Accounting Chapter 3 and 4 PP
mimo_doll
ch03.pptx3-‹#›
THE ACCOUNTING INFORMATION SYSTEM
Financial Accounting, Seventh Edition
3
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After studying this chapter, you should be able to:
Analyze the effect of business transactions on the basic accounting equation.
Explain what an account is and how it helps in the recording process.
Define debits and credits and explain how they are used to record business transactions.
Identify the basic steps in the recording process.
Explain what a journal is and how it helps in the recording process.
Explain what a ledger is and how it helps in the recording process.
Explain what posting is and how it helps in the recording process.
Explain the purposes of a trial balance.
Classify cash activities as operating, investing, or financing.
Learning Objectives
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Preview of Chapter 3
Financial Accounting
Seventh Edition
Kimmel Weygandt Kieso
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Accounting Information System
System of
collecting and
processing transaction data and
communicating financial information to decision makers.
Most businesses use computerized accounting (EDP) systems.
The Accounting Information System
LO 1 Analyze the effect of business transactions on the basic accounting equation.
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Transactions are economic events that require recording in the financial statements.
Not all activities represent transactions.
Assets, liabilities, or stockholders’ equity items change as a result of some economic event.
Dual effect on the accounting equation.
Accounting Transactions
LO 1 Analyze the effect of business transactions on the basic accounting equation.
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Question: Are the following events recorded in the accounting records?
Event
Purchase computer.
Criterion
Is the financial position (assets, liabilities, or stockholders’ equity) of the company changed?
Pay rent.
Record/ Don’t Record
Accounting Transactions
Discuss guided trip options with potential customer.
Illustration 3-1
LO 1 Analyze the effect of business transactions on the basic accounting equation.
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Assets
Liabilities
Stockholders’ Equity
=
+
Analyzing Transactions
LO 1 Analyze the effect of business transactions on the basic accounting equation.
Basic Accounting Equation
Accounting Transactions
The process of identifying the specific effects of economic events on the accounting equation.
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LO 1 Analyze the effect of business transactions on the basic accounting equation.
Accounting Transactions
Illustration 3-2
Expanded accounting equation
Analyzing Transactions
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Event (1). On October 1, cash of $10,000 is invested in Sierra Corporation by investors in exchange for $10,000 of common stock.
Accounting Transactions
1. +10,000 +10,000
LO 1 Analyze the effect of business transactions on the basic accounting equation.
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Event (2). On October 1, Sierra borrowed $5,000 from Castle Bank by signing a 3-month, 12%, $5,000 note payable.
Accounting Transactions
1. +10,000 +10,000
2. +5,000 +5,000
LO 1 Analyze the effect of business transactions on the basic accounting equation.
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Event (3). On October 2, Sierra purchased equipment by paying $5,000 cash to Superior Equipment Sales Co.
Accounting Transactions
3. -5,000 +5,000
1. +10,000 +10,000
2. +5,000 +5,000
LO 1 Analyze the effect of business transactions on the basic accounting equation.
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Event (4). On October 2, Sierra received a $1,200 cash advance from R. Knox, a client.
Accounting Transactions
4. +1,200 +1,200
3. -5,000 +5,000
1. +10,000 +10,000
2. +5,000 +5,000
LO 1 Analyze the effect of business transactions on the basic accounting equation.
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Event (5). On October 3, Sierra received $10,000 in cash from Copa Company for guide services performed.
Accounting Transactions
4. +1,200 +1,200
5. +10,000 +10,000
3. -5,000 +5,000
1. +10,000 +10,000
2. +5,000 +5,000
LO 1 Analyze the effect of business transactions on the basic accounting equation.
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Event (6). On October 3, Sierra Corporation paid its office rent for the month of October in cash, $900.
Accounting Transactions
4. +1,200 +1,200
5. +10,000 +10,000
6. -900 -900
3. -5,000 +5,000
1. +10,000 +10,000
2. +5,000 +5,000
LO 1 Analyze the effect of business transactions on the basic accounting equation.
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Event (7). On October 4, Sierra paid $600 for a one-year insurance policy that will expire next year on September 30.
Accounting Transactions
4. +1,200 +1,200
5. +10,000 +10,000
6. -900 -900
7. -600 +600
3. -5,000 +5,000
1. +10,000 +10,000
2. +5,000 +5,000
LO 1 Analyze the effect of business transactions on the basic accounting equation.
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Event (8). On October 5, Sierra purchased an estimated three months of supplies on account from Aero Supply for $2,500.
Accounting Transactions
4. +1,200 +1,200
5. +10,000 +10,000
6. -900 -900
7. -600 +600
8. +2,500 +2,500
3. -5,000 +5,000
1. +10,000 +10,000
2. +5,000 +5,000
LO 1 Analyze the effect of business transactions on the basic accounting equation.
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Event (9). On October 9, Sierra hired four new employees to begin work on October 15.
Accounting Transactions
4. +1,200 +1,200
5. +10,000 +10,000
6. -900 -900
7. -600 +600
8. +2,500 +2,500
3. -5,000 +5,000
1. +10,000 +10,000
2. +5,000 +5,000
LO 1 Analyze the effect of business transactions on the basic accounting equation.
An accounting transaction has not occurred.
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Event (10). On October 20, Sierra paid a $500 dividend.
Accounting Transactions
4. +1,200 +1,200
5. +10,000 +10,000
6. -900 -900
7. -600 +600
8. +2,500 +2,500
10. -500 -500
3. -5,000 +5,000
1. +10,000 +10,000
2. +5,000 +5,000
LO 1 Analyze the effect of business transactions on the basic accounting equation.
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Event (11). Employees have worked two weeks, earning $4,000 in salaries, which were paid on October 26.
Accounting Transactions
4. +1,200 +1,200
5. +10,000 +10,000
6. -900 -900
7. -600 +600
8. +2,500 +2,500
10. -500 -500
11. -4,000 -4,000
3. -5,000 +5,000
1. +10,000 +10,000
2. +5,000 +5,000
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Record of increases and decreases in a specific asset, liability, equity, revenue, or expense item.
Debit = “Left”
Credit = “Right”
Account
An Account can be illustrated in a T-Account form.
LO 2 Explain what an account is and how it helps in the recording process.
The Account
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Double-entry system
Each transaction must affect two or more accounts to keep the basic accounting equation in balance.
Recording done by debiting at least one account and crediting another.
DEBITS must equal CREDITS.
LO 3 Define debits and credits and explain they are used to record business transactions.
Debit and Credit Procedures
The Account
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If Debits are greater than Credits, the account will have a debit balance.
$10,000
Transaction #2
$3,000
$15,000
8,000
Transaction #3
Balance
Transaction #1
Debit and Credit Procedures
LO 3 Define debits and credits and explain they are used to record business transactions.
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$10,000
Transaction #2
$3,000
Balance
Transaction #1
$1,000
8,000
Transaction #3
Debit and Credit Procedures
If Credits are greater than Debits, the account will have a credit balance.
LO 3 Define debits and credits and explain they are used to record business transactions.
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Assets - Debits should exceed credits.
Liabilities – Credits should exceed debits.
Procedures for Assets and Liabilities
LO 3 Define debits and credits and explain they are used to record business transactions.
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Investments by stockholders and revenues increase stockholders’ equity (credit).
Dividends and expenses decrease stockholder’s equity (debit).
Procedures for Stockholders’ Equity
LO 3 Define debits and credits and explain they are used to record business transactions.
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The purpose of earning revenues is to benefit the stockholders.
The effect of debits and credits on revenue accounts is the same as their effect on stockholders’ equity.
Expenses have the opposite effect: expenses decrease stockholders’ equity.
Procedures for Revenue and Expense
LO 3 Define debits and credits and explain they are used to record business transactions.
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Stockholders’ Equity Relationships
Illustration 3-15
LO 3 Define debits and credits and explain they are used to record business transactions.
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Normal Balance Credit
Normal Balance Debit
Summary of Debit/Credit Rules
LO 3 Define debits and credits and explain they are used to record business transactions.
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Balance Sheet Income Statement
=
+
=
-
Asset
Liability
Equity
Revenue
Expense
Debit
Credit
Summary of Debit/Credit Rules
LO 3 Define debits and credits and explain they are used to record business transactions.
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Summary of Debit/Credit Rules
Relationship among the assets, liabilities and stockholders’ equity of a business:
The equation must be in balance after every transaction. For every Debit there must be a Credit.
Illustration 3-16
Assets
Liabilities
=
Stockholders’ Equity
Basic Equation
Expanded Basic Equation
+
LO 3 Define debits and credits and explain they are used to record business transactions.
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Debits:
increase both assets and liabilities.
decrease both assets and liabilities.
increase assets and decrease liabilities.
decrease assets and increase liabilities.
Review Question
Summary of Debit/Credit Rules
LO 3 Define debits and credits and explain they are used to record business transactions.
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Accounts that normally have debit balances are:
assets, expenses, and revenues.
assets, expenses, and equity.
assets, liabilities, and dividends.
assets, dividends, and expenses.
Review Question
Summary of Debit/Credit Rules
LO 3 Define debits and credits and explain they are used to record business transactions.
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Source documents, such as a sales slip, a check, a bill, or a cash register tape, provide evidence of the transaction.
Steps in the Recording Process
LO 4 Identify the basic steps in the recording process.
Illustration 3-17
Analyze each transaction
Enter transaction in a journal
Transfer journal information to ledger accounts
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Book of original entry.
Transactions recorded in chronological order.
Contributions to the recording process:
Discloses the complete effects of a transaction.
Provides a chronological record of transactions.
Helps to prevent or locate errors because the debit and credit amounts can be easily compared.
LO 5 Explain what a journal is and how it helps in the recording process.
Steps in the Recording Process
The Journal
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Journalizing - Entering transaction data in the journal.
Illustration: Presented below is information related to Sierra Corporation.
Sierra issued common stock in exchange for $10,000 cash.
Oct. 1
Sierra borrowed $5,000 by signing a note.
1
Sierra purchased equipment for $5,000.
2
Instructions - Journalize these transactions.
The Journal
LO 5 Explain what a journal is and how it helps in the recording process.
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Journalizing
General Journal
LO 5 Explain what a journal is and how it helps in the recording process.
Cash
Common stock
10,000
10,000
Sierra issued common stock in exchange for $10,000 cash.
Oct. 1
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Journalizing
General Journal
LO 5 Explain what a journal is and how it helps in the recording process.
Sierra borrowed $5,000 by signing a note.
Oct. 1
Cash
Notes payable
5,000
5,000
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Journalizing
General Journal
LO 5 Explain what a journal is and how it helps in the recording process.
Sierra purchased equipment for $5,000.
Oct. 2
Equipment
Cash
5,000
5,000
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The Ledger is comprised of the entire group of accounts maintained by a company.
LO 6 Explain what a ledger is and how it helps in the recording process.
Illustration 3-19
Steps in the Recording Process
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Steps in the Recording Process
LO 6 Explain what a ledger is and how it helps in the recording process.
Chart of Accounts – listing of accounts used by a company to record transactions.
Illustration 3-20
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General Ledger
General Journal
Oct. 1
Stock issued
J1
10,000
10,000
101
J1
Steps in the Recording Process
LO 7
Posting – the process of transferring journal entry amounts to ledger accounts.
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Posting:
normally occurs before journalizing.
transfers ledger transaction data to the journal.
is an optional step in the recording process.
transfers journal entries to ledger accounts.
Review Question
LO 7 Explain what posting is and how it helps in the recording process.
Steps in the Recording Process
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The Recording Process Illustrated
Follow these steps:
1. Determine what type of account is involved.
2. Determine what items increased or decreased and by how much.
3. Translate the increases and decreases into debits and credits.
LO 7 Explain what posting is and how it helps in the recording process.
Illustration 3-21
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The Recording Process Illustrated
LO 7 Explain what posting is and how it helps in the recording process.
Follow these steps:
1. Determine what type of account is involved.
2. Determine what items increased or decreased and by how much.
3. Translate the increases and decreases into debits and credits.
Illustration 3-22
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The Recording Process Illustrated
LO 7 Explain what posting is and how it helps in the recording process.
Follow these steps:
1. Determine what type of account is involved.
2. Determine what items increased or decreased and by how much.
3. Translate the increases and decreases into debits and credits.
Illustration 3-23
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LO 7 Explain what posting is and how it helps in the recording process.
Additional Transactions
The Recording Process Illustrated
Illustration 3-24
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LO 7 Explain what posting is and how it helps in the recording process.
Additional Transactions
The Recording Process Illustrated
Illustration 3-25
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LO 7 Explain what posting is and how it helps in the recording process.
Additional Transactions
The Recording Process Illustrated
Illustration 3-26
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Additional Transactions
The Recording Process Illustrated
Illustration 3-27
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LO 7 Explain what posting is and how it helps in the recording process.
Additional Transactions
The Recording Process Illustrated
Illustration 3-28
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LO 7 Explain what posting is and how it helps in the recording process.
The Recording Process Illustrated
Additional Transactions
Illustration 3-29
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LO 7 Explain what posting is and how it helps in the recording process.
Additional Transactions
The Recording Process Illustrated
Illustration 3-30
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LO 7
Additional Transactions
The Recording Process Illustrated
Illustration 3-31
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Summary Illustration of Journalizing
Illustration 3-32
LO 7
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Summary Illustration of Journalizing
Illustration 3-32
LO 7
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Summary Illustration of Posting
Illustration 3-33
LO 7 Explain what posting is and how it helps in the recording process.
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Selected transactions from the journal of Faital Inc. during its first
month of operations are presented below. Post these transactions to T-accounts.
LO 7 Explain what posting is and how it helps in the recording process.
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Trial Balance
A list of accounts and their balances at a given time.
Accounts are listed in the order in which they appear in the ledger.
The Trial Balance
LO 8 Explain the purposes of a trial balance.
Purpose is to prove that debits equal credits.
May also uncover errors in journalizing and posting.
Useful in the preparation of financial statements.
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The Trial Balance
Illustration 3-34
Equal
LO 8
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The trial balance may balance even when
a transaction is not journalized,
a correct journal entry is not posted,
a journal entry is posted twice,
incorrect accounts are used in journalizing or posting, or
offsetting errors are made in recording the amount of a transaction.
The Trial Balance
LO 8 Explain the purposes of a trial balance.
Limitations of a Trial Balance
Ethics Note An error is the result of an unintentional mistake. It is neither ethical nor unethical. An irregularity is an intentional misstatement, which
is viewed as unethical.
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A trial balance will not balance if:
a correct journal entry is posted twice.
the purchase of supplies on account is debited to Supplies and credited to Cash.
a $100 cash dividends is debited to the Dividends account for $1,000 and credited to Cash for $100.
a $450 payment on account is debited to Accounts Payable for $45 and credited to Cash for $45.
Review Question
The Trial Balance
LO 8 Explain the purposes of a trial balance.
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The Cash account and the related cash transactions indicate why cash changed during October. To make this information useful for analysis it is summarized in a statement of cash flows. The statement of cash flows classifies each transaction as an operating activity, an investing activity, or a financing activity.
Sierra Corporation’s:
Operating activities involve providing guide services.
Investing activities include the purchase or sale of long-lived assets used in operating the business, or the purchase or sale of investment securities.
Financing activities are borrowing money, issuing shares of stock, and paying dividends.
LO 9 Classify cash activities as operating, investing, or financing.
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Transaction analysis is the same under IFRS and GAAP however different standards sometimes impact how transactions are recorded.
European companies rely less on historical cost and more on fair value than U.S. companies. The double-entry system is the basis of accounting systems worldwide.
Both the IASB and FASB go beyond the basic definitions provided in this textbook for the key elements of financial statements, that is, assets, liabilities, equity, revenues, and expenses.
Key Points
LO 10 Compare the procedures for the recording process under GAAP and IFRS.
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A trial balance under IFRS follows the same format as shown in the textbook.
As shown in the textbook, dollars signs are typically used only in the trial balance and the financial statements. The same practice is followed under IFRS, using the currency of the country in which the reporting company is headquartered.
Key Points
LO 10 Compare the procedures for the recording process under GAAP and IFRS.
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In deciding whether the United States should adopt IFRS, some of the issues the SEC said should be considered are:
Whether IFRS is sufficiently developed and consistent in application.
Whether the IASB is sufficiently independent.
Whether IFRS is established for the benefit of investors.
Key Points
LO 10 Compare the procedures for the recording process under GAAP and IFRS.
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Some of the issues the SEC said should be considered are:
The issues involved in educating investors about IFRS.
The impact of a switch to IFRS on U.S. laws and regulations.
The impact on companies including changes to their accounting systems, contractual arrangements, corporate governance, and litigation.
The issues involved in educating accountants, so they can prepare statements under IFRS.
Key Points
LO 10 Compare the procedures for the recording process under GAAP and IFRS.
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The basic recording process shown in this textbook is followed by companies across the globe. It is unlikely to change in the future. The definitional structure of assets, liabilities, equity, revenues, and expenses may change over time as the IASB and FASB evaluate their overall conceptual framework for establishing accounting standards.
Looking to the Future
LO 10 Compare the procedures for the recording process under GAAP and IFRS.
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Which statement is correct regarding IFRS?
IFRS reverses the rules of debits and credits, that is, debits are on the right and credits are on the left.
IFRS uses the same process for recording transactions as GAAP.
The chart of accounts under IFRS is different because revenues follow assets.
None of the above statements are correct.
IFRS Practice
LO 10 Compare the procedures for the recording process under GAAP and IFRS.
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A trial balance:
is the same under IFRS and GAAP.
proves that transactions are recorded correctly.
proves that all transactions have been recorded.
will not balance if a correct journal entry is posted twice.
IFRS Practice
LO 10 Compare the procedures for the recording process under GAAP and IFRS.
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One difference between IFRS and GAAP is that:
GAAP uses accrual-accounting concepts and IFRS uses primarily the cash basis of accounting.
IFRS uses a different posting process than GAAP.
IFRS uses more fair value measurements than GAAP.
the limitations of a trial balance are different between IFRS and GAAP.
IFRS Practice
LO 10 Compare the procedures for the recording process under GAAP and IFRS.
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Copyright
“Copyright © 2013 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.”
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Account Name
Debit / Dr.
Credit / Cr.
Account Name
Debit / Dr.
Credit / Cr.
Account Name
Debit / Dr.
Credit / Cr.
Account Name
Debit / Dr.
Credit / Cr.
Account Name
Debit / Dr.
Credit / Cr.
Chapter
3-23
Assets
Assets
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Chapter
3-24
Liabilities
Liabilities
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Chapter 3-*
Assets
Debit / Dr.
Credit / Cr.
Normal Balance
Chapter 3-*
Liabilities
Debit / Dr.
Credit / Cr.
Normal Balance
Chapter
3-25
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Common Stock
Common Stock
Chapter
3-23
Dividends
Dividends
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Chapter
3-25
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Stockholders
Stockholders
’
’
Equity
Equity
Chapter
3-25
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Retained Earnings
Retained Earnings
Chapter 3-*
Debit / Dr.
Credit / Cr.
Normal Balance
Retained Earnings
Chapter 3-*
Debit / Dr.
Credit / Cr.
Normal Balance
Common Stock
Chapter 3-*
Dividends
Debit / Dr.
Credit / Cr.
Normal Balance
Chapter 3-*
Debit / Dr.
Credit / Cr.
Normal Balance
Stockholders’ Equity
Chapter
3-27
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Expense
Expense
Chapter
3-26
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Revenue
Revenue
Chapter 3-*
Debit / Dr.
Credit / Cr.
Normal Balance
Expense
Chapter 3-*
Debit / Dr.
Credit / Cr.
Normal Balance
Revenue
Chapter
3-23
Assets
Assets
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Chapter
3-27
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Expense
Expense
Chapter
3-24
Liabilities
Liabilities
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Chapter
3-25
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Stockholders
Stockholders
’
’
Equity
Equity
Chapter
3-26
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Revenue
Revenue
Chapter 3-*
Debit / Dr.
Credit / Cr.
Normal Balance
Stockholders’ Equity
Chapter 3-*
Debit / Dr.
Credit / Cr.
Normal Balance
Revenue
Chapter 3-*
Assets
Debit / Dr.
Credit / Cr.
Normal Balance
Chapter 3-*
Debit / Dr.
Credit / Cr.
Normal Balance
Expense
Chapter 3-*
Liabilities
Debit / Dr.
Credit / Cr.
Normal Balance
Account TitleRef.DebitCredit
Oct.1
Date
Sheet1
| Date | Account Title | Ref. | Debit | Credit | |||
| Oct. | 1 |
Account TitleRef.DebitCredit
Oct.1
Date
Sheet1
| Date | Account Title | Ref. | Debit | Credit | |||
| Oct. | 1 |
Account TitleRef.DebitCredit
Oct.2
Date
Sheet1
| Date | Account Title | Ref. | Debit | Credit | |||
| Oct. | 2 |
Cash
Acct. No. 101
ExplanationRef.DebitCreditBalanceDate
DateAccount TitleRef.DebitCredit
Oct. 1Cash10,000
Common stock10,000
Chart of Accounts
| Chart of Accounts | |||
| Acct. No. | Account | ||
| 100 | Cash | ||
| 105 | Accounts receivable | ||
| 110 | Inventory | ||
| 130 | Building | ||
| 200 | Accounts payable | ||
| 220 | Note payable | ||
| 300 | Common stock | ||
| 330 | Retained earnings | ||
| 400 | Sales | ||
| 500 | Cost of goods sold |
General Ledger
| General Journal | |||||||
| Date | Account Title | Ref. | Debit | Credit | |||
| Jan. | 3 | Cash | 100 | 100,000 | |||
| Common stock | 300 | 100,000 | |||||
| 10 | Building | 130 | 150,000 | ||||
| Note payable | 220 | 150,000 | |||||
| 15 | Inventory | 110 | 60,000 | ||||
| Accounts payable | 200 | 60,000 | |||||
| 20 | Accounts receivable | 105 | 75,000 | ||||
| Sales | 400 | 75,000 | |||||
| 20 | Cost of goods sold | 500 | 30,000 | ||||
| Inventory | 110 | 30,000 | |||||
| 29 | Cash | 100 | 40,000 | ||||
| Accounts receivable | 105 | 40,000 | |||||
| General Ledger | |||||||
| Cash | Acct. No. 100 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 3 | Sale of common stock | GJ | 100,000 | 100,000 | ||
| 20 | GJ | 40,000 | 140,000 | ||||
| Accounts Receivable | Acct. No. 105 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 20 | GJ | 75,000 | 75,000 | |||
| GJ | 40,000 | 35,000 | |||||
| Inventory | Acct. No. 110 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 15 | GJ | 60,000 | 60,000 | |||
| 20 | GJ | 30,000 | 30,000 | ||||
| Building | Acct. No. 130 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 10 | GJ | 150,000 | 150,000 | |||
| Accounts payable | Acct. No. 200 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 15 | GJ | 60,000 | (60,000) | |||
| Notes payable | Acct. No. 220 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 10 | GJ | 150,000 | (150,000) | |||
| Common stock | Acct. No. 300 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 3 | Sale for cash | GJ | 100,000 | (100,000) | ||
| Retained Earnings | Acct. No. 330 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| - 0 | |||||||
| Sales | Acct. No. 400 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 20 | GJ | 75,000 | (75,000) | |||
| Cost of Goods Sold | Acct. No. 500 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 20 | GJ | 30,000 | 30,000 |
Trial Balance
| Trial Balance | ||||
| Acct. No. | Account | Debit | Credit | |
| 100 | Cash | 140,000 | ||
| 105 | Accounts receivable | 35,000 | ||
| 110 | Inventory | 30,000 | ||
| 130 | Building | 150,000 | ||
| 200 | Accounts payable | 60,000 | ||
| 220 | Note payable | 150,000 | ||
| 300 | Common stock | 100,000 | ||
| 330 | Retained earnings | |||
| 400 | Sales | 75,000 | ||
| 500 | Cost of goods sold | 30,000 | ||
| 385,000 | 385,000 |
Journal Entry
| No. | Account | Debit | Credit | |||||
| 1 | 10,000 |
Sheet1 (2)
| Date | Account Title | Ref. | Debit | Credit | ||||
| Jan. | 3 | Cash | 100 | 100,000 | ||||
| Common stock | 300 | 100,000 | ||||||
| Cash | Acct. No. 101 | |||||||
| Date | Explanation | Ref. | Debit | Credit | Balance |
Chart of Accounts
| Chart of Accounts | |||
| Acct. No. | Account | ||
| 100 | Cash | ||
| 105 | Accounts receivable | ||
| 110 | Inventory | ||
| 130 | Building | ||
| 200 | Accounts payable | ||
| 220 | Note payable | ||
| 300 | Common stock | ||
| 330 | Retained earnings | ||
| 400 | Sales | ||
| 500 | Cost of goods sold |
General Ledger
| General Journal | |||||||
| Date | Account Title | Ref. | Debit | Credit | |||
| Jan. | 3 | Cash | 100 | 100,000 | |||
| Common stock | 300 | 100,000 | |||||
| 10 | Building | 130 | 150,000 | ||||
| Note payable | 220 | 150,000 | |||||
| 15 | Inventory | 110 | 60,000 | ||||
| Accounts payable | 200 | 60,000 | |||||
| 20 | Accounts receivable | 105 | 75,000 | ||||
| Sales | 400 | 75,000 | |||||
| 20 | Cost of goods sold | 500 | 30,000 | ||||
| Inventory | 110 | 30,000 | |||||
| 29 | Cash | 100 | 40,000 | ||||
| Accounts receivable | 105 | 40,000 | |||||
| General Ledger | |||||||
| Cash | Acct. No. 100 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 3 | Sale of common stock | GJ | 100,000 | 100,000 | ||
| 20 | GJ | 40,000 | 140,000 | ||||
| Accounts Receivable | Acct. No. 105 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 20 | GJ | 75,000 | 75,000 | |||
| GJ | 40,000 | 35,000 | |||||
| Inventory | Acct. No. 110 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 15 | GJ | 60,000 | 60,000 | |||
| 20 | GJ | 30,000 | 30,000 | ||||
| Building | Acct. No. 130 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 10 | GJ | 150,000 | 150,000 | |||
| Accounts payable | Acct. No. 200 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 15 | GJ | 60,000 | (60,000) | |||
| Notes payable | Acct. No. 220 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 10 | GJ | 150,000 | (150,000) | |||
| Common stock | Acct. No. 300 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 3 | Sale for cash | GJ | 100,000 | (100,000) | ||
| Retained Earnings | Acct. No. 330 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| - 0 | |||||||
| Sales | Acct. No. 400 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 20 | GJ | 75,000 | (75,000) | |||
| Cost of Goods Sold | Acct. No. 500 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 20 | GJ | 30,000 | 30,000 |
Trial Balance
| Trial Balance | ||||
| Acct. No. | Account | Debit | Credit | |
| 100 | Cash | 140,000 | ||
| 105 | Accounts receivable | 35,000 | ||
| 110 | Inventory | 30,000 | ||
| 130 | Building | 150,000 | ||
| 200 | Accounts payable | 60,000 | ||
| 220 | Note payable | 150,000 | ||
| 300 | Common stock | 100,000 | ||
| 330 | Retained earnings | |||
| 400 | Sales | 75,000 | ||
| 500 | Cost of goods sold | 30,000 | ||
| 385,000 | 385,000 |
Journal Entry
| No. | Account | Debit | Credit | |||||
| 1 | 10,000 |
Sheet1
| Date | Account Title | Ref. | Debit | Credit | ||
| Oct. 1 | Cash | 10,000 | ||||
| Common stock | 10,000 | |||||
| Building | 130 | 150,000 | ||||
| Note payable | 220 | 150,000 |
Sheet1 (2)
| Date | Account Title | Ref. | Debit | Credit | ||||
| Jan. | 3 | Cash | 100 | 100,000 | ||||
| Common stock | 300 | 100,000 | ||||||
| Cash | Acct. No. 100 | |||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | |||
| Jan. | 3 | Sale of common stock | GJ | 100,000 | 100,000 |
