9. H. BALANCE SHEET CHANGES (cont) 7. On January 31, ABC Company collects the account receivable in cash. ABC Company Balance Sheet January 31, Year 1 Assets Liabilities and Equity Cash $14,500 Inventory 2,000 Total $16,500 Note payable $ 5,000 Paid-in capital 10,000 Retained earnings 1,500 Total $16,500
10. I. ACCOUNTING CONVENTIONS 1. Preparing a new balance sheet after each transaction is cumbersome. 2. Instead, changes in balance sheet amounts are reflected in “accounts”. 3. Any balance sheet account can be increased and decreased. 4. Accountants often use “T accounts” to summarize the effects of transactions. 5. The Cash T account for ABC Company is shown below. + Cash - Balance, Jan 1 0 1. Jan 2 10,000 2. Jan 3 5,000 4. Jan 9 2,500 8,000 5. Jan 10 7. Jan 31 5,000 22,500 8,000 Balance, Jan 31 14,500
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13. PRACTICE EXERCISE (cont) Cash Inventory Note Payable Paid-in Capital Retained Earnings Accounts Receivable Accounts Payable End of Part Two