Fundamentals of Financial Accounting

Size: px
Start display at page:

Download "Fundamentals of Financial Accounting"

Transcription

1 Fundamentals of Financial Accounting CHAPTER I Accounting in action. What is accounting? Accounting is the recording of financial transactions plus storing, sorting, retrieving, summarizing, and presenting the information in various reports and analyses. Accounting is also a profession consisting of individuals having the formal education to carry out these tasks. Accounting consist of 3 basics activity Identifies Records Communicates The building boxes of accounting Effective financial reporting depends on sound ethical behavior. To sensitize you to ethical situation in business and to give you practice at solving ethical dilemmas, we address ethics in a number of ways in this book: Ethics in Financial Reporting A number of the Feature Stories discuss the central importance of ethical behavior to financial reporting Ethics insight boxes and marginal Ethics Notes highlight ethics situations and issues in actual business settings Many of the People, Planet, and Profit Insight boxes focus on ethical issues that companies face in measuring and reporting social and environmental issues Ethics case simulates a business situation and asks you to put yourself in the position of a decision-maker in that case. Accounting Standards International Accounting Standards Board (IASB) Financial Accounting Standard Board (FASB) Measurement Principles Historical Cost Principle Fair Value Principle Assumptions Monetary Unit Assumption Economic Entity Assumption Proprietorship Partnership Corporation

2 The Basic Accounting Equation Assets = Liabilities + Equity Asset Liabilities Equity Equipment, Land, Supplies, Cash Interest payable, Salaries payable, Accounts payable, Notes payable Salaries expense, Services expense, Retained earnings, Share Capital-Ordinary Increases Investments by shareholders Decreases Dividends to shareholders Equity Revenue Expenses Transaction Analysis Transaction Analysis is the process of reconciling the differences made to each side of the equation with each financial transaction occurs. Let s look at some sample transactions to get a better understanding of how the analysis and equation work. 1. A transaction that decreases total assets must also decrease total liabilities or equity. 2. A transaction that increases total assets must also increase total liabilities or equity. 3. Some transactions may increase one account and decrease another on the same side of the equation i.e. one asset increases and another decreases. Assets = Liabilities + Equity and - Assets = Liabilities + Equity Share Capital-Ordinary + Retained Earnings Revenues - Expenses - Dividends

3 The accounting equation for a brand new company will look like this: Assets = Liabilities + Equity $0 $0 $0 Transaction 1: The owner deposits $5000 in the checking account to begin operations Assets = Liabilities + Equity +$5000 $0 + $5000 The asset Cash is increased by $5000 and the Owner s Equity is increased $5000. The business owes the owner $5000. Transaction 2: The business purchases a computer, on credit, for $2500. Assets = Liabilities + Equity +$2500 +$2500 $ The asset Computers is increased by $2500 and the liability is also increased $2500 because the business now owns the store $2500. Transaction 3: The business purchases office supplies using $550 cash. Assets = Liabilities + Equity +$550 -$550 The asset Office Supplies is increased $550 and the asset Cash is decreased $550. Transaction 4: A business purchases a building for $100,000 with a $25,000 cash down-payment and a loan for the $75,000 outstanding. Assets = Liabilities + Owner s Equity +$100, ,000 -$25,000 Transaction 5: The business sells goods for $1,200 cash. Assets = Liabilities + Owner s Equity +$1200 +$1200 (Revenue) The asset Cash is increased $1200 and the revenue increases Owner s Equity $1200. Transaction 6: The business pays its rent monthly rent of $950 using a company check. Assets = Liabilities + Owner s Equity -$950 -$950 (Expense) The asset Cash is decreased $950 and the expense decreases Owner s Equity $950. Transaction 7: The business owner withdraws $2,000 for his personal use.

4 Assets = Liabilities + Owner s Equity -$1200 -$1200 (Revenue) The asset Cash is decreased $2000 and the drawing decreases Owner s Equity $2000. Financial Statements Income Statement Retained Earnings Statement Statement of Financial Position Statement of Cash Flows

5

6 CHAPTER II The Recording Process The Account Debits and Credits Account Name Debit/Dr. Credit/Cr. T-account form If debit amounts are greater than Credit amounts, the account will have a debit balance Account Name Debit/Dr. Credit/Cr. $10,000 8,000 $3,000 balance $15,000 If debit amounts are less than Credit amounts, the account will have a credit balance Account Name Debit/Dr. Credit/Cr. $10,000 $3,000 8,000 balance $1,000 Assets Debits should exceed credits Liabilities Credits should exceed debits Normal balance is on the increase side Share capital and revenues increase equity (credit) Dividends and expenses decrease equity (debit) Step in the Recording Process 1. Analyze each transaction for its effects on the accounts. 2. Enter the transaction information in a journal. 3. Transfer the journal information to appropriate accounts in ledger. The Journal General Journal J1 Date Account Titles and Explanation Ref. Debit Credit 2015 Jan. 1 Cash 2 15, Share Capital-Ordinary 15,000 (Issues shares for cash) 4 Equipment 7,000 Cash 7,000 (Purchased equipment for cash)

7 The date of the transaction. The debit account title is entered first. The credit account title is indented and entered on next line. A brief explanation of transaction appears on the line below the credit account title. The column titled Reference is left blank when the journal entry is made. The ledger General Journal J1 Date Account Titles and Explanation Ref. Debit Credit 2015 Jan. 1 Cash Share Capital-Ordinary (Issues shares for cash) ,000 15,000 General Ledger No.101 Date Explanation Ref. Debit Credit Balance 2015 Jan. 1 J1 15,000 15,000 Trial balance

8 Prepaid expense Chapter III Adjusting the accounts Ex. On Oct1, 2013, paid $12,000 for one year rent. Accounting period is one year Journal Entry: Oct1 : Prepaid Rent 12,000 Cash 12,000 On Dec31, 3 months expenses have been incurred. Therefore, Adjusting Entry: Dec31 : Rent expense 3,000 12,000/12 *3 Prepaid Rent 3,000 Unearned Revenue Ex. On Nov1, 2013, Received $3,000 in advance for one year from a customer for services to be rendered in the future. Accounting period is one year,2013 Journal Entry Nov1 : Cash 3,000 Unearned Revenue 3,000 On Dec31, 2months revenues have been earned. Therefore, Adjusting Entry: Dec 31: Unearned Revenue 500 Service Revenue 500 A liability-revenue account relationship exists with unearned revenues. Accrued Revenue (note receivable) interest. Ex. On Nov1, 2013, Sun Co rendered services for $3,000 to a customer and received a 12%, 3month note. Journal Entry: Nov1: Notes Receivable 3,000 Service Revenue 3,000 2 months interest (Nov&Dec) is accrued revenue (2 months because 2 month is another year) Adjusting Entry: Dec 31: Interest Receivable 60 3,000*(12/100)*(2/12) Interest Revenue 60 Summary of the adjusting entries Debit Credit 1. Prepaid Expense 2. Supplies Expense Prepaid Expense 3. Unearned Revenue Supplies Expense Supplies

9 4. Accrued Revenue 5. Accrued Expense Unearned Revenue Service Revenue Accrued Receivable Service Revenue Expense Payable 6. Depreciation Expense Accumulated Depreciation Equipment 7. Interest on a Notes receivable Interest Receivable Interest Revenue 8. Interest on a Notes Payable Interest Expense Interest Payable Ex. The Ledger of Villa Rental Agency on March 31 of the current year includes the selected accounts, shown below, before adjusting entries have been prepared. Analysis of the accounts shows the following. 1. The equipment depreciates $300 per month. : answer is depreciation expense 2. One-third of the unearned rent revenue was recognized during the quarter. 3. Interest of $500 is accrued on the notes payable. 4. Supplies on hand total $ Insurance expires at the rate of $200 per month.: expired = using up

10 **Explanation of 1. Have to multiple by 3 because in the first month of year 2013 is January February and in the end of March so have to multiple by , have to multiple by 13 because of the word quarter because $200 is per month but this problem is 3 months.

11 Chapter IV Completing the accounting Cycle This chapter is about how to make worksheet, income statement, retained earnings statement, statement of financial position and closing entries. This have the fixed pattern as follow Worksheet Name of company Worksheet For the.... Ended Retained Earnings Statement Income Statement

12 Statement of Financial Position

13 Correction Entry If the question give your debit and credit if it wrong you have to put it in opposite side such as wrong is debit when you do the correct you should put it on credit. Ex. Joshua Company discovered the following errors made in Jan A payment of salaries and wages expense of $700 was debited to equipment and credited to cash, both for $700 Correct

14 Ex. The trial balance of Midas Company at December 31, the end of the company s fiscal year is shown on the work sheet: Adjustment data: 1. Depreciation is $10,000 on buildings and $9,000 on equipment 2. Interest of $5,000 is due and unpaid on notes payable at December Journalize the closing entries. Instructions: 1. Complete the worksheet. 2. Prepare a multiple-step income statement, a retained earnings statement and state of financial position at December31. ********** The Work Sheet Answer in another file*********

15

16

17 Journal Entries for the Buyer: Chapter V Accounting for Merchandising Operations Journal Entries for the Seller: ***Note: FOB Shipping Point = Buyer have to pay FOB Destination = Seller have to pay

18 Ex. The trial balance of Midas Company at December 31, the end of the company s fiscal year is shown on the work sheet: Adjustment data: 1.Depreciation is $10,000 on buildings and $9,000 on equipment 2. Interest of $5,000 is due and unpaid on notes payable at December 3.Journalize the closing entries. Instructions: 3. Complete the worksheet. 4. Prepare a multiple-step income statement, a retained earnings statement and state of financial position at December31. **Interpret the adjustment data 1. Depreciation exp-build 10,000 Accumulated dep-build 10,000 Depreciation exp-equipment 9,000 Accumulated dep-equipment 9, Interest expense 5, Ending balance = 88,900 Interest payable 5,000 = 90,000 Cost of goods sold 1,100

19 Classifying Inventory Merchandising Company Inventory Manufacturing Company Raw Materials Work in Process Finished Goods Determining Inventory Quantities Perpetual System Periodic System Taking a Physical Inventory Determining Ownership of Goods Chapter VI Inventory Purchased goods not yet received Sold goods not yet delivered Inventory Costing Specific Identification First-In, First-Out (FIFO) Average-cost How to compute the cost of goods sold? Example Use the following information to calculate the value of inventory on hand on Mar 31 and cost of goods sold during March in FIFO periodic inventory system and under FIFO perpetual inventory system. Mar 1 Beginning Inventory 68 $15.00 per unit 5 Purchase 140 $15.50 per unit 9 Sale 94 $19.00 per unit 11 Purchase 40 $16.00 per unit 16 Purchase 78 $16.50 per unit 20 Sale 116 $19.50 per unit 29 Sale 62 $21.00 per unit Cost Flow Assumptions Cost of goods sold = Beginning Inventory + Purchases Ending Inventory Average Unit cos = Cost of beginning inventory + Cost of purchases Units in beginning inventory + Units purchased

20 Solution FIFO Periodic Units Available for Sale = = 326 Units Sold = = 272 Units in Ending Inventory = = 54 Cost of Goods Sold Units Unit Cost Total Sales From Mar 1 Inventory 68 $15.00 $1,020 Sales From Mar 5 Purchase 140 $15.50 $2,170 Sales From Mar 11 Purchase 40 $16.00 $640 Sales From Mar 16 Purchase 24 $16.50 $ $4,226 Ending Inventory Units Unit Cost Total Inventory From Mar 16 Purchase 54 $16.50 $891 FIFO Perpetual Purchases Sales Balance Date Units Unit Cost Total Units Unit Cost Total Units Unit Cost Total Mar 1 68 $15.00 $1, $15.50 $2, $15.00 $1, $15.50 $2, $15.00 $1, $15.50 $1, $15.50 $ $16.00 $ $15.50 $1, $16.00 $640

21 16 78 $16.50 $1, $15.50 $1, $16.00 $ $16.50 $1, $15.50 $1, $16.00 $608 2 $16.00 $32 78 $16.50 $1, $16.00 $ $16.50 $ $16.50 $396 Lower-of-Cost-or-Net Realizable Value Lower-of-Cost-or- Cost Net Realizable Value Net Realizable Value Flat-screen TVs $60,000 $55,000 $55,000 Satellite radios 45,000 52,000 45,000 DVD recorders 48,000 45,000 45,000 DVDs 15,000 14,000 14,000 Total inventory $159,000

22 Chapter IV Fraud, Internal Control and Cash Fraud Dishonest act by an employee that results in personal benefit to the employee at a cost to the employer. Internal Control o Methods and measures adopted to: Safeguard assets. Enhance accuracy and reliability of accounting records. Increase efficiency of operations. Ensure compliance with laws and regulations. Principles of Internal Control Activities Physical Controls

23 Independent Internal Verification Cash Receipts Controls Over-the-Counter Receipts Mail Receipts

24 Example : Permitting only designated personnel to handle cash receipts is an application of the principle of: a. segregation of duties. b. establishment of responsibility. c. independent check. d. other controls Cash Disbursements Controls Voucher system Petty cash fund Example: Assume that on March 15 Zhu s petty cash custodian requests a check for NT$2,610. The fund contains NT$390 cash and petty cash receipts for postage NT$1,320, freight-out NT$1,140, and miscellaneous expenses NT$150. The general journal entry to record the check is: Mar. 15 Postage expense 1,320 Freight-out expense 1,140 Miscellaneous expense 150 Bank Code Numbers Control Features: Use of a Bank Use of a Bank (Deposits) Cash 2,610 Front Side Reverse Side

25 Use of a Bank (Checks) Maker Payee Payer Debit Memorandum Bank service charge. NSF (not sufficient funds). Credit Memorandum Collect notes receivable. Interest earned Bank Statements

26 Reconciliation Procedures + Deposit in Transit - Outstanding Checks +/- Bank Errors + Notes collected by bank (CM) - NSF (bounced) checks (DM) - Check printing or other service charges (DM) +/- Book Errors CORRECT BALANCE CORRECT BALANCE Example : The bank statement for Laird Company, in Illustration 7-10, shows a balance per bank of 15, on April 30, On this date the balance of cash per books is 11, Using the four reconciliation steps, Laird determines the following reconciling items. Step 1. Deposits in transit: April 30 deposit (received by bank on May 1). 2, Step 2. Outstanding checks: No. 453, 3,000.00; no. 457, 1,401.30; no. 460, 1, , Step 3. Errors: Laird wrote check no. 443 for 1, and the bank correctly paid that amount. However, Laird recorded the check as 1, Step 4. Bank memoranda: a. Debit NSF check from J. R. Baron for b. Debit Charge for printing company checks c. Credit Collection of note receivable for 1,000 plus interest earned 50, less bank collection fee ,035.00

27 Prepare a bank reconciliation at April 30. Cash balance per bank statement 15, Add: Deposit in transit 2, Less: Outstanding checks (5,904.00) Adjusted cash balance per bank 12, Cash balance per books 11, Add: Error in check No Less: NSF check (425.60) Less: Bank service charge (30.00) Add: Collection of notes receivable 1, Adjusted cash balance per books 12,204.85

Equity The remainder is the shareholders claim on the assets-equity. It is often referred to as residual equity.

Equity The remainder is the shareholders claim on the assets-equity. It is often referred to as residual equity. ACT 1600 Fundamental of Financial Accounting Chapter 1 The Basic Accounting Equation Asset = Liabilities + Equity Asset Assets are resources a business owns. The common characteristic possessed by all

More information

Chapter 7 Fraud, Internal Control, and Cash 高立翰

Chapter 7 Fraud, Internal Control, and Cash 高立翰 Chapter 7 Fraud, Internal Control, and Cash 高立翰 Study Objectives 1. Define fraud and internal control. 2. Identify the principles of internal control activities. 3. Explain the applications of internal

More information

Accounting II Second Semester Final

Accounting II Second Semester Final Name: Class: Date: Accounting II Second Semester Final Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. 1. Profit is the difference between:

More information

Self-test Comprehensive Problems II 综 合 自 测 题 II

Self-test Comprehensive Problems II 综 合 自 测 题 II Self-test Comprehensive Problems II 综 合 自 测 题 II Part One (30%) 1. Give the Chinese/English of the following terms: (5%) subsidiary ledger 统 制 账 户 purchase requisition 现 金 溢 缺 petty cash fund 永 续 盘 存 制

More information

RAPID REVIEW Chapter Content

RAPID REVIEW Chapter Content RAPID REVIEW BASIC ACCOUNTING EQUATION (Chapter 2) INVENTORY (Chapters 5 and 6) Basic Equation Assets Owner s Equity Expanded Owner s Owner s Assets Equation = Liabilities Capital Drawing Revenues Debit

More information

Vol. 1, Chapter 3 - Accounting Adjustments

Vol. 1, Chapter 3 - Accounting Adjustments Vol. 1, Chapter 3 - Accounting Adjustments Problem 1 1. ($20,000 2,000) 48 = $375 per month 2. Jan. 31 Depreciation Expense $375 Accumulated Depreciation Van $375 To record depreciation expense for January

More information

PROFESSOR S NAME ACC 255 FALL 2011 COVER SHEET FOR COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5-8)

PROFESSOR S NAME ACC 255 FALL 2011 COVER SHEET FOR COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5-8) COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5-8) Page 137 NAME ANSWER KEY PROFESSOR S NAME SECTION SCORE ACC 255 FALL 2011 COVER SHEET FOR COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5-8) INSTRUCTIONS: COMPLETE ALL

More information

How To Calculate A Trial Balance For A Company

How To Calculate A Trial Balance For A Company THE BASIC MODEL The accounting information system is designed to collect and organize data into information that is useful for stakeholders. The Accounting Equation The basic accounting equation is what

More information

Definition of Accounting

Definition of Accounting SOLUTIONS TO EXERCISES Lesson 1: Definition of Accounting 1. What is accounting? What are its main functions? Accounting is the process of financially measuring, recording, summarizing and communicating

More information

In the event of a tie, the score on the last ten questions will be used as a tie-breaker.

In the event of a tie, the score on the last ten questions will be used as a tie-breaker. NEW YORK STATE ASSOCIATION FUTURE BUSINESS LEADERS OF AMERICA SPRING DISTRICT MEETING ACCOUNTING II 2010 TEST DIRECTIONS 1. Complete the information requested on the answer sheet. PRINT your name on the

More information

Century 21 Accounting, 8e General Journal Chapter Outlines

Century 21 Accounting, 8e General Journal Chapter Outlines Century 21 Accounting, 8e General Journal Chapter Outlines PART 1 Chapter 1 ACCOUNTING FOR A SERVICE BUSINESS ORGANIZED AS A PROPRIETORSHIP Starting A Proprietorship: Changes that Affect the Accounting

More information

Chapter 8. Internal Control. Chapter 8-1

Chapter 8. Internal Control. Chapter 8-1 8 Internal Control and Cash 8-1 Internal Control and Cash Internal Control Cash Controls Use of a Bank Reporting Cash The Sarbanes- Oxley Act Principles Limitations Control over cash receipts Control over

More information

ACCOUNTING 105 CONCEPTS REVIEW

ACCOUNTING 105 CONCEPTS REVIEW ACCOUNTING 105 CONCEPTS REVIEW A note from the tutors: This handout is designed to help you review important information as you study for your cumulative final exam. While it does cover many important

More information

Accounting 201 Comprehensive Practice Exam 2C Page 1

Accounting 201 Comprehensive Practice Exam 2C Page 1 Accounting 201 Comprehensive Practice Exam 2C Page 1 1. A business organized as a corporation a. is not a separate legal entity in most states. b. requires that stockholders be personally liable for the

More information

Chapter 1 Accounting in action

Chapter 1 Accounting in action Chapter 1 Accounting in action What is Accounting Accounting is the financial information system that consists of three basic activities-it identifies, records, and communicates the economic events of

More information

1. A set of procedures for controlling cash payments by preparing and approving vouchers before payments are made is known as a voucher system.

1. A set of procedures for controlling cash payments by preparing and approving vouchers before payments are made is known as a voucher system. Accounting II True/False Indicate whether the sentence or statement is true or false. 1. A set of procedures for controlling cash payments by preparing and approving vouchers before payments are made is

More information

Chapter 1. Introduction to Accounting and Business

Chapter 1. Introduction to Accounting and Business 1 Chapter 1 Introduction to Accounting and Business Learning Objective 1 Describe the nature of a business, the role of accounting, and ethics in business. Nature of Business and Accounting A business

More information

Accounting Cycle. Matching Principle

Accounting Cycle. Matching Principle CHAPTER 3 Accounting Cycle Analyze and record the transactions Post the transactions and prepare trial balance Adjust the accounts and prepare trial balance Prepare the financial statements Close the accounts

More information

> DO IT! Chapter 3 Adjusting the Accounts. Timing Concepts. Adjusting Entries for Deferrals D-12. Solution

> DO IT! Chapter 3 Adjusting the Accounts. Timing Concepts. Adjusting Entries for Deferrals D-12. Solution Chapter 3 Adjusting the Accounts Timing Concepts Review the glossary terms. Study carefully the revenue recognition principle, the expense recognition principle, and the time period assumption. Several

More information

Chapter 5 Accounting for Merchandising Operations

Chapter 5 Accounting for Merchandising Operations Chapter 5 Accounting for Merchandising Operations Purchase Transactions Purchaser records goods at cost. When goods are returned, purchaser reduces Inventory. On September 5, De La Hoya Company buys merchandise

More information

In the event of a tie, the score on the last ten questions will be used as a tie-breaker.

In the event of a tie, the score on the last ten questions will be used as a tie-breaker. NEW YORK STATE ASSOCIATION FUTURE BUSINESS LEADERS OF AMERICA SPRING DISTRICT MEETING ACCOUNTING I 2010 TEST DIRECTIONS 1. Complete the information requested on the answer sheet. PRINT your name on the

More information

The Measurement of the Business Income. 1 by recording revenues when earned and expenses when incurred. 2 by adjusting accounts

The Measurement of the Business Income. 1 by recording revenues when earned and expenses when incurred. 2 by adjusting accounts Recap from Week 3 The Measurement of the Business Income The primary objective of accounting is measuring the net income of the businesses according to the generally accepted accounting principles. Net

More information

ANSWERS TO QUESTIONS FOR GROUP LEARNING

ANSWERS TO QUESTIONS FOR GROUP LEARNING Accounting for a 5 Merchandising Business ANSWERS TO QUESTIONS FOR GROUP LEARNING Q5-1 A merchandising business has a major revenue reduction called cost of goods sold. The computation of cost of goods

More information

Financial Statements Tutorial

Financial Statements Tutorial Financial Statement Review: Financial Statements Tutorial There are four major financial statements used to communicate information to external users (creditors, investors, suppliers, etc.) - 1. Balance

More information

Accounting Skills Assessment Practice Exam Page 1 of 10

Accounting Skills Assessment Practice Exam Page 1 of 10 NAU ACCOUNTING SKILLS ASSESSMENT PRACTICE EXAM & KEY 1. A company received cash and issued common stock. What was the effect on the accounting equation? Assets Liabilities Stockholders Equity A. + NE +

More information

Assignment 6: Adjusting Journal Entries and

Assignment 6: Adjusting Journal Entries and Name: Due Date: December 12, 2011 Score: out of a possible 47 Course value: 7.5% Assignment 6: Adjusting Journal Entries and Worksheets A series of transactions are presented and their journal entries

More information

Review of Accounting Principles

Review of Accounting Principles Appendix A Review of Accounting Principles Appendix A is a review of basic accounting principles and procedures. Standard accounting procedures are based on the double-entry system. This means that each

More information

For more course tutorials visit www.uoptutorial.com

For more course tutorials visit www.uoptutorial.com ACC 290 Final Exam Guide (New) Click Here to Buy the Tutorial http://www.uoptutorial.com/index.php?route=product/ product&path=737&product_id=11101 For more course tutorials visit www.uoptutorial.com ACC

More information

Jackson Company recorded the following cash transactions for the year:

Jackson Company recorded the following cash transactions for the year: ACC 290 Final Exam Guide (New) Click Here to Buy the Tutorial http://www.uoptutorial.com/index.php?route=product/product&path=7 37&product_id=11101 For more course tutorials visit www.uoptutorial.com ACC

More information

Fraud, Internal Control, and Cash

Fraud, Internal Control, and Cash Chapter 7 Fraud, Internal Control, and Cash 7-1 Learning Objectives After studying this chapter, you should be able to: 1. Define fraud ( 欺 騙 ) and internal control ( 內 部 控 制 ). 2. Identify the principles

More information

Internal Control and Cash

Internal Control and Cash Accounting Principles, 7 th Edition Weygandt Kieso Kimmel Chapter 8 Internal Control and Cash Prepared by Naomi Karolinski Monroe Community College and Marianne Bradford Bryant College John Wiley & Sons,

More information

EXERCISES. Does not normally require adjustment. Normally requires adjustment (AE).

EXERCISES. Does not normally require adjustment. Normally requires adjustment (AE). EXERCISES Ex. 3 1 1. Prepaid expense 2. Accrued revenue 3. Unearned revenue 4. Accrued expense 5. Unearned revenue 6. Prepaid expense 7. Accrued expense 8. Accrued expense Ex. 3 2 Account Accounts Receivable...

More information

Chapter 6. Inventories

Chapter 6. Inventories 1 Chapter 6 Inventories 2 Learning objectives 1. Define and identify the items included in inventory at the reporting date 2. Determine the s to be included in the value of inventory 3. Describe the four

More information

1. Analyze the following T-account in the ledger of Moxy Pool Supply Company

1. Analyze the following T-account in the ledger of Moxy Pool Supply Company Name: Date: 1. Analyze the following T-account in the ledger of Moxy Pool Supply Company Mdse. Inventory 5,000 400 If $5,000 in the Inventory account represents merchandise purchased from a supplier, we

More information

Basic Accounting Principles

Basic Accounting Principles Basic Accounting Principles Basic Accounting Model The basic accounting model represents the relationship between assets (what the company owns), liabilities (what the company owes), and owner s equity

More information

ACCT 652 Accounting. Review of last week. Review of last time (2) 1/25/16. Week 3 Merchandisers and special journals

ACCT 652 Accounting. Review of last week. Review of last time (2) 1/25/16. Week 3 Merchandisers and special journals ACCT 652 Accounting Week 3 Merchandisers and special journals Some slides Times Mirror Higher Education Division, Inc. Used by permission Michael D. Kinsman, Ph.D. Review of last week Some highlights of

More information

CHAPTER 2 REVIEW OF THE ACCOUNTING PROCESS. Lecture Outline

CHAPTER 2 REVIEW OF THE ACCOUNTING PROCESS. Lecture Outline CHAPTER 2 REVIEW OF THE ACCOUNTING PROCESS Overview Chapter 1 explained that the primary means of conveying financial information to investors, creditors, and other external users is through financial

More information

Chapter 4. Completing the accounting cycle

Chapter 4. Completing the accounting cycle 1 Chapter 4 Completing the accounting cycle 2 Learning objectives 1. Prepare an accounting worksheet and describe its purpose 2. Prepare a classified balance sheet and explain the major headings 3. Explain

More information

Chapter 5 Merchandising Operations

Chapter 5 Merchandising Operations Chapter 5 Merchandising Operations Financial Statements of a Service Company and a Merchandiser: - Service Companies: Revenues earned through performance of services. Examples: Dentists, Accounting Firms,

More information

TRANSACTIONS ANALYSIS EXAMPLE. Maxwell Partners Medical Diagnostic Services report the following information for 2011, their first year of operations:

TRANSACTIONS ANALYSIS EXAMPLE. Maxwell Partners Medical Diagnostic Services report the following information for 2011, their first year of operations: TRANSACTIONS ANALYSIS EXAMPLE Maxwell Partners Medical Diagnostic Services report the following information for 2011, their first year of operations: 1. Billings to clients for services provided: $350,000

More information

How To Account For Revenue Under Accrual Accounting

How To Account For Revenue Under Accrual Accounting BAT 4M: Chapter 3 ANSWERS TO QUESTIONS 01. (a) Under the time period assumption, an accountant is required to determine the relevance of each business transaction to specific accounting periods, and its

More information

ACCT 652 Accounting. Review of last week. Should you always take discounts? 5/17/15. ACCT652 Week 4 1

ACCT 652 Accounting. Review of last week. Should you always take discounts? 5/17/15. ACCT652 Week 4 1 ACCT 652 Accounting Week 4 Special Journals, Cash, and Internal Controls Some slides Times Mirror Higher Education Division, Inc. Used by permission Michael D. Kinsman, Ph.D. Review of last week Some highlights

More information

CENTURY 21 ACCOUNTING, 8e General Journal Chapter Objectives

CENTURY 21 ACCOUNTING, 8e General Journal Chapter Objectives CENTURY 21 ACCOUNTING, 8e General Journal Chapter Objectives Chapter 1 Starting A Proprietorship: Changes that Affect the Accounting Equation After studying Chapter 1, you will be able to: 1. Define accounting

More information

Glossary of Accounting Terms Peter Baskerville

Glossary of Accounting Terms Peter Baskerville Glossary of Accounting Terms Peter Baskerville Account for or 'bring to account': An accounting phrase used to describe the recording of a financial transaction that is required under the generally accepted

More information

THE ACCOUNTING INFORMATION SYSTEM

THE ACCOUNTING INFORMATION SYSTEM CHAPTER 3 THE ACCOUNTING INFORMATION SYSTEM OVERVIEW Accounting information must be accumulated and summarized before it can be communicated and analysed. In this chapter, we will discuss the steps involved

More information

CHAPTER 3. BE3-2 Advertising. Dec. 31 Advertising Supplies Expense 7200 Advertising Supplies 7200 to adjust. BE3-3 Bere Co.

CHAPTER 3. BE3-2 Advertising. Dec. 31 Advertising Supplies Expense 7200 Advertising Supplies 7200 to adjust. BE3-3 Bere Co. CHAPTER 3 BE3-2 Advertising Advertising Supplies Supplies Expense 8700 7200 7200 1500 7200 Dec. Advertising Supplies Expense 7200 Advertising Supplies 7200 BE3-3 Bere Co. Prepaid Insurance Insurance Expense

More information

CHAPTER 5 ACCOUNTING FOR MERCHANDISING OPERATIONS

CHAPTER 5 ACCOUNTING FOR MERCHANDISING OPERATIONS CHAPTER 5 ACCOUNTING FOR MERCHANDISING OPERATIONS LEARNING OBJECTIVES 1. IDENTIFY THE DIFFERENCES BETWEEN SERVICE AND MERCHANDISING COMPANIES. 2. EXPLAIN THE RECORDING OF PURCHASES UNDER A PERPETUAL INVENTORY

More information

GBA 521 Midterm Review Dr. Markelevich

GBA 521 Midterm Review Dr. Markelevich GBA 521 Midterm Review Dr. Markelevich Multiple Choice (3 points for each question) Identify the letter of the choice that best completes the statement or answers the question. Wynn Corp. Wynn Corp. reported

More information

Financial Accounting Study Guide Fall 2013 CH1 & 2 PART VI RATIOS

Financial Accounting Study Guide Fall 2013 CH1 & 2 PART VI RATIOS Financial Accounting Study Guide Fall 2013 CH1 & 2 PART VI RATIOS Name: Selected information from the financial statements of Miller Company for the year ended December 31, 2012, appears below: 2012 Current

More information

Income Statements. Accounting for Merchandising Operations

Income Statements. Accounting for Merchandising Operations Accounting Principles, 7 th Edition Weygandt Kieso Kimmel Income Statements Accounting for Merchandising Operations Prepared by Naomi Karolinski Monroe Community College and Marianne Bradford Bryant College

More information

Bookkeeping Proficiency

Bookkeeping Proficiency Bookkeeping Proficiency (Exam) Your AccountingCoach PRO membership includes lifetime access to all of our materials. Take a quick tour by visiting www.accountingcoach.com/quicktour. Table of Contents (click

More information

Student Solutions Manual to Accompany. Introduction to Financial Accounting. David Annand. Based on International Financial Reporting Standards

Student Solutions Manual to Accompany. Introduction to Financial Accounting. David Annand. Based on International Financial Reporting Standards Student Solutions Manual to Accompany Introduction to Financial Accounting Based on International Financial Reporting Standards David Annand Copyright 2014 David Annand Published by David Annand 4910C

More information

Exam 1 chapters 1-4 Needles 10ed

Exam 1 chapters 1-4 Needles 10ed Exam 1 chapters 1-4 Needles 10ed Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Which of the following is the most appropriate definition of accounting?

More information

Dr. M.D. Chase Accounting Principles Examination 2J Page 1

Dr. M.D. Chase Accounting Principles Examination 2J Page 1 Accounting Principles Examination 2J Page 1 Code 1 1. The term "net sales" refers to gross sales revenue reduced by sales discounts and transportation-in. 2. The cost of goods available for sale in a given

More information

Learning Goal 26. bal. 62,300 3,000

Learning Goal 26. bal. 62,300 3,000 S1 Learning Goal 26 Multiple Choice 1. c Remember that any entry to the Accounts Receivable account also requires an entry to a subsidiary account. 2. b 3. d Only the direct write-off method debits an

More information

Financial Accounting. (Exam)

Financial Accounting. (Exam) Financial Accounting (Exam) Your AccountingCoach PRO membership includes lifetime access to all of our materials Take a quick tour by visiting wwwaccountingcoachcom/quicktour Table of Contents (click to

More information

Chapter 13 Financial Statements and Closing Procedures

Chapter 13 Financial Statements and Closing Procedures Chapter 13 - Financial Statements and Closing Procedures Chapter 13 Financial Statements and Closing Procedures TEACHING OBJECTIVES 13-1) Prepare a classified income statement from the worksheet. 13-2)

More information

2. The balance in a deferred revenue account represents an amount that is Earned Collected a. Yes Yes b. Yes No c. No Yes d. No No.

2. The balance in a deferred revenue account represents an amount that is Earned Collected a. Yes Yes b. Yes No c. No Yes d. No No. Multiple choice (36%, 2%each): 1. Failure to record the expired amount of prepaid rent expense would not a. understate expense. b. overstate net income. c. overstate owners' equity. d. understate liabilities.

More information

COMPUTERIZED ACCOUNTING II Curriculum Content Frameworks

COMPUTERIZED ACCOUNTING II Curriculum Content Frameworks COMPUTERIZED ACCOUNTING II Curriculum Content Frameworks Please note: All assessment questions will be taken from the knowledge portion of these frameworks. Prepared by Loretta Burgess, Greenbrier High

More information

Study Guide - Final Exam Accounting I

Study Guide - Final Exam Accounting I Study Guide - Final Exam Accounting I True/False Indicate whether the sentence or statement is true or false. 1. Entries in a sales journal affect account balances in both the accounts receivable ledger

More information

Introductory Financial Accounting Course Outline

Introductory Financial Accounting Course Outline Aboriginal Financial Officers Association of Alberta Introductory Financial Accounting Course Outline ACCT 210: INTRODUCTORY FINANCIAL ACCOUNTING I... 1 ACCT 240: INTRODUCTORY FINANCIAL ACCOUNTING II...

More information

ACCOUNTING SCHOLAR.COM GENERAL ACCOUNTING CHEAT SHEET This sheet is not for unauthorized distribution.

ACCOUNTING SCHOLAR.COM GENERAL ACCOUNTING CHEAT SHEET This sheet is not for unauthorized distribution. ACCOUNTING SCHOLAR.COM GENERAL ACCOUNTING CHEAT SHEET This sheet is not for unauthorized distribution. Table of Contents 1. Balance Sheet & Assets, Liabilities & Shareholder s Equity (Pages 2 and 3) 2.

More information

The Work Sheet and the Closing Process

The Work Sheet and the Closing Process C H A P T E R 4 The Work Sheet and the Closing Process A systematic approach is essential for efficient and accurate processing of large amounts of information. Whether work sheets are on paper or computerized,

More information

CASH FLOW STATEMENT & BALANCE SHEET GUIDE

CASH FLOW STATEMENT & BALANCE SHEET GUIDE CASH FLOW STATEMENT & BALANCE SHEET GUIDE The Agriculture Development Council requires the submission of a cash flow statement and balance sheet that provide annual financial projections for the business

More information

The General Journal and the General Ledger

The General Journal and the General Ledger 4-1 McGraw-Hill 2009 The McGraw-Hill Companies, Inc. All rights reserved. Chapter 4 The General Journal and the General Ledger Section 1: The General Journal Section Objectives 1. Record transactions in

More information

Accounting 300A-10A The Operating Cycle: Worksheet/Closing Entries Page 1

Accounting 300A-10A The Operating Cycle: Worksheet/Closing Entries Page 1 Accounting 3A-1A The Operating Cycle: Worksheet/Closing Entries Page 1 THE WORKSHEET and CLOSING ENTRIES I. Review of Key Concepts and Terms: A. The purpose of the worksheet 1. To show that the accounts

More information

Sample Test for entrance into Acct 3110 and Acct 3310

Sample Test for entrance into Acct 3110 and Acct 3310 Sample Test for entrance into Acct 3110 and Acct 3310 1. Which of the following financial statements could properly have the following in the date line: For the Year Ended December 31, 2010"? a. Balance

More information

Adjusting and Closing Entries

Adjusting and Closing Entries Adjusting and Closing Entries Adjusting and Closing entries tend to be difficult to grasp at first. A reason for this might be due to the type of transactions requiring adjustment, which tend to be unfamiliar.

More information

Introduction to Accounting 2 Modul 1 Internal Control and Cash

Introduction to Accounting 2 Modul 1 Internal Control and Cash Introduction to Accounting 2 Modul 1 Internal Control and Cash After studying this chapter, you should be able to: 1. Describe the Sarbanes-Oxley Act of 2002 and its impact on internal controls and financial

More information

The Nature of Accounting Systems

The Nature of Accounting Systems Basic Accounting & Budgeting February 4, 2009 The Nature of Accounting Systems Accounting is the process of recording, classifying, summarizing, reporting and interpreting information about the economic

More information

Chapter 4. Completing the accounting cycle. Appendix 4A: Reversing entries

Chapter 4. Completing the accounting cycle. Appendix 4A: Reversing entries 1 Chapter 4 Completing the accounting cycle Appendix 4A: Reversing entries 2 Learning objective 1. Prepare reversing entries and describe their purpose 3 Reversing entries Reversing entries are optional

More information

Accounting Self Study Guide for Staff of Micro Finance Institutions

Accounting Self Study Guide for Staff of Micro Finance Institutions Accounting Self Study Guide for Staff of Micro Finance Institutions LESSON 5 Summarizing Changes in Financial Position OBJECTIVES The purpose of this lesson is to show how to summarize the transactions

More information

ACC 211/212: Double Entry Logs

ACC 211/212: Double Entry Logs ACC 211/212: Double Entry Logs Journal Entries: o Credits are always indented (account name and value). o The sum of debits will always equal the sum of credits. o The month name is required only for the

More information

Advanced Accounting. Chapter 4: Financial Reporting for a Departmentalized Business

Advanced Accounting. Chapter 4: Financial Reporting for a Departmentalized Business Advanced Accounting Chapter 4: Financial Reporting for a Departmentalized Business Financial statements are used to summarize financial info and then are used to evaluate the financial position and progress

More information

Supplement to CHAPTER 3 CLOSING ENTRIES AND THE WORK SHEET

Supplement to CHAPTER 3 CLOSING ENTRIES AND THE WORK SHEET Supplement to CHAPTER 3 CLOSING ENTRIES AND THE WORK SHEET Answers to Review Questions 1. No, the work sheet cannot be used as a substitute for the financial statements. It is a tool used in preparing

More information

CHAPTER 3: PREPARING FINANCIAL STATEMENTS

CHAPTER 3: PREPARING FINANCIAL STATEMENTS CHAPTER 3: PREPARING FINANCIAL STATEMENTS I. TIMING AND REPORTING A. The Accounting Period Time period assumption an organization s activities can be divided into specific time periods. Examples: a month,

More information

CHAPTER 3 THE ADJUSTING PROCESS

CHAPTER 3 THE ADJUSTING PROCESS 1. a. Under cash-basis accounting, revenues are reported in the period in which cash is received and expenses are reported in the period in which cash is paid. b. Under accrual-basis accounting, revenues

More information

Accounting Norms and Principles January 7, 2003

Accounting Norms and Principles January 7, 2003 1 Accounting Norms and Principles January 7, 2003 The purpose of an accounting system is to provide credit union management with complete and accurate financial information that can be used to operate

More information

Financial Statements for Manufacturing Businesses

Financial Statements for Manufacturing Businesses Management Accounting 31 Financial Statements for Manufacturing Businesses Importance of Financial Statements Accounting plays a critical role in decision-making. Accounting provides the financial framework

More information

Closing Entries and the Postclosing Trial Balance

Closing Entries and the Postclosing Trial Balance 6-1 McGraw-Hill 2009 The McGraw-Hill Companies, Inc. All rights reserved. Chapter Closing Entries and the Postclosing Trial Balance 6 Section 1: Closing Entries Section Objectives 1. Journalize and post

More information

CHAPTER 4. Adjusting the accounts and preparing financial statements CONTENTS

CHAPTER 4. Adjusting the accounts and preparing financial statements CONTENTS CHAPTER 4 Adjusting the accounts and preparing financial statements CONTENTS Demonstration problem 4.1 Adjusting entries and corrections 4.2 Adjusting centries and effect on financial statements 4.3 Adjusting

More information

CHAPTER 3 Solutions MEASURING BUSINESS INCOME

CHAPTER 3 Solutions MEASURING BUSINESS INCOME CHAPTER 3 Solutions MEASURING BUSINESS INCOME Chapter 3, SE 1. 1. 2. 3. 4. c b d a Chapter 3, SE 2. Dec. 31 Insurance Expense 800 Prepaid Insurance To record insurance expired during the year $460 + $1,040

More information

Accounting for a Merchandising Business

Accounting for a Merchandising Business Chapter 11 Accounting for a Merchandising Business ANSWERS TO SECTION 11.1 REVIEW QUESTIONS (text p. 428) The Merchandising Business 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 1. 2. 3. 4. 14. 15. Copyright

More information

(a) (i) Marking Scheme: 1 mark for definition and 1 mark for example.

(a) (i) Marking Scheme: 1 mark for definition and 1 mark for example. T A S M A N I A N Accounting C E R T I F I C A T E Subject Code ACC5C O F E D U C A T I O N Question 1 T A S M A N I A N Q U A L I F I C A T I O N S A U T H O R I T Y (a) (i) Marking Scheme: 1 mark for

More information

Veideretti Cabinets, Incorporated

Veideretti Cabinets, Incorporated Veideretti Cabinets, Incorporated 2 nd Web-Based Edition Transactions for June 24-30, And the June 30 th Bank Reconciliation Page 1 TRANSACTIONS FOR JUNE 24-26 June 24: Paying an expense A $120 check (30429)

More information

Chapter 04 - Accounting for Merchandising Operations. Chapter Outline

Chapter 04 - Accounting for Merchandising Operations. Chapter Outline I. Merchandising Activities Products that a company acquires to resell to customers are referred to as merchandise (also called goods). A merchandiser earns net income by buying and selling merchandise.

More information

We now examine the documents and procedures used to perform each step. Step 1: Capture Transaction Data on Source Documents

We now examine the documents and procedures used to perform each step. Step 1: Capture Transaction Data on Source Documents Journals and Ledgers TRANSACTION PROCESSING: DOCUMENTS AND PROCEDURES IN A MANUAL AIS One basic function of the AIS is the efficient and effective processing of data about a company s transactions. Transaction

More information

Chapter 2: Debits and Credits. 2012 Educating Bookkeepers for Business, Inc.

Chapter 2: Debits and Credits. 2012 Educating Bookkeepers for Business, Inc. Chapter 2: Debits and Credits Think through and record transactions (write sentences) using T-accounts and journal entries. Debits and Credits Every transaction (sentence in the story of what happened

More information

Gold Run Snowmobile. Adjusting Entries and Closing Entries For The Quarter Ended December 31. Final Project Evaluation. 5 th Edition.

Gold Run Snowmobile. Adjusting Entries and Closing Entries For The Quarter Ended December 31. Final Project Evaluation. 5 th Edition. Gold Run Snowmobile 5 th Edition Adjusting Entries and Closing Entries For The Quarter Ended December 31 and the Final Project Evaluation Page 1 ADJUSTING ENTRIES FOR THE QUARTER Using a copy of the December

More information

ACCOUNTING COMPETENCY EXAM SAMPLE EXAM. 2. The financial statement or statements that pertain to a stated period of time is (are) the:

ACCOUNTING COMPETENCY EXAM SAMPLE EXAM. 2. The financial statement or statements that pertain to a stated period of time is (are) the: ACCOUNTING COMPETENCY EXAM SAMPLE EXAM 1. The accounting process does not include: a. interpreting d. observing b. reporting e. classifying c. purchasing 2. The financial statement or statements that pertain

More information

SMART TOUCH LEARNING Balance Sheet May 31, 2013 $ 4,800. $ 48,700 Accounts receivable 2,600. 900 Inventory 30,500. 100 Supplies.

SMART TOUCH LEARNING Balance Sheet May 31, 2013 $ 4,800. $ 48,700 Accounts receivable 2,600. 900 Inventory 30,500. 100 Supplies. 3 The Adjusting Process Are these balances correctly showing everything the company OWNS? SMART TOUCH LEARNING ance Sheet May 31, 2013 Are these balances correctly showing everything the company OWES?

More information

CHAPTER 4 COMPLETING THE ACCOUNTING CYCLE SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM S TAXONOMY. True-False Statements

CHAPTER 4 COMPLETING THE ACCOUNTING CYCLE SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM S TAXONOMY. True-False Statements CHAPTER 4 COMPLETING THE ACCOUNTING CYCLE SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM S TAXONOMY Item SO BT Item SO BT Item SO BT Item SO BT Item SO BT True-False Statements 1. 1 K 9. 2 K 17. 4

More information

Financial Statement Consolidation

Financial Statement Consolidation Financial Statement Consolidation We will consolidate the previously completed worksheets in this financial plan. In order to complete this section of the plan, you must have already completed all of the

More information

ACC 120 PRINCIPLES OF FINANCIAL ACCOUNTING

ACC 120 PRINCIPLES OF FINANCIAL ACCOUNTING ACC 120 PRINCIPLES OF FINANCIAL ACCOUNTING COURSE DESCRIPTION: Prerequisites ENG 090, and RED 090 or DRE 098; MAT 070 or DMA 010, 020, 030, 040, or satisfactory score on placement test Corequisites: None

More information

a. $ 65,000. b. $ 80,000. c. $130,000. d. $145,000.

a. $ 65,000. b. $ 80,000. c. $130,000. d. $145,000. 注 意 1. 本 試 題 卷 共 50 題, 總 分 100 分 第 01-15 題, 每 題 1.75 分, 合 計 26.25 分 ; 第 16-35 題, 每 題 2 分, 合 計 40 分 ; 第 36-50 題, 每 題 2.25 分, 合 計 33.75 答 錯 不 倒 扣 2. 請 將 答 案 按 試 題 題 號, 依 序 填 入 答 案 卡 1.FastForward had cash

More information