cost of goods sold30,000
385,000385,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Sheet1
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
Chapter 3-*
2. PostingPosting the process of transferring amounts from the journal to the ledger accounts. General LedgerGeneral JournalJan. 3Sale of stockGJ1100,000100,000100GJ1LO 4 Record transactions in journals, post to ledger accounts, and prepare a trial balance.
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Trial Balance
Acct. No.AccountDebitCredit
100Cash140,000
105Accounts receivable35,000
110Inventory30,000
130Building150,000
200Accounts payable60,000
220Note payable150,000
300Common stock100,000
330Retained earnings
400Sales75,000
500Cost of goods sold30,000
385,000385,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Sheet1
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
Sheet1 (2)
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Trial Balance
Acct. No.AccountDebitCredit
100Cash140,000
105Accounts receivable35,000
110Inventory30,000
130Building150,000
200Accounts payable60,000
220Note payable150,000
300Common stock100,000
330Retained earnings
400Sales75,000
500Cost of goods sold30,000
385,000385,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Sheet1
DateAccount TitleRef.DebitCredit
Jan.3Cash100,000
Common stock100,000
10Building130150,000
Note payable220150,000
Sheet1 (2)
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
Chapter 3-*
3. Trial BalanceTrial Balance a list of each account and its balance; used to prove equality of debit and credit balances.LO 4 Record transactions in journals, post to ledger accounts, and prepare a trial balance.
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Acct. No.AccountDebitCredit
100Cash$140,000
105Accounts receivable35,000
110Inventory30,000
130Building150,000
200Accounts payable$60,000
220Note payable150,000
300Common stock100,000
330Retained earnings
400Sales75,000
500Cost of goods sold30,000
$385,000$385,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Journal slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
Posting slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
Chapter 3-*
4. Adjusting EntriesRevenues - recorded in the period in which they are earned.Expenses - recognized in the period in which they are incurred.Adjusting entries - needed to ensure that the revenue recognition and matching principles are followed.LO 5 Explain the reasons for preparing adjusting entries.
Chapter 3-*
Classes of Adjusting Entries1.Prepaid Expenses. Expenses paid in cash and recorded as assets before they are used or consumed.Prepayments3. Accrued Revenues. Revenues earned but not yet received in cash or recorded. 4. Accrued Expenses. Expenses incurred but not yet paid in cash or recorded.2. Unearned Revenues. Revenues received in cash and recorded as liabilities before they are earned.AccrualsLO 5 Explain the reasons for preparing adjusting entries.Illustration 3-20
Chapter 3-*
Adjusting Entries Prepaid ExpensesPayment of cash that is recorded as an asset because service or benefit will be received in the future.insurancesuppliesadvertisingCash PaymentExpense RecordedBEFORELO 5 Explain the reasons for preparing adjusting entries.rentmaintenance on equipmentfixed assetsPrepayments often occur in regard to:
Chapter 3-*
Adjusting Entries Prepaid ExpensesExample: On Jan. 1st, Phoenix Corp. paid $12,000 for 12 months of insurance coverage. Show the journal entry to record the payment on Jan. 1st. Cash12,000Prepaid insurance12,000Jan. 1LO 5 Explain the reasons for preparing adjusting entries.DebitCreditPrepaid Insurance12,00012,000DebitCreditCash
Chapter 3-*
Adjusting Entries Prepaid ExpensesExample: On Jan. 1st, Phoenix Corp. paid $12,000 for 12 months of insurance coverage. Show the adjusting journal entry required at Jan. 31st. Prepaid insurance1,000Insurance expense1,000Jan. 31LO 5 Explain the reasons for preparing adjusting entries.DebitCreditPrepaid Insurance12,0001,000DebitCreditInsurance expense1,00011,000
Chapter 3-*
Adjusting Entries Unearned RevenuesReceipt of cash that is recorded as a liability because the revenue has not been earned.rentairline ticketsschool tuitionCash ReceiptRevenue RecordedBEFORELO 5 Explain the reasons for preparing adjusting entries.magazine subscriptionscustomer depositsUnearned revenues often occur in regard to:
Chapter 3-*
Adjusting Entries Unearned RevenuesExample: On Nov. 1st, Phoenix Corp. received $24,000 from Arcadia High School for 3 months rent in advance. Show the journal entry to record the receipt on Nov. 1st. Unearned rent revenue24,000Cash24,000Nov. 1LO 5 Explain the reasons for preparing adjusting entries.DebitCreditCash24,00024,000DebitCreditUnearned Rent Revenue
Chapter 3-*
Adjusting Entries Unearned RevenuesExample: On Nov. 1st, Phoenix Corp. received $24,000 from Arcadia High School for 3 months rent in advance. Show the adjusting journal entry required on Nov. 30th. Rent revenue8,000Unearned rent revenue8,000Nov. 30LO 5 Explain the reasons for preparing adjusting entries.DebitCreditRent Revenue8,00024,000DebitCreditUnearned Rent Revenue8,00016,000
Chapter 3-*
Adjusting Entries Accrued RevenuesRevenues earned but not yet received in cash or recorded.rentinterestservices performedBEFORELO 5 Explain the reasons for preparing adjusting entries.Accrued revenues often occur in regard to:Cash ReceiptRevenue RecordedAdjusting entry results in:
Chapter 3-*
Adjusting Entries Accrued RevenuesExample: On July 1st, Phoenix Corp. invested $300,000 in securities that return 5% interest per year. Show the journal entry to record the investment on July 1st. Cash300,000Investments300,000July 1LO 5 Explain the reasons for preparing adjusting entries.DebitCreditInvestments300,000300,000DebitCreditCash
Chapter 3-*
Adjusting Entries Accrued RevenuesExample: On July 1st, Phoenix Corp. invested $300,000 in securities that return 5% interest per year. Show the adjusting journal entry required on July 31st. Interest revenue1,250Interest receivable1,250July 31LO 5 Explain the reasons for preparing adjusting entries.DebitCreditInterest Receivable1,2501,250DebitCreditInterest Revenue
Chapter 3-*
Adjusting Entries Accrued ExpensesExpenses incurred but not yet paid in cash or recorded.rentinteresttaxesBEFORELO 5 Explain the reasons for preparing adjusting entries.Accrued expenses often occur in regard to:Cash Payment, if any*Expense Recordedsalariesbad debts*Adjusting entry results in:
Chapter 3-*
Adjusting Entries Accrued ExpensesNotes payable200,000Cash200,000Feb. 2LO 5 Explain the reasons for preparing adjusting entries.DebitCreditCash200,000200,000DebitCreditNotes PayableExample: On Feb. 2nd, Phoenix Corp. borrowed $200,000 at a rate of 9% per year. Interest is due on first of each month. Show the journal entry to record the borrowing on Feb. 2nd.
Chapter 3-*
Adjusting Entries Accrued ExpensesExample: On Feb. 2nd, Phoenix Corp. borrowed $200,000 at a rate of 9% per year. Interest is due on first of each month. Show the adjusting journal entry required on Feb. 28th.Interest payable1,500Interest expense1,500Feb. 28LO 5 Explain the reasons for preparing adjusting entries.DebitCreditInterest Expense1,5001,500DebitCreditInterest Payable
Chapter 3-*
5. Adjusted Trial BalanceShows the balance of all accounts, after adjusting entries, at the end of the accounting period. LO 5 Explain the reasons for preparing adjusting entries.
Chapter 3-*
6. Preparing Financial StatementsLO 6 Prepare financial statement from the adjusted trial balance.Financial Statements are prepared directly from the Adjusted Trial Balance. Balance SheetIncome StatementStatement of Cash FlowsStatement of Retained Earnings
Chapter 3-*
6. Preparing Financial StatementsBalance SheetLO 6 Prepare financial statement from the adjusted trial balance.Assume the following Adjusted Trial Balance
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Adjusted Trial BalanceDebitCredit
Cash$140,000
Accounts receivable35,000
Building190,000
Note payable$150,000
Common stock100,000
Retained earnings38,000
Dividends declared10,000
Sales185,000
Interest income17,000
Cost of goods sold47,000
Salary expense25,000
Depreciation expense43,000
$490,000$490,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Journal slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
Posting slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Balance Sheet
Assets
Cash$140,000
Accounts receivable35,000
Building190,000
Total assets$365,000
Liabilities
Note payable150,000
Stockholders' equity
Common stock100,000
Retained earnings115,000
Total liab. & equity$365,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Journal slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
Posting slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
Chapter 3-*
6. Preparing Financial StatementsLO 6 Prepare financial statement from the adjusted trial balance.Income StatementAssume the following Adjusted Trial Balance
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Adjusted Trial BalanceDebitCredit
Cash$140,000
Accounts receivable35,000
Building190,000
Note payable$150,000
Common stock100,000
Retained earnings38,000
Dividends declared10,000
Sales185,000
Interest income17,000
Cost of goods sold47,000
Salary expense25,000
Depreciation expense43,000
$490,000$490,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Journal slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
Posting slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Income Statement
Revenues:
Sales$185,000
Interest income17,000
Total revenue202,000
Expenses:
Cost of goods sold47,000
Salary expense25,000
Depreciation expense43,000
Total expenses115,000
Net income$87,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Journal slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
Posting slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
Chapter 3-*
6. Preparing Financial StatementsLO 6 Prepare financial statement from the adjusted trial balance.Statement of Retained EarningsAssume the following Adjusted Trial Balance
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Adjusted Trial BalanceDebitCredit
Cash$140,000
Accounts receivable35,000
Building190,000
Note payable$150,000
Common stock100,000
Retained earnings38,000
Dividends declared10,000
Sales185,000
Interest income17,000
Cost of goods sold47,000
Salary expense25,000
Depreciation expense43,000
$490,000$490,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Journal slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
Posting slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Statement of Retained Earnings
Beginning balance$38,000
+ Net income87,000
- Dividends(10,000)
Ending balance115,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Journal slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
Posting slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
Chapter 3-*
7. Closing EntriesLO 7 Prepare closing entries.To reduce the balance of the income statement (revenue and expense) accounts to zero. To transfer net income or net loss to owners equity.Balance sheet (asset, liability, and equity) accounts are not closed.Dividends are closed directly to the Retained Earnings account.
Chapter 3-*
7. Closing EntriesLO 7 Prepare closing entries.Example: Assume the following Adjusted Trial Balance
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Acct. No.AccountDebitCredit
100Cash$140,000
105Accounts receivable35,000
130Building190,000
220Note payable$150,000
300Common stock100,000
330Retained earnings38,000
380Dividends declared10,000
400Sales185,000
430Interest income17,000
500Cost of goods sold47,000
520Salary expense25,000
550Depreciation expense43,000
$490,000$490,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Journal slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
Posting slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
Chapter 3-*
7. Closing EntriesExample: Prepare the Closing journal entry from the adjusted trial balance on the previous slide.LO 7 Prepare closing entries.Sales185,000Income summary202,000Interest income17,000Income summary115,000Cost of goods sold47,000Salary expense25,000Depreciation expense43,000Income summary87,000Retained earnings87,000Retained earnings10,000Dividends declared10,000
Chapter 3-*
8. Post-Closing Trial BalanceLO 7 Prepare closing entries.Example continued:
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Acct. No.AccountDebitCredit
100Cash$140,000
105Accounts receivable35,000
130Building190,000
220Note payable$150,000
300Common stock100,000
330Retained earnings115,000
380Dividends declared0.0
400Sales0.0
430Interest income0.0
500Cost of goods sold0.0
520Salary expense0.0
550Depreciation expense0.0
$365,000$365,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Journal slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
Posting slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
Chapter 3-*
9. Reversing EntriesLO 7 Prepare closing entries.Reversing entries is an optional step that a company may perform at the beginning of the next accounting period.
Chapter 3-*
Perpetual Inventory SystemLO 8 Explain how to adjust inventory accounts at year-end.Inventory account increased with each purchase.Inventory account reduced and Cost of Goods Sold account increased with each sale.Balance in Inventory account should equal inventory amount on hand.No Adjusting Entries should be needed.Physical inventory performed to confirm balance in Inventory account.
Chapter 3-*
Periodic Inventory SystemLO 8 Explain how to adjust inventory accounts at year-end.Inventory account remains unchanged during period.Purchases account increased with each purchase.At end of accounting period:Purchases account closed.Inventory account adjusted to physical count.
Chapter 3-*
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1. On the topic, Challenges Facing Financial Accounting, what did the AICPA Special Committee on Financial Reporting suggest should be included in future financial statements?Non-financial Measurements (customer satisfaction indexes, backlog information, and reject rates on goods purchases).Forward-looking Information Soft Assets (a companys know-how, market dominance, marketing setup, well-trained employees, and brand image).Timeliness (no real time financial information)
Service Cost - Actuaries compute service cost as the present value of the new benefits earned by employees during the year. Future salary levels considered in calculation.Interest on Liability - Interest accrues each year on the PBO just as it does on any discounted debt.Actual Return on Plan Assets - Increase in pension funds from interest, dividends, and realized and unrealized changes in the fair market value of the plan assets.Amortization of Unrecognized Prior Service Cost - The cost of providing retroactive benefits is allocated to pension expense in the future, specifically to the remaining service-years of the affected employees.Gain or Loss - Volatility in pension expense can be caused by sudden and large changes in the market value of plan assets and by changes in the projected benefit obligation. Two items comprise the gain or loss: difference between the actual return and the expected return on plan assets and, amortization of the unrecognized net gain or loss from previous periods