Bài giảng Financial Accounting - Chapter 3

Collects, organizes and processes transaction dataTransaction is an event that results in a change of a balance sheet item.Typically it is an exchange. (Asset, liability, stock, revenue or expense for one another.)201Lec03.PPTX13Step 1: Accumulate facts. Step 2: Determine effects on accounting equation Note: Algebra requires that you keep the equality!Steps in transaction analysis:2Transaction AnalysisTwo or more items will always be affectedExample: (1) Owner invested $10,000 Cash in exchange for $10,000 of Common Stock3Example: (2) Borrowed $5,000 by issuing a bond. (2) + $5,000 + $5,000 ________ $15,000 = $5,000 +$10,000Bonds Payable4Transaction AnalysisTRANSACTION ANALYSIS examples Business buys a computer, paying cash. Increase and DecreaseBusiness provides service to a customer and is paid cash. Increase and IncreasesContractor works and business pays cash for service. Decrease and Decreases5TRANSACTION ANALYSIS examples Business applies & gets a corporate credit card account. Business takes out an advertisement that runs today in the newspaper and charges the cost to the credit card. Increase and DecreasesBusiness pays off credit card . Decrease and Decrease6TRANSACTION ANALYSIS examples Business provides services to a customer but allows them 30 days to pay. Increase and Increases30 days later customer pays off amount due in full. Increase and DecreaseBusiness pays cash dividend to Owners. Decrease and Decreases7Lowest level of detail in accounting.Records increases and decreases for a specific Asset, Liability, or Stockholders’ Equity item.Number of accounts used depends on facts and personal desires of the accountant & management. How much detail do they want on the financial statements?8Account is . . . .Account Detail exampleConsider the options in accounts used to record the purchase of an Apple computer:Equipment. If used, other computers, printers, photocopiers, factory machines all will be grouped into one account.Office Equipment. If used, other computers, printers, photocopiers will be grouped here, but factory machines go in a different account.Computer related equipment If used, other computers and printers will be grouped here, but photocopiers, factory machines go in different accounts.Apple Computers and so on.9Note: Its easier to add up accounts to get a grouped total than it is to split out what has been grouped in a single account.Stockholder’s equity has accounts for: - Stock - Retained earnings (from previous years) Also temporary, current year only accounts: - Dividends (paid in current year) - Revenues (earned in current year) - Expenses (incurred in current year)10AccountAccount Implementation: TABULAR summary format (Not used in the business world.) Example: Cash in checking +50.00 +100.00 - 20.00 +60.00 - 30.00 +250.00 +300.00 +500.00 - 15.00 +10.00 balance +1205.0011Account Implementation: ACCOUNT form (aka T-Account)ACCOUNT NAMEDebit Side (Dr.)Credit Side (Cr.) means LEFT means RIGHTCASH IN CHECKING 50.00100.00 60.00250.00300.00510.00 20.00 30.00 15.00Example: 1270.00 BALANCE 1205.00 65.0012ACCOUNT NAMEDate Reference or Description Debit Credit BalanceAccount Implementation: Running balance format. Not in text9/15 Cash sale 100.00 100.00dr9/16 Pay bill 70.00 30.00dr9/17 Buy supplies 40.00 10.00cr13 - Algebra is the foundation. - The accounting equation: ASSETS = LIABILITIES + EQUITY . EXPENSES REVENUES debit credit + - debit credit - +14 debit credit + - debit credit - + debit credit - ++ means increase balance- means decrease balanceAccounting MathematicsAlgebra requires that you must keep the equality: Example: 10 = 6 + 4 10 + 1 = (6 + 4) + 1 or 10+1-1= 6 + 4Same rule in accounting states that we must use the ‘double entry’ system. This requires that:15 EACH TRANSACTION MUST BE RECORDED SO THAT TOTAL DEBITS EQUALS TOTAL CREDITS.Step 1: Accumulate facts. Step 2: Determine effects on accounting equationSTEP3: Determine accounts and amounts of required debits and credits. 16Steps in transaction analysis:TRANSACTION ANALYSIS REVISTEDOwner’s Invest $10,000 in business and are issued stock. Debit and Credit Business borrows $5,000 from a bank by issuing a bond. Debit and Credit 17TRANSACTION ANALYSIS REVISTEDBusiness buys a computer, paying cash. Debit and Credit Business provides service to a customer and is paid cash. Debit and Credit Contractor works and business pays cash for service. Debit and Credit 18TRANSACTION ANALYSIS REVISTEDBusiness applies & gets a corporate credit card account. Not a transaction. No effect on accounting equation.Business takes out an advertisement that runs today in the newspaper and charges the cost to the credit card. Debit and Credit Business pays off credit card . Debit and Credit 19TRANSACTION ANALYSIS REVISTEDBusiness provides services to a customer but allows them 30 days to pay. Debit and Credit 30 days later customer pays off amount due in full. Debit and Credit Business pays cash dividend to Owners. Debit and Credit 20General Journal - Book used to record transactions before recording them in the accounts. - Listing of transactions by date.General Ledger - Binder of all the accounts. (T or ledger format) - Table of contents to the general ledger is called the “Chart of Accounts” Information ends up being recorded twice. It’s just organized differently.Process of copying transactions from journal to ledger is called POSTINGJOURNALLEDGER21The BOOKS in accountingWhat did we buy?Example: Use of ledger and journalCASH IN CHECKING 50.00100.00 60.00250.00300.00510.00 50.00 15.001000.00 1270.00 1065.00Look at journal entryDate Accounts Debits Credits9/12 Computers 700.00 Supplies 300.00 Cash 1000.00(Purchased Laser printer & toner cartridges from Office Depot)22Steps 1, 2, 3: Accumulate facts, determine effects on accounting equation, accounts to be used, debits and creditsStep 4: Journalize (usually done daily)Step 5: Post to Ledger (often batched, daily or weekly)Step 6: Total all accounts in ledger and check math for errors. Total Debits = Total Credits (called trial balance). Debit Credit Cash 100 Equipment 500 Accounts Payable 200 Retained Earnings 400 Revenue 200 Wage Expense 200 800 80023Steps in transaction analysis:Example: Assume the following 10/1/2014 ledger balances: Ret Earnings1200Cash in Bank1000Receivables200Fee RevenueRent Exp 10/3 Earned $300 in fees, terms net 30 days. 10/10 Received $100 payment on account from customers. 10/20 Earned $400 in fees. Cash received from customers. 10/31 Paid rent of $200.24 Ret Earnings1200Cash in Bank1000Receivables200Fee RevenueRent Exp 10/3 Earned $300 in fees, terms net 30 days.General Journal10/3 Receivables 300 Fee Revenue 300 25 Ret Earnings1200Cash in Bank1000Receivables200Fee RevenueRent Exp 10/10 Received $100 payment on account from customers.General Journal10/3 Receivables 300 Fee Revenue 30010/10 Cash 100 Receivables 100 26 Ret Earnings1200Cash in Bank1000Receivables200Fee RevenueRent Exp 10/20 Earned $400 in fees. Cash received from customers.General Journal10/3 Receivables 300 Fee Revenue 30010/10 Cash 100 Receivables 10010/20 Cash 400 Fee Revenue 400 27 Ret Earnings1200Cash in Bank1000Receivables200Fee RevenueRent Exp 10/31 Paid rent of $200.General Journal10/3 Receivables 300 Fee Revenue 30010/10 Cash 100 Receivables 10010/20 Cash 400 Fee Revenue 40010/31 Rent Expense 200 Cash 200 28 Ret Earnings1200Cash in Bank1000Receivables200Fee RevenueRent ExpGeneral Journal10/3 Receivables 300 Fee Revenue 30010/10 Cash 100 Receivables 10010/20 Cash 400 Fee Revenue 40010/31 Rent Expense 200 Cash 200 30030029 Ret Earnings1200Cash in Bank1000Receivables200Fee RevenueRent ExpGeneral Journal10/3 Receivables 300 Fee Revenue 30010/10 Cash 100 Receivables 10010/20 Cash 400 Fee Revenue 40010/31 Rent Expense 200 Cash 200 30030010010030 Ret Earnings1200Cash in Bank1000Receivables200Fee RevenueRent ExpGeneral Journal10/3 Receivables 300 Fee Revenue 30010/10 Cash 100 Receivables 10010/20 Cash 400 Fee Revenue 40010/31 Rent Expense 200 Cash 200 30030010010040040031 Ret Earnings1200Cash in Bank1000Receivables200Fee RevenueRent ExpGeneral Journal10/3 Receivables 300 Fee Revenue 30010/10 Cash 100 Receivables 10010/20 Cash 400 Fee Revenue 40010/31 Rent Expense 200 Cash 200 30030010010040040020020032 Ret Earnings1200Cash in Bank1000Receivables200Fee RevenueRent Exp30030010010040040020020013004001200700200TRIAL BALANCE 10/31/14 Debit Credit Cash 1300 Receivables 400 Retained Earnings 1200 Fee Revenue 700 Rent Expense 200 1900 190033