Section 2

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Excerises on Chapter 2: Recording process

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Section 2

  1. 1. No Cellphone
  2. 2. Principles Of Accounting (1) Chapter 2 The Recording Process Mohamed Mahmoud [email_address] Tel: (+202) 33318449
  3. 3. Study Objectives Basic Accounting Equation Financial Statment Debit and Credit Journalizing Posting
  4. 4. Assets Liabilities Owner’s Equity = + Resources a business owns. Provide future services or benefits. Cash, Supplies, Equipment, Account Receivable , Notes Receivable, Trucks . Assets 1. The Basic Accounting Equation
  5. 5. Assets Liabilities Owner’s Equity = + 1. The Basic Accounting Equation Claims against assets (debts and obligations). Creditors - party to whom money is owed. Accounts payable, Notes payable, etc. Liabilities
  6. 6. Assets Liabilities Owner’s Equity = + 1. The Basic Accounting Equation Ownership claim on total assets. Capital, Drawings, etc. (Proprietorship or Partnership). Owner’s Equity
  7. 7. Assets Liabilities Owner’s Equity = + 1. The Basic Accounting Equation Ownership claim on total assets. Capital, Drawings, etc. (Proprietorship or Partnership). Owner’s Equity
  8. 8. Income Statement Owner’s Equity Statement Net income is needed to determine the ending balance in owner’s equity. 2. Financial Statements
  9. 9. Owners’ Equity Statement The ending balance in owner’s equity is needed in preparing the balance sheet Balance Sheet 2. Financial Statements
  10. 10. Prepare an income statement , an owner's equity statement , and a balance sheet for the dental practice of Alzorkany, from the items listed below for the month of September. Alzorkany, Capital, September 1 $42,000 Accounts payable 7,000 Equipment 30,000 Service revenue 25,000 Alzorkany, Drawings 6,000 Dental supplies expense 3,500 Cash 6,000 Utilities expense 700 Dental supplies 2,800 Salaries expense 9,000 Accounts receivable 14,000 Rent expense 2,000   DDS = Doctor Of Dental Surgery Exercise 1
  11. 11. Alzorkany, DDS Income Statement For the Month Ended September 30, 2008 —————————————————————————————————————————— ------------------------------- Revenues Service revenue.................................................................................................$25,000 Expenses Salaries expense................................................................................................. $9,000 Dental supplies expense....................................................................................... 3,500 Rent expense........................................................................................................ 2,000 Utilities expense.................................................................................................... 700 Total expense....................................................................................................... 15,200 Net income ........................................................................................................ $ 9,800
  12. 12. Alzorkany, DDS Owner's Equity Statement For the Month Ended September 30, 2008 ———————————————————————————————————— Alzorkany, Capital, September 1.................................................................... $ 42,000 Add: Net income............................................................................................... 9,800 51,800 Less: Drawings................................................................................................. 6,000 Alzorkany, Capital, September 30.................................................................. $ 45,800
  13. 13. Assets Cash............................................................................................................................. $ 6,000 Accounts receivable..................................................................................................... 14,000 Dental supplies ............................................................................................................ 2,800 Equipment.................................................................................................................... 30,000 Total assets.................................................................................................................. $ 52,800 Liabilities and Owner's Equity Liabilities Accounts payable....................................................................................................... $ 7,000 Owner's Equity Alzorkany, Capital ......................................................................................................... 45,800 Total liabilities and owner's equity.............................................................................. $52,800 Alzorkany, DDS Balance Sheet September 30, 2008 ———————————————————————————————
  14. 14. 3. Debit and Credit Generally these types of accounts are increased with a Debit :       D rawings       E xpenses       A ssets       L osses You might think of D – E – A – L when recalling the accounts that are increased with a debit. Generally these types of accounts are increased with a Credit :       G ains       I ncome       R evenues       L iabilities       S tockholders' (Owner's) Equity You might think of G – I – R – L – S when recalling the accounts that are increased with a credit.
  15. 15. General Journal 4. Journalizing
  16. 16. Transactions for Salem Company for the month of October are presented below. 1 . Oct 1. Invested an additional $40,000 cash in the business. 2 . Oct 3 . Purchased land costing $28,000 for cash. 3 . Oct 9 . Purchased equipment costing $12,000 for $3,000 cash and the remainder on credit. 4 . Oct 13. Purchased supplies on account for $800. 5 . Oct 17 . Paid $1,000 for a one-year insurance policy. 6 . Oct 22. Received $3,000 cash for services performed. 7 . Oct 25. Received $4,000 for services previously performed on account. 8 . Oct 28. Paid wages to employees for $2,500. 9 . Oct 31. Salem withdrew $1,000 cash from the business. Instructions Journalize each transaction. Exercise 2
  17. 17. Oct.1 Cash ......................................................................................... 40,000 E. Petry, Capital...................................................................... 40,000 Oct.3 Land ......................................................................................... 28,000 Cash ....................................................................................... 28,000 Oct.9 Equipment ................................................................................ 12,000 Cash ....................................................................................... 3,000 Accounts Payable................................................................... 9,000 1 . Oct 1. Invested an additional $40,000 cash in the business. 2 . Oct 3. Purchased land costing $28,000 for cash. 3 . Oct 9. Purchased equipment costing $12,000 for $3,000 cash and the remainder on credit.
  18. 18. Oct.13 Supplies .......................................................................................... 800 Accounts Payable .................................................................. 800 Oct.17 Prepaid Insurance ......................................................................... 1,000 Cash .................................................................................. 1,000 Oct.22 Cash .............................................................................................. 3,000 Service Revenue ................................................................ 3,000 4 . Oct 13. Purchased supplies on account for $800. 5 . Oct 17. Paid $1,000 for a one-year insurance policy. 6 . Oct 22. Received $3,000 cash for services performed.
  19. 19. Oct.25 Cash............................................................................................. 4,000 Accounts Receivable........................................................... 4,000 Oct.28 Wages Expense........................................................................... 2,500 Cash................................................................................... 2,500 Oct.31 E. Petry, Drawing ....................................................................... 1,000 Cash................................................................................... 1,000 7 . Oct 25. Received $4,000 for services previously performed on account. 8 . Oct 28. Paid wages to employees for $2,500. 9 . Oct 31. Salem withdrew $1,000 cash from the business.
  20. 20. 1. Cash ................................................................................................ 40,000 E. Petry, Capital...................................................................... 40,000 2. Land ................................................................................................ 28,000 Cash ....................................................................................... 28,000 3. Equipment ....................................................................................... 12,000 Cash ....................................................................................... 3,000 Accounts Payable................................................................... 9,000 4. Supplies .......................................................................................... 800 Accounts Payable .................................................................. 800 5. Prepaid Insurance ........................................................................... 1,000 Cash ....................................................................................... 1,000 6. Cash ................................................................................................ 3,000 Service Revenue .................................................................... 3,000 7. Cash................................................................................................. 4,000 Accounts Receivable............................................................... 4,000 8. Wages Expense............................................................................... 2,500 Cash........................................................................................ 2,500 9. E. Petry, Drawing ............................................................................. 1,000 Cash........................................................................................ 1,000
  21. 21. 5. Posting

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