Uploaded byrinaasmaraasmara
PPT, PDF31 views

Ch02_WRD25e_Instructor.pptCh02_WRD25e_Instructor.ppt

The document outlines accounting principles focused on analyzing transactions, detailing characteristics of accounts, chart of accounts, and illustrating journalization and posting of transactions using the double-entry accounting system. It explains the definitions of assets, liabilities, owner’s equity, revenues, and expenses, and includes examples of various transactions and their impact on the accounting equation. Additionally, it covers the process of preparing an unadjusted trial balance and the significance of horizontal analysis in evaluating company performance.

Embed presentation

Download to read offline
1 / 104
2 / 104
3 / 104
4 / 104
5 / 104
6 / 104
7 / 104
8 / 104
9 / 104
10 / 104
11 / 104
12 / 104
13 / 104
14 / 104
15 / 104
16 / 104
17 / 104
18 / 104
19 / 104
20 / 104
21 / 104
22 / 104
23 / 104
24 / 104
25 / 104
26 / 104
27 / 104
28 / 104
29 / 104
30 / 104
31 / 104
32 / 104
33 / 104
34 / 104
35 / 104
36 / 104
37 / 104
38 / 104
39 / 104
40 / 104
41 / 104
42 / 104
43 / 104
44 / 104
45 / 104
46 / 104
47 / 104
48 / 104
49 / 104
50 / 104
51 / 104
52 / 104
53 / 104
54 / 104
55 / 104
56 / 104
57 / 104
58 / 104
59 / 104
60 / 104
61 / 104
62 / 104
63 / 104
64 / 104
65 / 104
66 / 104
67 / 104
68 / 104
69 / 104
70 / 104
71 / 104
72 / 104
73 / 104
74 / 104
75 / 104
76 / 104
77 / 104
78 / 104
79 / 104
80 / 104
81 / 104
82 / 104
83 / 104
84 / 104
85 / 104
86 / 104
87 / 104
88 / 104
89 / 104
90 / 104
91 / 104
92 / 104
93 / 104
94 / 104
95 / 104
96 / 104
97 / 104
98 / 104
99 / 104
100 / 104
101 / 104
102 / 104
103 / 104
104 / 104
c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Analyzing Analyzing Transactions Transactions Chapter 2 Chapter 2
Learning Objectives Learning Objectives 1. 1. Describe the characteristics of an account and a Describe the characteristics of an account and a chart of accounts. chart of accounts. 2. 2. Describe and illustrate journalizing transactions Describe and illustrate journalizing transactions using the double-entry accounting system. using the double-entry accounting system. 3. 3. Describe and illustrate the journalizing and Describe and illustrate the journalizing and posting of transactions to accounts. posting of transactions to accounts. 4. 4. Prepare an unadjusted trial balance and explain Prepare an unadjusted trial balance and explain how it can be used to discover errors. how it can be used to discover errors. 5. 5. Describe and illustrate the use of horizontal Describe and illustrate the use of horizontal analysis in evaluating a company’s performance analysis in evaluating a company’s performance and financial condition. and financial condition.
c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Learning Objective Describe the characteristics of an Describe the characteristics of an account and a chart of account and a chart of accounts accounts 1 1
Using Accounts to Record Transactions Using Accounts to Record Transactions o Accounting systems are designed to show the Accounting systems are designed to show the increases and decreases in each accounting increases and decreases in each accounting equation element as a separate record.This equation element as a separate record.This record is called an record is called an account account. .
USING ACCOUNTS USING ACCOUNTS TO RECORD TO RECORD TRANSACTIONS TRANSACTIONS
THE T ACCOUNT THE T ACCOUNT The T account has a title Title
THE T ACCOUNT THE T ACCOUNT The left side of the account is called the debit debit side. Title
Title Debit The right side of the account is called the credit credit side. Credit THE T ACCOUNT THE T ACCOUNT
THE T ACCOUNT THE T ACCOUNT Cash (a) 25,000 (b) 20,000 (d) 7,500 (e) 3,650 (f) 950 (h) 2,000 Balance 5,900 Debit Side of Account Credit Side of Account Balance of the account
Chart of Accounts Chart of Accounts o A group of accounts for a business entity is A group of accounts for a business entity is called a called a ledger ledger. . o A list of the accounts in the ledger is called a A list of the accounts in the ledger is called a chart of accounts chart of accounts. .
Chart of Accounts Chart of Accounts o Assets Assets are resources owned by the business. are resources owned by the business. Some examples of assets follow: Some examples of assets follow:  Cash Cash  Supplies Supplies  Accounts receivable Accounts receivable  Buildings Buildings
Chart of Accounts Chart of Accounts o Liabilities Liabilities are debts owed to outsiders are debts owed to outsiders (creditors). Some examples of liabilities follow: (creditors). Some examples of liabilities follow:  Accounts payable Accounts payable  Notes payable Notes payable  Wages payable Wages payable  Interest payable Interest payable
Chart of Accounts Chart of Accounts o Owner’s equity Owner’s equity is the owner’s right to the is the owner’s right to the assets of the business after all liabilities have assets of the business after all liabilities have been paid. For a proprietorship, the owner’s been paid. For a proprietorship, the owner’s equity is represented by the balance of the equity is represented by the balance of the owner’s owner’s capital account capital account. . o A A drawing drawing account represents the amount of account represents the amount of withdrawals made by the owner. withdrawals made by the owner.
Chart of Accounts Chart of Accounts o Revenues Revenues are increases in owner’s equity as a are increases in owner’s equity as a result of selling services or products to result of selling services or products to customers. Some examples of revenue customers. Some examples of revenue accounts follow: accounts follow:  Fees earned Fees earned  Commission revenue Commission revenue  Rent revenue Rent revenue
Chart of Accounts Chart of Accounts o The using up of assets or consuming services The using up of assets or consuming services in the process of generating revenues results in in the process of generating revenues results in expenses expenses. Some examples of expenses follow: . Some examples of expenses follow:  Wages expense Wages expense  Rent expense Rent expense  Miscellaneous expense Miscellaneous expense
CHART OF CHART OF ACCOUNTS ACCOUNTS
c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Learning Objective Describe and illustrate journalizing Describe and illustrate journalizing transactions using the double-entry transactions using the double-entry accounting system accounting system 2 2
Double-Entry Accounting System Double-Entry Accounting System o All businesses use what is called the All businesses use what is called the double- double- entry accounting system entry accounting system.This system is based .This system is based on the accounting equation and requires: on the accounting equation and requires:  Every business transaction to be recorded in at least Every business transaction to be recorded in at least two accounts. two accounts.  The total debits recorded for each transaction to be The total debits recorded for each transaction to be equal to the total credits recorded. equal to the total credits recorded.
Balance Sheet Accounts Balance Sheet Accounts o The debit and credit rules for balance sheet The debit and credit rules for balance sheet accounts are as follows: accounts are as follows:
Income Statement Accounts Income Statement Accounts o The debit and credit rules for income The debit and credit rules for income statement accounts are based on their statement accounts are based on their relationship with owner’s equity. relationship with owner’s equity.
Owner Withdrawals Owner Withdrawals • The debit and credit rules for The debit and credit rules for recording owner withdrawals are recording owner withdrawals are based on the effect of owner based on the effect of owner withdrawals on owner’s equity. withdrawals on owner’s equity.
Normal Balances Normal Balances o The sum of the increases in an account is The sum of the increases in an account is usually equal to or greater than the sum of usually equal to or greater than the sum of the decreases in the account. Thus, the the decreases in the account. Thus, the normal balance of normal balance of an account an account is either a is either a debit or a credit depending on whether debit or a credit depending on whether increases in the account are recorded as increases in the account are recorded as debits or credits. debits or credits.
Rules of Debit and Credit – Normal Balances of Accounts Rules of Debit and Credit – Normal Balances of Accounts
Normal Balances Normal Balances Increases (Normal Bal.) Decreases Balance sheet accounts: AssetDebit Credit Liability Credit Debit Owner’s Equity: Capital Credit Debit Drawing Debit Credit Income statement accounts: Revenue Credit Debit Expense Debit Credit
Transaction A Transaction A o On November 1, Chris Clark opens a new On November 1, Chris Clark opens a new business and deposits $25,000 in a bank account in business and deposits $25,000 in a bank account in the name of NetSolutions. the name of NetSolutions.
TRANSACTION A TRANSACTION A Step 1 Step 4 Step 5 Step 3 Assets = Liabilities + Owner’s Equity (investment) Assets = Liabilities + Owner’s Equity (investment) Accounting Equation Impact Accounting Equation Impact increase increase increase increase Step 2 Step 3
(continued) Journalizing Journalizing Journalizing requires the following steps: Journalizing requires the following steps: oStep 1. Step 1. The date of the transaction is entered The date of the transaction is entered in the Date column. in the Date column. oStep 2. Step 2. The title of the account to be debited The title of the account to be debited is recorded at the left-hand margin under the is recorded at the left-hand margin under the Description column, and the amount to be Description column, and the amount to be debited is entered in the Debit column. debited is entered in the Debit column.
(continued) Journalizing Journalizing o Step 3. Step 3. The title of the account to be The title of the account to be credited is listed below and to the right of the credited is listed below and to the right of the debited account title, and the amount to be debited account title, and the amount to be credited is entered in the Credit column. credited is entered in the Credit column. o Step 4. Step 4. A brief description may be entered A brief description may be entered below the credited account. below the credited account.
Journalizing Journalizing o Step 5. Step 5. The Post. Ref. (Posting Reference) The Post. Ref. (Posting Reference) column is left blank when the journal entry is column is left blank when the journal entry is initially recorded.This column is used later initially recorded.This column is used later when the journal entry amounts are transferred when the journal entry amounts are transferred to the accounts in the ledger. to the accounts in the ledger.
Journalizing Journalizing o A transaction is initially entered in a record A transaction is initially entered in a record called a called a journal journal. .
Journalizing Journalizing o A transaction is initially entered in a record A transaction is initially entered in a record called a journal. called a journal. o The process of recording a transaction in the The process of recording a transaction in the journal is called journal is called journalizing journalizing. .
Journalizing Journalizing o A transaction is initially entered in a record A transaction is initially entered in a record called a journal. called a journal. o The process of recording a transaction in the The process of recording a transaction in the journal is called journalizing. journal is called journalizing. o The entry in the journal is called a The entry in the journal is called a journal journal entry entry. .
Transaction B Transaction B o On November 5, NetSolutions paid $20,000 for On November 5, NetSolutions paid $20,000 for the purchase of land as a future building site. the purchase of land as a future building site.
TRANSACTION B TRANSACTION B Accounting Equation Impact Assets = Liabilities + Owner’s Equity increase increase decrease decrease
Transaction C Transaction C o On November 10, NetSolutions purchased On November 10, NetSolutions purchased supplies on account for $1,350. supplies on account for $1,350.
TRANSACTION C TRANSACTION C Accounting Equation Impact Assets = Liabilities + Owner’s Equity increase increase increase increase
Transaction D Transaction D o On November 18, NetSolutions received cash On November 18, NetSolutions received cash of $7,500 from customers for services of $7,500 from customers for services provided. provided.
Accounting Equation Impact Assets = Liabilities + Owner’s Equity (Revenue) increase increase increase increase in revenues in revenues TRANSACTION D TRANSACTION D
Transaction E Transaction E o On November 30, NetSolutions incurred the On November 30, NetSolutions incurred the following expenses: wages, $2,125; rent, $800; following expenses: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275. utilities, $450; and miscellaneous, $275.
Accounting Equation Impact Assets = Liabilities + Owner’s Equity (Expense) decrease decrease All four All four expense expense accounts accounts increase increase TRANSACTION E TRANSACTION E
Transaction F Transaction F o On November 30, NetSolutions paid creditors On November 30, NetSolutions paid creditors on account, $950. on account, $950.
Accounting Equation Impact Assets = Liabilities + Owner’s Equity decrease decrease decrease decrease TRANSACTION F TRANSACTION F
Transaction G Transaction G o NetSolutions purchased $1,350 of supplies on NetSolutions purchased $1,350 of supplies on November 10. Chris Clark determined that the November 10. Chris Clark determined that the cost of supplies on hand on November 30 was cost of supplies on hand on November 30 was $550. $550.
Accounting Equation Impact Assets = Liabilities + Owner’s Equity (Expense) decrease decrease increase increase in expense in expense TRANSACTION G TRANSACTION G Supplies used = $1,350 - $550 = $800
Transaction H Transaction H o On November 30, Chris Clark withdrew $2,000 On November 30, Chris Clark withdrew $2,000 from NetSolutions for personal use. from NetSolutions for personal use.
Accounting Equation Impact Assets = Liabilities + Owner’s Equity (Drawing) decrease decrease increase increase in drawing in drawing TRANSACTION H TRANSACTION H
c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Learning Objective Describe and illustrate the Describe and illustrate the journalizing and posting of journalizing and posting of transactions to accounts. transactions to accounts. 3 3
Posting Journal Entries to Accounts Posting Journal Entries to Accounts o The process of transferring the debits and The process of transferring the debits and credits from the journal entries to the accounts credits from the journal entries to the accounts is called is called posting posting. .
Posting Journal Entries to Accounts Posting Journal Entries to Accounts o On December 1, NetSolutions paid a premium On December 1, NetSolutions paid a premium of $2,400 for an insurance policy for liability, of $2,400 for an insurance policy for liability, theft, and fire.The policy covers a one-year theft, and fire.The policy covers a one-year period. period.
POSTING POSTING JOURNAL JOURNAL ENTRIES TO ENTRIES TO ACCOUNTS ACCOUNTS Accounting Equation Impact Assets = Liabilities + Owner’s Equity increase increase decrease decrease
Exhibit 4 - Steps in Posting Exhibit 4 - Steps in Posting o Step 1. Step 1. The date of the transaction is The date of the transaction is entered in the Date column of Prepaid entered in the Date column of Prepaid Insurance. Insurance.
2,400 2,400 Exhibit 4 - Steps in Posting Exhibit 4 - Steps in Posting o Step 2. Step 2. The amount (2,400) is entered in The amount (2,400) is entered in the Debit column of Prepaid Insurance. the Debit column of Prepaid Insurance.
Exhibit 4 - Steps in Posting Exhibit 4 - Steps in Posting o Step 3. Step 3. The journal page number (2) is The journal page number (2) is entered in the account’s Post. Ref. column. entered in the account’s Post. Ref. column. 2
Exhibit 4 - Steps in Posting Exhibit 4 - Steps in Posting o Step 4. Step 4. The account number (15) is entered The account number (15) is entered in the journal’s Post. Ref. column. in the journal’s Post. Ref. column.
Recording and Posting of a Debit and a Credit Recording and Posting of a Debit and a Credit These steps These steps are are repeated to repeated to post to the post to the Cash Cash account. account.
December Transactions December Transactions o On December 1, NetSolutions paid rent for On December 1, NetSolutions paid rent for December, $800. The company from which December, $800. The company from which NetSolutions is renting its store space now NetSolutions is renting its store space now requires the payment of rent on the first of requires the payment of rent on the first of each month, rather than at the end of the each month, rather than at the end of the month. month.
DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS Accounting Equation Impact Assets = Liabilities + Owner’s Equity (Expense) decrease increase in expense
December Transactions December Transactions o On December 1, NetSolutions received an offer On December 1, NetSolutions received an offer from a local retailer to rent the land purchased on from a local retailer to rent the land purchased on November 5.The retailer plans to use the land as a November 5.The retailer plans to use the land as a parking lot for its employees and customers. parking lot for its employees and customers. NetSolutions agreed to rent the land to the retailer NetSolutions agreed to rent the land to the retailer for three months, with the rent payable in advance. for three months, with the rent payable in advance. NetSolutions received $360 for three months’ rent NetSolutions received $360 for three months’ rent beginning December 1. beginning December 1. o The liability created by receiving the cash in The liability created by receiving the cash in advance of providing the service is called advance of providing the service is called unearned revenue unearned revenue. .
DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS Accounting Equation Impact Assets = Liabilities + Owner’s Equity increase increase
December Transactions December Transactions o On December 4, NetSolutions purchased office On December 4, NetSolutions purchased office equipment on account from Executive Supply equipment on account from Executive Supply Co. for $1,800. Co. for $1,800.
Accounting Equation Impact Assets = Liabilities + Owner’s Equity increase increase DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS
December Transactions December Transactions o On December 6, NetSolutions paid $180 for a On December 6, NetSolutions paid $180 for a newspaper advertisement. newspaper advertisement.
Accounting Equation Impact Assets = Liabilities + Owner’s Equity (Expense) decrease increase in expense DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS
December Transactions December Transactions o On December 11, NetSolutions paid creditors On December 11, NetSolutions paid creditors $400. $400.
DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS Accounting Equation Impact Assets = Liabilities + Owner’s Equity decrease decrease
December Transactions December Transactions o On December 13, NetSolutions paid a On December 13, NetSolutions paid a receptionist and a part-time assistant $950 for receptionist and a part-time assistant $950 for two weeks’ wages. two weeks’ wages.
DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS Accounting Equation Impact Assets = Liabilities + Owner’s Equity (Expense) decrease increase in expense
December Transactions December Transactions o On December 16, NetSolutions received $3,100 On December 16, NetSolutions received $3,100 from fees earned for the first half of December. from fees earned for the first half of December.
DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS Accounting Equation Impact Assets = Liabilities + Owner’s Equity (Revenue) increase increase in revenues
December Transactions December Transactions o Fees earned on account totaled $1,750 for the Fees earned on account totaled $1,750 for the first half of December. first half of December.
DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS Accounting Equation Impact Assets = Liabilities + Owner’s Equity (Revenue) increase increase in revenues
December Transactions December Transactions o On December 20, NetSolutions paid $900 to On December 20, NetSolutions paid $900 to Executive Supply Co. on the $1,800 debt owed Executive Supply Co. on the $1,800 debt owed from the December 4 transaction. from the December 4 transaction.
DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS Accounting Equation Impact Assets = Liabilities + Owner’s Equity decrease decrease
December Transactions December Transactions o On December 21, NetSolutions received $650 On December 21, NetSolutions received $650 from customers in payment of their accounts. from customers in payment of their accounts.
DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS Accounting Equation Impact Assets = Liabilities + Owner’s Equity increase decrease
December Transactions December Transactions o On December 23, NetSolutions paid $1,450 for On December 23, NetSolutions paid $1,450 for supplies. supplies.
Accounting Equation Impact Assets = Liabilities + Owner’s Equity increase decrease DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS
December Transactions December Transactions o On December 27, NetSolutions paid the On December 27, NetSolutions paid the receptionist and the part-time assistant $1,200 receptionist and the part-time assistant $1,200 for two weeks’ wages. for two weeks’ wages.
Accounting Equation Impact Assets = Liabilities + Owner’s Equity (Expense) increase in expense decrease DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS
December Transactions December Transactions o On December 31, NetSolutions paid its $310 On December 31, NetSolutions paid its $310 telephone bill for the month. telephone bill for the month.
DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS Accounting Equation Impact Assets = Liabilities + Owner’s Equity (Expense) increase in expense decrease
December Transactions December Transactions o On December 31, NetSolutions paid its $225 On December 31, NetSolutions paid its $225 electric bill for the month. electric bill for the month.
Accounting Equation Impact Assets = Liabilities + Owner’s Equity (Expense) increase in expense decrease DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS
December Transactions December Transactions o On December 31, NetSolutions received $2,870 On December 31, NetSolutions received $2,870 from fees earned for the second half of from fees earned for the second half of December. December.
Accounting Equation Impact Assets = Liabilities + Owner’s Equity (Revenue) increase increase in revenues DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS
December Transactions December Transactions o On December 31, fees earned on account On December 31, fees earned on account totaled $1,120 for the second half of totaled $1,120 for the second half of December. December.
DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS Accounting Equation Impact Assets = Liabilities + Owner’s Equity (Revenue) increase increase in revenues
December Transactions December Transactions o On December 31, Chris Clark withdrew $2,000 On December 31, Chris Clark withdrew $2,000 for personal use. for personal use.
Accounting Equation Impact Assets = Liabilities + Owner’s Equity (Drawing) increase in drawing decrease DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS
c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Learning Objective Prepare an unadjusted trial balance Prepare an unadjusted trial balance and explain how it can be used to and explain how it can be used to discover errors discover errors 4 4
Trial Balance Trial Balance o The equality of debits and credits in the ledger The equality of debits and credits in the ledger should be proven at the end of each should be proven at the end of each accounting period by preparing a accounting period by preparing a trial trial balance balance. .
UNADJUSTED UNADJUSTED TRIAL BALANCE TRIAL BALANCE
Trial Balance Errors - Transposition Trial Balance Errors - Transposition o A A transposition transposition occurs when the order of the occurs when the order of the digits is changed by mistake, such as writing digits is changed by mistake, such as writing $542 as $452 or $524. $542 as $452 or $524.
Trial Balance Errors - Slide Trial Balance Errors - Slide o In a In a slide slide, the entire number is moved one or , the entire number is moved one or more spaces to the right or the left by mistake, more spaces to the right or the left by mistake, such as writing $542.00 as $54.20 or $97.50 as such as writing $542.00 as $54.20 or $97.50 as $975.00. $975.00.
Errors Not Affecting the Trial Balance Errors Not Affecting the Trial Balance o If an error has already been journalized and If an error has already been journalized and posted to the ledger, a posted to the ledger, a correcting journal correcting journal entry entry is normally prepared. is normally prepared.
Errors Not Affecting the Trial Balance Errors Not Affecting the Trial Balance o Another type of error is a posting error. Another type of error is a posting error. o Assume that on May 5 a $12,500 purchase of Assume that on May 5 a $12,500 purchase of office equipment on account was incorrectly office equipment on account was incorrectly journalized and posted as a debit to Supplies journalized and posted as a debit to Supplies and a credit to Accounts Payable for $12,500. and a credit to Accounts Payable for $12,500. o The entry to correct the error is: The entry to correct the error is:
c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Learning Objective Describe and illustrate the use of Describe and illustrate the use of horizontal analysis in evaluating a horizontal analysis in evaluating a company’s performance and company’s performance and financial condition. financial condition. 5 5
Horizontal Analysis Horizontal Analysis o In In horizontal analysis horizontal analysis, the amount of each item , the amount of each item on a current financial statement is compared on a current financial statement is compared with the same item on an earlier statement. with the same item on an earlier statement.
Horizontal Analysis Horizontal Analysis o In horizontal analysis, the amount of each item In horizontal analysis, the amount of each item on a current financial statement is compared on a current financial statement is compared with the same item on an earlier statement. with the same item on an earlier statement. o When two statements are being compared, the When two statements are being compared, the earlier statement is used as the base for earlier statement is used as the base for computing the amount and the percent of computing the amount and the percent of change. change.
HORIZONTAL HORIZONTAL ANALYSIS ANALYSIS
c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Analyzing Analyzing Transactions Transactions The End The End

More Related Content

PDF
2. Chapter 2 Principle of accounting 1.pdf
bychiduongg2010
 
PDF
| Accounting Cycle | Double Entry Accounting | Basic Accounting Equation | 8 ...
byAhmad Hassan
 
PPT
Chapter 2 Financial Accounting
byfsuttonnnu
 
PPTX
chapter 2 principle.pptx
byissackmohamed3
 
PPTX
Lecture Week 3.pptxengineering lecture for arab acadimy
bysolimansalman1
 
PPTX
Unit 3 Debits and Credits
byJenny Hubbard
 
PPT
Ch02 wrd12e instructor_final
byfsuttonnnu
 
PPT
chap02.ppt
byRaselAzam2
 
2. Chapter 2 Principle of accounting 1.pdf
bychiduongg2010
 
| Accounting Cycle | Double Entry Accounting | Basic Accounting Equation | 8 ...
byAhmad Hassan
 
Chapter 2 Financial Accounting
byfsuttonnnu
 
chapter 2 principle.pptx
byissackmohamed3
 
Lecture Week 3.pptxengineering lecture for arab acadimy
bysolimansalman1
 
Unit 3 Debits and Credits
byJenny Hubbard
 
Ch02 wrd12e instructor_final
byfsuttonnnu
 
chap02.ppt
byRaselAzam2
 

Similar to Ch02_WRD25e_Instructor.pptCh02_WRD25e_Instructor.ppt

PPT
Chapter Two LIC.ppt
byHaleemaAbdella
 
PPTX
Fundamentals of accountancy business management 1 PS 11 Q3 0803.pptx
bytintincabos09
 
PPTX
WildFAP23eCh02PPT Analyzing and Recording
byssuser851e44
 
PPTX
WildFAP23eCh02PPT.pptxAnalyzing and Recording
byssuser851e44
 
PPT
Accounting Cycle - Journals - Capturing accounting event
byFaHaD .H. NooR
 
PPT
Accountancy3
byhjayapal1968
 
PPTX
Account cycle
byAbdirisakKhalifIsse
 
PDF
Lecture # 04 (Recording Process) FA..pdf
byRehanIftikhar7
 
PPT
278046962-Accounting-Warren-21st-Edition.ppt
byMinawBelay
 
PDF
ACCT1 CH2 Acct Cycle By Aregawi Gebru(MA).pdf
byAregawi Gebru
 
PPTX
ch02 The recording process kieso i guess.pptx
byRickySuhartono2
 
PDF
5.2 Chart of Accounts _ Debit Credit.pdf
byxavyvillegas
 
PPT
Fundamentals of Accounting I_Chaptet_02.ppt
byOromoof
 
PDF
Unit 3 Debits and Credits
byJenny Hubbard
 
PDF
Accounts - Double Entry Bookkeeping. Pdf
bykrisretro1
 
PPT
Muhasebe slaytları
byalper
 
PPT
Book Keeping - Theory for the course on accounting
bytpsingh29
 
PPTX
FINANCIAL_ACCOUNTING_LECTURE.pptx
byMdZabedHossain2
 
PPT
FRSA Unit 1.ppt for studying accountings
bysinghrohan1452
 
PPT
Ppt ch 02
byJoyce Effinger
 
Chapter Two LIC.ppt
byHaleemaAbdella
 
Fundamentals of accountancy business management 1 PS 11 Q3 0803.pptx
bytintincabos09
 
WildFAP23eCh02PPT Analyzing and Recording
byssuser851e44
 
WildFAP23eCh02PPT.pptxAnalyzing and Recording
byssuser851e44
 
Accounting Cycle - Journals - Capturing accounting event
byFaHaD .H. NooR
 
Accountancy3
byhjayapal1968
 
Account cycle
byAbdirisakKhalifIsse
 
Lecture # 04 (Recording Process) FA..pdf
byRehanIftikhar7
 
278046962-Accounting-Warren-21st-Edition.ppt
byMinawBelay
 
ACCT1 CH2 Acct Cycle By Aregawi Gebru(MA).pdf
byAregawi Gebru
 
ch02 The recording process kieso i guess.pptx
byRickySuhartono2
 
5.2 Chart of Accounts _ Debit Credit.pdf
byxavyvillegas
 
Fundamentals of Accounting I_Chaptet_02.ppt
byOromoof
 
Unit 3 Debits and Credits
byJenny Hubbard
 
Accounts - Double Entry Bookkeeping. Pdf
bykrisretro1
 
Muhasebe slaytları
byalper
 
Book Keeping - Theory for the course on accounting
bytpsingh29
 
FINANCIAL_ACCOUNTING_LECTURE.pptx
byMdZabedHossain2
 
FRSA Unit 1.ppt for studying accountings
bysinghrohan1452
 
Ppt ch 02
byJoyce Effinger
 

Recently uploaded

PPTX
Expected Revenue Report In Odoo 18 CRM
byCeline George
 
PDF
Micro Economics for class 12 and class 11
bysurajbajaj4116
 
PPTX
Pig- piggy bank in Big Data Analytics.ppt.pptx
byVarshini M
 
PPTX
Basics in Phytochemistry, Extraction, Isolation methods, Characterisation etc.
byD. Y. Patil College of Pharmacy, Kolhapur.
 
PDF
Analyzing the data of your initial survey
byThelma Villaflores
 
PPTX
10-12-2025 Francois Staring How can Researchers and Initial Teacher Educators...
byEduSkills OECD
 
PPTX
Nursing Unit Management, patient care unit, physical layout of nursing unit,t...
byyellow4878
 
PPTX
TAMIS & TEMS - HOW, WHY and THE STEPS IN PROCTOLOGY
byJohn Thanakumar
 
PPTX
Planning Assessment for Outcome-based Education
byAdri Jovin
 
PPTX
Overview of how to Create a Model in Odoo 18
byCeline George
 
PDF
Multiple Myeloma , definition, etiology, PP, CM , DE and management
byNisha Borsa
 
PPTX
Multiple Linear Regression - Least Square Method X₁ on X₂ and X₃
bySundar B N
 
PDF
Using Charts and Tables in Presenting Data
byThelma Villaflores
 
PPTX
AN EXTREMELY BORING GENERAL QUIZ FOR UG.pptx
bySriramG47
 
PDF
IMANI Africa files RTI request seeking full disclosure on 2026 SIM registrati...
bynservice241
 
PPTX
Introduction-to-Anatomy-and-Physiology.pptx
byAshish Umale
 
PPTX
Partial Correlation of Coefficient - Values of r₁₂.₃, r₂₃.₁ & r₁₃.₂
bySundar B N
 
PPTX
Semester 6 Unit 2 Club foot (talipes).pptx
bysachin7989
 
PDF
M.Sc. Nonchordates Complete Syllabus PPT | All Important Topics Covered
byKNIPSS SULTANPUR
 
PDF
Types of eggs and Egg membranes (Developmental Zoology)
bySudhandraKarthi
 
Expected Revenue Report In Odoo 18 CRM
byCeline George
 
Micro Economics for class 12 and class 11
bysurajbajaj4116
 
Pig- piggy bank in Big Data Analytics.ppt.pptx
byVarshini M
 
Basics in Phytochemistry, Extraction, Isolation methods, Characterisation etc.
byD. Y. Patil College of Pharmacy, Kolhapur.
 
Analyzing the data of your initial survey
byThelma Villaflores
 
10-12-2025 Francois Staring How can Researchers and Initial Teacher Educators...
byEduSkills OECD
 
Nursing Unit Management, patient care unit, physical layout of nursing unit,t...
byyellow4878
 
TAMIS & TEMS - HOW, WHY and THE STEPS IN PROCTOLOGY
byJohn Thanakumar
 
Planning Assessment for Outcome-based Education
byAdri Jovin
 
Overview of how to Create a Model in Odoo 18
byCeline George
 
Multiple Myeloma , definition, etiology, PP, CM , DE and management
byNisha Borsa
 
Multiple Linear Regression - Least Square Method X₁ on X₂ and X₃
bySundar B N
 
Using Charts and Tables in Presenting Data
byThelma Villaflores
 
AN EXTREMELY BORING GENERAL QUIZ FOR UG.pptx
bySriramG47
 
IMANI Africa files RTI request seeking full disclosure on 2026 SIM registrati...
bynservice241
 
Introduction-to-Anatomy-and-Physiology.pptx
byAshish Umale
 
Partial Correlation of Coefficient - Values of r₁₂.₃, r₂₃.₁ & r₁₃.₂
bySundar B N
 
Semester 6 Unit 2 Club foot (talipes).pptx
bysachin7989
 
M.Sc. Nonchordates Complete Syllabus PPT | All Important Topics Covered
byKNIPSS SULTANPUR
 
Types of eggs and Egg membranes (Developmental Zoology)
bySudhandraKarthi
 

Ch02_WRD25e_Instructor.pptCh02_WRD25e_Instructor.ppt

  • 1.
    c. 2014 CengageLearning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Analyzing Analyzing Transactions Transactions Chapter 2 Chapter 2
  • 2.
    Learning Objectives Learning Objectives 1. 1.Describe the characteristics of an account and a Describe the characteristics of an account and a chart of accounts. chart of accounts. 2. 2. Describe and illustrate journalizing transactions Describe and illustrate journalizing transactions using the double-entry accounting system. using the double-entry accounting system. 3. 3. Describe and illustrate the journalizing and Describe and illustrate the journalizing and posting of transactions to accounts. posting of transactions to accounts. 4. 4. Prepare an unadjusted trial balance and explain Prepare an unadjusted trial balance and explain how it can be used to discover errors. how it can be used to discover errors. 5. 5. Describe and illustrate the use of horizontal Describe and illustrate the use of horizontal analysis in evaluating a company’s performance analysis in evaluating a company’s performance and financial condition. and financial condition.
  • 3.
    c. 2014 CengageLearning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Learning Objective Describe the characteristics of an Describe the characteristics of an account and a chart of account and a chart of accounts accounts 1 1
  • 4.
    Using Accounts toRecord Transactions Using Accounts to Record Transactions o Accounting systems are designed to show the Accounting systems are designed to show the increases and decreases in each accounting increases and decreases in each accounting equation element as a separate record.This equation element as a separate record.This record is called an record is called an account account. .
  • 5.
    USING ACCOUNTS USING ACCOUNTS TORECORD TO RECORD TRANSACTIONS TRANSACTIONS
  • 6.
    THE T ACCOUNT THET ACCOUNT The T account has a title Title
  • 7.
    THE T ACCOUNT THET ACCOUNT The left side of the account is called the debit debit side. Title
  • 8.
    Title Debit The right sideof the account is called the credit credit side. Credit THE T ACCOUNT THE T ACCOUNT
  • 9.
    THE T ACCOUNT THET ACCOUNT Cash (a) 25,000 (b) 20,000 (d) 7,500 (e) 3,650 (f) 950 (h) 2,000 Balance 5,900 Debit Side of Account Credit Side of Account Balance of the account
  • 10.
    Chart of Accounts Chartof Accounts o A group of accounts for a business entity is A group of accounts for a business entity is called a called a ledger ledger. . o A list of the accounts in the ledger is called a A list of the accounts in the ledger is called a chart of accounts chart of accounts. .
  • 11.
    Chart of Accounts Chartof Accounts o Assets Assets are resources owned by the business. are resources owned by the business. Some examples of assets follow: Some examples of assets follow:  Cash Cash  Supplies Supplies  Accounts receivable Accounts receivable  Buildings Buildings
  • 12.
    Chart of Accounts Chartof Accounts o Liabilities Liabilities are debts owed to outsiders are debts owed to outsiders (creditors). Some examples of liabilities follow: (creditors). Some examples of liabilities follow:  Accounts payable Accounts payable  Notes payable Notes payable  Wages payable Wages payable  Interest payable Interest payable
  • 13.
    Chart of Accounts Chartof Accounts o Owner’s equity Owner’s equity is the owner’s right to the is the owner’s right to the assets of the business after all liabilities have assets of the business after all liabilities have been paid. For a proprietorship, the owner’s been paid. For a proprietorship, the owner’s equity is represented by the balance of the equity is represented by the balance of the owner’s owner’s capital account capital account. . o A A drawing drawing account represents the amount of account represents the amount of withdrawals made by the owner. withdrawals made by the owner.
  • 14.
    Chart of Accounts Chartof Accounts o Revenues Revenues are increases in owner’s equity as a are increases in owner’s equity as a result of selling services or products to result of selling services or products to customers. Some examples of revenue customers. Some examples of revenue accounts follow: accounts follow:  Fees earned Fees earned  Commission revenue Commission revenue  Rent revenue Rent revenue
  • 15.
    Chart of Accounts Chartof Accounts o The using up of assets or consuming services The using up of assets or consuming services in the process of generating revenues results in in the process of generating revenues results in expenses expenses. Some examples of expenses follow: . Some examples of expenses follow:  Wages expense Wages expense  Rent expense Rent expense  Miscellaneous expense Miscellaneous expense
  • 16.
  • 17.
    c. 2014 CengageLearning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Learning Objective Describe and illustrate journalizing Describe and illustrate journalizing transactions using the double-entry transactions using the double-entry accounting system accounting system 2 2
  • 18.
    Double-Entry Accounting System Double-EntryAccounting System o All businesses use what is called the All businesses use what is called the double- double- entry accounting system entry accounting system.This system is based .This system is based on the accounting equation and requires: on the accounting equation and requires:  Every business transaction to be recorded in at least Every business transaction to be recorded in at least two accounts. two accounts.  The total debits recorded for each transaction to be The total debits recorded for each transaction to be equal to the total credits recorded. equal to the total credits recorded.
  • 19.
    Balance Sheet Accounts BalanceSheet Accounts o The debit and credit rules for balance sheet The debit and credit rules for balance sheet accounts are as follows: accounts are as follows:
  • 20.
    Income Statement Accounts IncomeStatement Accounts o The debit and credit rules for income The debit and credit rules for income statement accounts are based on their statement accounts are based on their relationship with owner’s equity. relationship with owner’s equity.
  • 21.
    Owner Withdrawals Owner Withdrawals •The debit and credit rules for The debit and credit rules for recording owner withdrawals are recording owner withdrawals are based on the effect of owner based on the effect of owner withdrawals on owner’s equity. withdrawals on owner’s equity.
  • 22.
    Normal Balances Normal Balances oThe sum of the increases in an account is The sum of the increases in an account is usually equal to or greater than the sum of usually equal to or greater than the sum of the decreases in the account. Thus, the the decreases in the account. Thus, the normal balance of normal balance of an account an account is either a is either a debit or a credit depending on whether debit or a credit depending on whether increases in the account are recorded as increases in the account are recorded as debits or credits. debits or credits.
  • 23.
    Rules of Debitand Credit – Normal Balances of Accounts Rules of Debit and Credit – Normal Balances of Accounts
  • 24.
    Normal Balances Normal Balances Increases (NormalBal.) Decreases Balance sheet accounts: AssetDebit Credit Liability Credit Debit Owner’s Equity: Capital Credit Debit Drawing Debit Credit Income statement accounts: Revenue Credit Debit Expense Debit Credit
  • 25.
    Transaction A Transaction A oOn November 1, Chris Clark opens a new On November 1, Chris Clark opens a new business and deposits $25,000 in a bank account in business and deposits $25,000 in a bank account in the name of NetSolutions. the name of NetSolutions.
  • 26.
    TRANSACTION A TRANSACTION A Step1 Step 4 Step 5 Step 3 Assets = Liabilities + Owner’s Equity (investment) Assets = Liabilities + Owner’s Equity (investment) Accounting Equation Impact Accounting Equation Impact increase increase increase increase Step 2 Step 3
  • 27.
    (continued) Journalizing Journalizing Journalizing requires thefollowing steps: Journalizing requires the following steps: oStep 1. Step 1. The date of the transaction is entered The date of the transaction is entered in the Date column. in the Date column. oStep 2. Step 2. The title of the account to be debited The title of the account to be debited is recorded at the left-hand margin under the is recorded at the left-hand margin under the Description column, and the amount to be Description column, and the amount to be debited is entered in the Debit column. debited is entered in the Debit column.
  • 28.
    (continued) Journalizing Journalizing o Step 3. Step3. The title of the account to be The title of the account to be credited is listed below and to the right of the credited is listed below and to the right of the debited account title, and the amount to be debited account title, and the amount to be credited is entered in the Credit column. credited is entered in the Credit column. o Step 4. Step 4. A brief description may be entered A brief description may be entered below the credited account. below the credited account.
  • 29.
    Journalizing Journalizing o Step 5. Step5. The Post. Ref. (Posting Reference) The Post. Ref. (Posting Reference) column is left blank when the journal entry is column is left blank when the journal entry is initially recorded.This column is used later initially recorded.This column is used later when the journal entry amounts are transferred when the journal entry amounts are transferred to the accounts in the ledger. to the accounts in the ledger.
  • 30.
    Journalizing Journalizing o A transactionis initially entered in a record A transaction is initially entered in a record called a called a journal journal. .
  • 31.
    Journalizing Journalizing o A transactionis initially entered in a record A transaction is initially entered in a record called a journal. called a journal. o The process of recording a transaction in the The process of recording a transaction in the journal is called journal is called journalizing journalizing. .
  • 32.
    Journalizing Journalizing o A transactionis initially entered in a record A transaction is initially entered in a record called a journal. called a journal. o The process of recording a transaction in the The process of recording a transaction in the journal is called journalizing. journal is called journalizing. o The entry in the journal is called a The entry in the journal is called a journal journal entry entry. .
  • 33.
    Transaction B Transaction B oOn November 5, NetSolutions paid $20,000 for On November 5, NetSolutions paid $20,000 for the purchase of land as a future building site. the purchase of land as a future building site.
  • 34.
    TRANSACTION B TRANSACTION B AccountingEquation Impact Assets = Liabilities + Owner’s Equity increase increase decrease decrease
  • 35.
    Transaction C Transaction C oOn November 10, NetSolutions purchased On November 10, NetSolutions purchased supplies on account for $1,350. supplies on account for $1,350.
  • 36.
    TRANSACTION C TRANSACTION C AccountingEquation Impact Assets = Liabilities + Owner’s Equity increase increase increase increase
  • 37.
    Transaction D Transaction D oOn November 18, NetSolutions received cash On November 18, NetSolutions received cash of $7,500 from customers for services of $7,500 from customers for services provided. provided.
  • 38.
    Accounting Equation Impact Assets= Liabilities + Owner’s Equity (Revenue) increase increase increase increase in revenues in revenues TRANSACTION D TRANSACTION D
  • 39.
    Transaction E Transaction E oOn November 30, NetSolutions incurred the On November 30, NetSolutions incurred the following expenses: wages, $2,125; rent, $800; following expenses: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275. utilities, $450; and miscellaneous, $275.
  • 40.
    Accounting Equation Impact Assets= Liabilities + Owner’s Equity (Expense) decrease decrease All four All four expense expense accounts accounts increase increase TRANSACTION E TRANSACTION E
  • 41.
    Transaction F Transaction F oOn November 30, NetSolutions paid creditors On November 30, NetSolutions paid creditors on account, $950. on account, $950.
  • 42.
    Accounting Equation Impact Assets= Liabilities + Owner’s Equity decrease decrease decrease decrease TRANSACTION F TRANSACTION F
  • 43.
    Transaction G Transaction G oNetSolutions purchased $1,350 of supplies on NetSolutions purchased $1,350 of supplies on November 10. Chris Clark determined that the November 10. Chris Clark determined that the cost of supplies on hand on November 30 was cost of supplies on hand on November 30 was $550. $550.
  • 44.
    Accounting Equation Impact Assets= Liabilities + Owner’s Equity (Expense) decrease decrease increase increase in expense in expense TRANSACTION G TRANSACTION G Supplies used = $1,350 - $550 = $800
  • 45.
    Transaction H Transaction H oOn November 30, Chris Clark withdrew $2,000 On November 30, Chris Clark withdrew $2,000 from NetSolutions for personal use. from NetSolutions for personal use.
  • 46.
    Accounting Equation Impact Assets= Liabilities + Owner’s Equity (Drawing) decrease decrease increase increase in drawing in drawing TRANSACTION H TRANSACTION H
  • 47.
    c. 2014 CengageLearning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Learning Objective Describe and illustrate the Describe and illustrate the journalizing and posting of journalizing and posting of transactions to accounts. transactions to accounts. 3 3
  • 48.
    Posting Journal Entriesto Accounts Posting Journal Entries to Accounts o The process of transferring the debits and The process of transferring the debits and credits from the journal entries to the accounts credits from the journal entries to the accounts is called is called posting posting. .
  • 49.
    Posting Journal Entriesto Accounts Posting Journal Entries to Accounts o On December 1, NetSolutions paid a premium On December 1, NetSolutions paid a premium of $2,400 for an insurance policy for liability, of $2,400 for an insurance policy for liability, theft, and fire.The policy covers a one-year theft, and fire.The policy covers a one-year period. period.
  • 50.
    POSTING POSTING JOURNAL JOURNAL ENTRIES TO ENTRIES TO ACCOUNTS ACCOUNTS AccountingEquation Impact Assets = Liabilities + Owner’s Equity increase increase decrease decrease
  • 51.
    Exhibit 4 -Steps in Posting Exhibit 4 - Steps in Posting o Step 1. Step 1. The date of the transaction is The date of the transaction is entered in the Date column of Prepaid entered in the Date column of Prepaid Insurance. Insurance.
  • 52.
    2,400 2,400 Exhibit 4- Steps in Posting Exhibit 4 - Steps in Posting o Step 2. Step 2. The amount (2,400) is entered in The amount (2,400) is entered in the Debit column of Prepaid Insurance. the Debit column of Prepaid Insurance.
  • 53.
    Exhibit 4 -Steps in Posting Exhibit 4 - Steps in Posting o Step 3. Step 3. The journal page number (2) is The journal page number (2) is entered in the account’s Post. Ref. column. entered in the account’s Post. Ref. column. 2
  • 54.
    Exhibit 4 -Steps in Posting Exhibit 4 - Steps in Posting o Step 4. Step 4. The account number (15) is entered The account number (15) is entered in the journal’s Post. Ref. column. in the journal’s Post. Ref. column.
  • 55.
    Recording and Postingof a Debit and a Credit Recording and Posting of a Debit and a Credit These steps These steps are are repeated to repeated to post to the post to the Cash Cash account. account.
  • 56.
    December Transactions December Transactions oOn December 1, NetSolutions paid rent for On December 1, NetSolutions paid rent for December, $800. The company from which December, $800. The company from which NetSolutions is renting its store space now NetSolutions is renting its store space now requires the payment of rent on the first of requires the payment of rent on the first of each month, rather than at the end of the each month, rather than at the end of the month. month.
  • 57.
    DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS Accounting Equation Impact Assets= Liabilities + Owner’s Equity (Expense) decrease increase in expense
  • 58.
    December Transactions December Transactions oOn December 1, NetSolutions received an offer On December 1, NetSolutions received an offer from a local retailer to rent the land purchased on from a local retailer to rent the land purchased on November 5.The retailer plans to use the land as a November 5.The retailer plans to use the land as a parking lot for its employees and customers. parking lot for its employees and customers. NetSolutions agreed to rent the land to the retailer NetSolutions agreed to rent the land to the retailer for three months, with the rent payable in advance. for three months, with the rent payable in advance. NetSolutions received $360 for three months’ rent NetSolutions received $360 for three months’ rent beginning December 1. beginning December 1. o The liability created by receiving the cash in The liability created by receiving the cash in advance of providing the service is called advance of providing the service is called unearned revenue unearned revenue. .
  • 59.
  • 60.
    December Transactions December Transactions oOn December 4, NetSolutions purchased office On December 4, NetSolutions purchased office equipment on account from Executive Supply equipment on account from Executive Supply Co. for $1,800. Co. for $1,800.
  • 61.
    Accounting Equation Impact Assets= Liabilities + Owner’s Equity increase increase DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS
  • 62.
    December Transactions December Transactions oOn December 6, NetSolutions paid $180 for a On December 6, NetSolutions paid $180 for a newspaper advertisement. newspaper advertisement.
  • 63.
    Accounting Equation Impact Assets= Liabilities + Owner’s Equity (Expense) decrease increase in expense DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS
  • 64.
    December Transactions December Transactions oOn December 11, NetSolutions paid creditors On December 11, NetSolutions paid creditors $400. $400.
  • 65.
  • 66.
    December Transactions December Transactions oOn December 13, NetSolutions paid a On December 13, NetSolutions paid a receptionist and a part-time assistant $950 for receptionist and a part-time assistant $950 for two weeks’ wages. two weeks’ wages.
  • 67.
    DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS Accounting Equation Impact Assets= Liabilities + Owner’s Equity (Expense) decrease increase in expense
  • 68.
    December Transactions December Transactions oOn December 16, NetSolutions received $3,100 On December 16, NetSolutions received $3,100 from fees earned for the first half of December. from fees earned for the first half of December.
  • 69.
    DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS Accounting Equation Impact Assets= Liabilities + Owner’s Equity (Revenue) increase increase in revenues
  • 70.
    December Transactions December Transactions oFees earned on account totaled $1,750 for the Fees earned on account totaled $1,750 for the first half of December. first half of December.
  • 71.
    DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS Accounting Equation Impact Assets= Liabilities + Owner’s Equity (Revenue) increase increase in revenues
  • 72.
    December Transactions December Transactions oOn December 20, NetSolutions paid $900 to On December 20, NetSolutions paid $900 to Executive Supply Co. on the $1,800 debt owed Executive Supply Co. on the $1,800 debt owed from the December 4 transaction. from the December 4 transaction.
  • 73.
  • 74.
    December Transactions December Transactions oOn December 21, NetSolutions received $650 On December 21, NetSolutions received $650 from customers in payment of their accounts. from customers in payment of their accounts.
  • 75.
  • 76.
    December Transactions December Transactions oOn December 23, NetSolutions paid $1,450 for On December 23, NetSolutions paid $1,450 for supplies. supplies.
  • 77.
    Accounting Equation Impact Assets= Liabilities + Owner’s Equity increase decrease DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS
  • 78.
    December Transactions December Transactions oOn December 27, NetSolutions paid the On December 27, NetSolutions paid the receptionist and the part-time assistant $1,200 receptionist and the part-time assistant $1,200 for two weeks’ wages. for two weeks’ wages.
  • 79.
    Accounting Equation Impact Assets= Liabilities + Owner’s Equity (Expense) increase in expense decrease DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS
  • 80.
    December Transactions December Transactions oOn December 31, NetSolutions paid its $310 On December 31, NetSolutions paid its $310 telephone bill for the month. telephone bill for the month.
  • 81.
    DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS Accounting Equation Impact Assets= Liabilities + Owner’s Equity (Expense) increase in expense decrease
  • 82.
    December Transactions December Transactions oOn December 31, NetSolutions paid its $225 On December 31, NetSolutions paid its $225 electric bill for the month. electric bill for the month.
  • 83.
    Accounting Equation Impact Assets= Liabilities + Owner’s Equity (Expense) increase in expense decrease DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS
  • 84.
    December Transactions December Transactions oOn December 31, NetSolutions received $2,870 On December 31, NetSolutions received $2,870 from fees earned for the second half of from fees earned for the second half of December. December.
  • 85.
    Accounting Equation Impact Assets= Liabilities + Owner’s Equity (Revenue) increase increase in revenues DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS
  • 86.
    December Transactions December Transactions oOn December 31, fees earned on account On December 31, fees earned on account totaled $1,120 for the second half of totaled $1,120 for the second half of December. December.
  • 87.
    DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS Accounting Equation Impact Assets= Liabilities + Owner’s Equity (Revenue) increase increase in revenues
  • 88.
    December Transactions December Transactions oOn December 31, Chris Clark withdrew $2,000 On December 31, Chris Clark withdrew $2,000 for personal use. for personal use.
  • 89.
    Accounting Equation Impact Assets= Liabilities + Owner’s Equity (Drawing) increase in drawing decrease DECEMBER DECEMBER TRANSACTIONS TRANSACTIONS
  • 93.
    c. 2014 CengageLearning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Learning Objective Prepare an unadjusted trial balance Prepare an unadjusted trial balance and explain how it can be used to and explain how it can be used to discover errors discover errors 4 4
  • 94.
    Trial Balance Trial Balance oThe equality of debits and credits in the ledger The equality of debits and credits in the ledger should be proven at the end of each should be proven at the end of each accounting period by preparing a accounting period by preparing a trial trial balance balance. .
  • 95.
  • 96.
    Trial Balance Errors- Transposition Trial Balance Errors - Transposition o A A transposition transposition occurs when the order of the occurs when the order of the digits is changed by mistake, such as writing digits is changed by mistake, such as writing $542 as $452 or $524. $542 as $452 or $524.
  • 97.
    Trial Balance Errors- Slide Trial Balance Errors - Slide o In a In a slide slide, the entire number is moved one or , the entire number is moved one or more spaces to the right or the left by mistake, more spaces to the right or the left by mistake, such as writing $542.00 as $54.20 or $97.50 as such as writing $542.00 as $54.20 or $97.50 as $975.00. $975.00.
  • 98.
    Errors Not Affectingthe Trial Balance Errors Not Affecting the Trial Balance o If an error has already been journalized and If an error has already been journalized and posted to the ledger, a posted to the ledger, a correcting journal correcting journal entry entry is normally prepared. is normally prepared.
  • 99.
    Errors Not Affectingthe Trial Balance Errors Not Affecting the Trial Balance o Another type of error is a posting error. Another type of error is a posting error. o Assume that on May 5 a $12,500 purchase of Assume that on May 5 a $12,500 purchase of office equipment on account was incorrectly office equipment on account was incorrectly journalized and posted as a debit to Supplies journalized and posted as a debit to Supplies and a credit to Accounts Payable for $12,500. and a credit to Accounts Payable for $12,500. o The entry to correct the error is: The entry to correct the error is:
  • 100.
    c. 2014 CengageLearning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Learning Objective Describe and illustrate the use of Describe and illustrate the use of horizontal analysis in evaluating a horizontal analysis in evaluating a company’s performance and company’s performance and financial condition. financial condition. 5 5
  • 101.
    Horizontal Analysis Horizontal Analysis oIn In horizontal analysis horizontal analysis, the amount of each item , the amount of each item on a current financial statement is compared on a current financial statement is compared with the same item on an earlier statement. with the same item on an earlier statement.
  • 102.
    Horizontal Analysis Horizontal Analysis oIn horizontal analysis, the amount of each item In horizontal analysis, the amount of each item on a current financial statement is compared on a current financial statement is compared with the same item on an earlier statement. with the same item on an earlier statement. o When two statements are being compared, the When two statements are being compared, the earlier statement is used as the base for earlier statement is used as the base for computing the amount and the percent of computing the amount and the percent of change. change.
  • 103.
  • 104.
    c. 2014 CengageLearning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Analyzing Analyzing Transactions Transactions The End The End