Unit 1: Accounting for a Service Business Organized as a Proprietorship (Chapters 2 10)

Transcription

1 Unit 1: Accounting for a Service Business Organized as a Proprietorship (Chapters 2 10) I. Analyzing Business Transactions A. Effect of business transactions on the fundamental accounting equation B. Principles of debit and credit C. Recording balances in the account (opening entry) D. Recording changes in asset liability and owner s equity accounts II. Journalizing (Chapter 5) A. General Journal (book of original entry) B. Source documents C. Journalizing Procedures 1. Date 2. Titles of the accounts to be debited and credited 3. Amounts of the debits and credits 4. Source Document (cross- reference for auditing) D. Error Correction (Chapter 8 - pp ) III. Posting (Chapter 6) A. Chart of Accounts B. General Ledger C. Ledger account format (four amount columns) 1. Account Title 2. Account Number 3. Date Accounting Unit 1 p. 1

2 4. Item 5. Posting Reference 6. Debit 7. Credit 8. Debit Balance 9. Credit Balance D. Opening an account E. Journal to general ledger posting 1. Recording Date 2. Amount of the debit or credit 3. Amount of the debit or credit balance 4. Posting References (In general ledger AND general journal) IV. Cash Control Systems (Banking and Petty Cash) (Chapter 7 & Checking Account Simulation Packet Provided By Rome Savings Bank) A. Checking Accounts 1. Opening an account - Authorizing Signatures 2. Preparing Checks a) Parts of a check b) Preparing Check Stubs/Check Register c) Voiding a check 3. Depositing Cash 4. Endorsing Checks a) Blank endorsement Accounting Unit 1 p. 2

3 b) Special endorsement c) Restrictive endorsement B. Bank Statements 1. Verifying a Bank Statement 2. Reconciling a Bank Statement 3. Recording Service Charges, Interest, EFTs, and ATM withdrawals 4. Journalizing Bank Service Charges, Interest on Funds, and EFTs C. Dishonored Checks 1. Reasons 2. Recording a Dishonored Check on Check Stub/Check Register 3. Journalizing a Dishonored Check D. Petty Cash 1. Establishing the fund 2. Writing the check to establish the fund 3. Journalizing the establishment of the fund 4. Opening the Petty Cash Account in the general ledger E. Operating the Petty Cash Fund 1. Receipts (audit trail) 2. Petty cash vouchers 3. Entries in the petty cash book F. Summarizing petty cash 1. Prove petty cash fund Accounting Unit 1 p. 3

4 2. Record petty cash short or over 3. Obtain the check to replenish the fund 4. Journalize the entry to replenish the fund 5. Record replenishing entry in the petty cash book V. Completion of the Accounting Cycle (Single Proprietorship- Service Business) A. Eight amount column work sheet 1. Trial balance 2. Adjustments a) Supplies b) Prepaid Insurance 3. Income Statement Net Income or Loss 4. Balance Sheet B. Financial statements 1. Income Statement a) Source of data b) Components (1) Revenue (2) Expenses (3) Net Income or Loss 2. Balance Sheet (account form) a) Source of data b) Components (1) Assets Accounting Unit 1 p. 4

5 (2) Liabilities (3) Owner s Equity 3. Period end closing procedures a) Adjusting Entries b) Closing Entries (1) Function of the Income Summary Account (2) Journalizing and posting closing entries c) Post-closing trial balance VI. Automated Accounting Cycle (Single Proprietorship-Service Business) A. Completion of Worksheet utilizing Microsoft Excel B. Use of Automated Accounting Software Topic: Analyzing Business Transactions The student must be able to: 1. Identify accounts as assets, liabilities, or owner s equity (D) 2. Classify accounts as assets, liabilities, or owner s equity (D) 3. Identify the debit or credit sides of a T account (D) 4. Identify the normal balance side of a T account (D) 5. Enter the account title and beginning balance in each T-account (D) 6. Analyze a business transaction and determine its effect on asset, liability, and owner s equity accounts (D) 7. Utilize a T- account to analyze transactions showing which accounts are debited or credited for each transaction. (P) 8. Verify the equality of debits and credits for each transaction. (P) Topic: Journalizing The student will be able to: 1. Identify accounting concepts and practices related to journalizing transactions and correcting simple errors. (D) 2. Explain the purpose of journalizing (D) 3. Identify journalizing procedure (D) 4. Explain the significance of source documents (D) 5. Analyze a business transaction into its debit and credit parts given a description of the transaction. (D) 6. Explain the importance of an audit trail (D) 7. Journalize selected business transactions (P) Accounting Unit 1 p. 5

6 Topic: Posting The student will be able to: 1. Identify accounting concepts and practices related to posting from a general journal to a general ledger (D) 2. Prepare a chart of accounts for a service business organized as a proprietorship. (P) 3. Explain the need for a general ledger. (D) 4. Explain the format of a four amount column general ledger account. (D) 5. Open the general ledger accounts (P) 6. Post amounts from a general journal to a general ledger (P) Topic: Cash Control Systems (Banking and Petty Cash) The students will be able to: 1. Identify accounting concepts and practices related to using a checking account. (D) 2. Prepare business papers (checks, deposit slips, check stubs, check registers) related to using a checking account. (P) 3. Reconcile a bank statement (P) 4. Journalize entries for establishing and replenishing a petty cash account. (P) 5. Journalize selected transactions related to using a checking account and a petty cash fund. (P) Topic: Completion of the Accounting Cycle (Single Proprietorship- Service Business) The students will be able to: 1. Identify accounting concepts and practices related to a work sheet for a service business organized as a proprietorship. (D) 2. Prepare a trial balance. (P) 3. Plan adjustments for supplies and prepaid insurance. (D) 4. Complete a worksheet for a service business organized as a proprietorship. (P) 5. Identify selected procedures for finding and correcting errors in accounting records. (D) 6. Identify accounting concepts and practices related to preparation of financial statements for a service business organized as a proprietorship. (D) 7. Prepare an income statement for a service business organized as a proprietorship. (P) 8. Analyze an income statement using component percentages. (P) 9. Prepare a balance sheet for a service business organized as a proprietorship. (P) 10. Identify accounting concepts and practices related to adjusting and closing entries for a service business organized as a proprietorship. (D) 11. Record adjusting entries for a service business organized as a proprietorship. (P) 12. Record closing entries for a service business organized as a proprietorship. 13. Prepare a post-closing trial balance for a service business organized as a proprietorship. (P) Topic: Automated Accounting Cycle (Single Proprietorship- Service Business) The student will be able to: Accounting Unit 1 p. 6

7 1. Complete an 8-column worksheet utilizing Microsoft Excel 2. Utilize South and Western Automated Accounting Software to enter transactions and produce reports Key Vocabulary Unit1 T-account (p.53) - An accounting device used to analyze transactions. debit (p.54) - An amount recorded on the left side of a T account. credit (p. 54) - An amount recorded on the right side of a T account. chart of accounts (p.55) - A list of accounts used by a business. contra account (p.63) - An account that reduces a related account on a financial statement. journal (p. 73) - A form for recording transactions in chronological order. journalizing (p.73) - Recording transactions in a journal. entry (p. 73) - Information for each transaction recorded in a journal. general journal (p. 73) - A journal with two amount columns in which all kinds of entries can be recorded. double-entry accounting (p.74) - The recording of debit and credit parts of a transaction. source document (p.74) - A business paper from which information is obtained for a journal entry. check (p.74) - A business form ordering a bank to pay cash from a bank account. receipt (p. 75) - A business form giving written acknowledgement for cash received. memorandum (p.76) - A form on which a brief message is written describing a transaction. ledger (p. 96) - A group of accounts. general ledger (p. 96) - A ledger that contains all accounts needed to prepare financial statements. account number (p. 96) - The number assigned to an account. file maintenance (p. 97) - The procedure for arranging accounts in a general ledger, Accounting Unit 1 p. 7

8 assigning account numbers, and keeping records current. opening an account (p. 99) - Writing an account title and number on the heading of an account. posting (p. 100) - Transferring information from a journal entry to a ledger account. proving cash (p. 111) - Determining that the amount of cash agrees with the accounting records. checking account (p. 131) - A bank account from which payments can be ordered by a depositor. endorsement (p. 133) - A signature or stamp on the back of a check transferring ownership. blank endorsement (p. 133) - An endorsement consisting only of the endorser s signature. special endorsement (p. 134) - An endorsement indicating a new owner of a check. restrictive endorsement (p. 134) - An endorsement restricting the further transfer of a check s ownership. postdated check (p. 136) - A check with a future date on it. bank statement (p. 138) - A report of deposits, withdrawals, and bank balance sent to a depositor by a bank. dishonored check (p. 143) - A check that a bank refuses to pay. electronic funds transfer (p. 146) - A computerized cash payments system that uses electronic impulses to transfer funds. petty cash (p. 147) - An amount of cash kept on hand and used for making small payments. petty cash slip (p. 149) - A form showing proof of a petty cash payment. fiscal period (p. 171) - The length of time for which a business summarizes and reports financial information. worksheet (p. 172) - A columnar accounting form used to summarize the general ledger information needed to prepare financial statements. trial balance (p. 172) - A proof of the equality of debits and credits in a general ledger. Accounting Unit 1 p. 8

9 adjustments (p. 175) - Changes recorded on a work sheet to update general ledger accounts at the end of a fiscal period. income statement (p. 178) - A financial statement showing the revenue and expenses for a fiscal period. net income (p. 180) - The difference between total revenue and total expenses when total revenue is greater. net loss (p. 182) - The difference between total revenue and total expenses when total expenses are greater. component percentage (p. 197) The percentage relationship between one financial statement item and the total that includes that item. adjusting entries (p. 211) - Journal entries recorded to update general ledger account at the end of a fiscal period. permanent accounts (p. 214) - Accounts used to accumulate information from one fiscal period to the next. temporary accounts (p. 215) - Accounts used to accumulate information until it is transferred to the owner s capital account. closing entries (p. 215) - Journal entries used to prepare temporary accounts for a new fiscal period. post-closing trial balance (p. 226) - A trial balance is prepared after the closing entries are posted. accounting cycle (p. 227) - The series of accounting activities included in recording financial information for a fiscal period. Accounting Unit 1 p. 9

10 Unit 2: Accounting for a Merchandise Business Organized as a Partnership (Chapters 11 17) VII. Partnership VIII. Merchandising Business A. Primary Trading Accounts 1. Merchandise Inventory 2. Purchases (merchandise) 3. Sales (merchandise) B. Source documents 1. Purchase invoice 2. Sales invoice 3. Check stub IX. Processing Financial Data Using Special Journals A. Purchases Journal 1. Journalizing merchandise purchases invoices 2. Posting daily transactions to the accounts payable subsidiary ledger (three amount columns) 3. Summarizing the journal 4. Posting the summary entry a) Purchases b) Accounts Payable (controlling account) B. Cash Payments Journal (four amount columns) Accounting Unit 1 p. 10

11 1. Column headings a) General Ledger Debit and Credit b) Accounts Payable Debit c) Cash Credit 2. Journalizing Cash Payments a) Merchandise for Cash b) Supplies for Cash c) Cash Payment on Account d) Cash Payment of an Expense e) Cash Payment to Replenish Petty Cash f) Cash Withdrawal 3. Posting daily transactions a) Entries to the general ledger b) Entries to the accounts payable subsidiary ledger (three amount columns) 4. Summarizing the journal 5. Posting the special column totals to the general ledger accounts C. Sales Journal (three amount columns) 1. Column Headings a) Accounts Receivable Debit b) Sales Tax Payable Credit c) Sales Credit 2. Journalizing Sales Invoices (Sales on Account) Accounting Unit 1 p. 11

12 3. Posting daily transactions to the accounts receivable subsidiary ledger (three amount columns) 4. Summarizing the journal 5. Posting the special column totals to the general ledger accounts D. Cash Receipts Journal (five amount columns) 1. Column headings a) General Ledger Credit b) Accounts Receivable Credit c) Sales Credit d) Sales Tax Payable Credit e) Cash Debit 2. Journalizing Cash Receipts a) Cash Receipts on Account b) Cash and Credit Card Sales 3. Posting daily transactions a) Entries to the general ledger b) Entries to the accounts receivable subsidiary ledger (three amount columns) 4. Summarizing the journal 5. Posting the special column totals to the general ledger accounts E. General Journal (two amount columns) 1. Journalizing Other Transactions a) Buying Supplies on Account b) Merchandise Withdrawal Accounting Unit 1 p. 12

13 2. Posting Transactions a) General Ledger b) Subsidiary Ledgers F. Schedules 1. Accounts Receivable 2. Accounts Payable X. Introduction to Payroll A. Source Documents 1. Time Cards 2. Employee s Withholding Allowance (W-4) B. Mandatory Deductions 1. Employee Income Tax a) Marital Status b) Withholding Allowance 2. Employee and Employer Social Security Tax (FICA) 3. Federal Unemployment Tax 4. State Income Tax C. Voluntary Deductions D. Payroll Register E. Payroll Checks Payment of Employees F. Employee Earnings Record G. Processing Payroll Entries Accounting Unit 1 p. 13

14 1. Journalizing employer s payroll tax liability 2. Journalizing employee payroll information H. Reporting Withholding and Payroll Taxes 1. Form 941 Employer s Quarterly Federal Tax Return 2. Journalizing employer s payroll tax payment 3. Form W-2, Wage and Tax Statement 4. Form W-3, Transmittal of Income and Tax Statements XI. Completion of the Accounting Cycle (Merchandising Business organized as a Partnership) A. Eight amount column worksheet B. Adjustments 1. Merchandise Inventory 2. Supplies 3. Prepaid Insurance C. Financial Statements for a Merchandising Business Organized as a Partnership 1. Income Statement a) Components (1) Revenue (Net Sales Income) (2) Cost of Merchandise (Goods) Sold (3) Gross Profit or Loss on Sales (4) Expenses (5) Net Income or Net Loss Accounting Unit 1 p. 14

15 b) Component Percentages 2. Distribution of Net Income Statement 3. Owners Equity Statement a) Beginning Capital Balance for the fiscal period b) Share of Net Income or Loss c) Withdrawals d) Net Increase or Decrease in Capital e) Ending Capital Balance 4. Balance Sheet (Report Form) a) Assets b) Liabilities c) Owner s Equity D. Period end Closing Procedures 1. Journalizing adjusting entries 2. Journalizing Closing Entries 3. Post-closing trial balance XII. Automated Accounting Cycle (Merchandising Business organized as a Partnership A. Completion of a Worksheet utilizing Microsoft Excel B. Use of an automated accounting package Topic: Partnership The student must be able to: 9. Identify accounting concepts and practices related partnership (D) Topic: Merchandising Business Accounting Unit 1 p. 15

16 The student must be able to: 8. Identify accounting concepts and practices related to merchandising business (D) 9. Identify accounts unique to a merchandising business (D) 10. Compare and contrast transactions between a merchandising business and a service business (D) 11. Identify source documents encountered in a merchandising business. (D) Topic: Processing Financial Data Using Special Journals The student must be able to: 7. Explain the advantage of using special journals in a specialized journal system (D) 8. Identify the accounting concepts and practices related to purchases and cash payments for a merchandising business. (D) 9. Explain the use of a purchases journal (D) 10. Analyze and journalize purchases transactions for a merchandising business (P) 11. Explain the use of a cash payments journal (D) 12. Analyze and journalize cash payments transactions for a merchandising business (P) 13. Total and rule a purchases journal (P) 14. Prove and rule a cash payments journal (P) 15. Identify the accounting concepts and practices related to sales and cash receipts for a merchandising business. (D) 16. Explain the use of a sales journal (D) 17. Analyze and journalize sales transactions for a merchandising business (P) 18. Explain the use of a cash receipts journal (D) 19. Analyze and journalize cash receipts transactions for a merchandising business (P) 20. Identify accounting practices related to posting from purchases, cash payments, general, sales, and cash receipts journals. (D) 21. Explain the procedure for posting to a general ledgers and subsidiary ledgers. (D) 22. Prepare a schedule of accounts payable and accounts receivable. (P) Topic: Introduction to Payroll The students must be able to: 1. Identify accounting practices related to payroll records. (D) 2. Calculate regular and overtime hours. (P) 3. Calculate gross earnings (P) 4. Locate appropriate taxes using tax tables (P) 5. Calculate employee deductions. (P) 6. Calculate employee net pay. (P) 7. Complete payroll records (Payroll Register, Employee Earnings Record). (P) 8. Prepare payroll checks. (P) 9. Analyze and journalize payroll transactions. (P) 10. Prepare a Form 941 Employer s Quarterly Federal Tax Return. (P) Topic: Completion of the Accounting Cycle (Merchandising Business organized as a Partnership) The students must be able to: Accounting Unit 1 p. 16

17 6. Identify accounting concepts and practices related to a worksheet for a merchandising business. (D) 7. Plan adjustments on a work sheet for a merchandising business. (P) 8. Complete a work sheet for a merchandising business. (P) 9. Identify accounting concepts and practices related to financial statements for a merchandising business organized as a partnership. (D) 10. Prepare an income statement for a merchandising business organized as a partnership. (P) 11. Analyze an income statement using component percentages for a merchandising business organized as a partnership. (P) 12. Prepare a distribution of net income statement for a merchandising business organized as a partnership. (P) 13. Prepare an owners equity statement for a merchandising business organized as a partnership. (P) 14. Prepare a balance sheet for a merchandising business organized as a partnership. (P) Topic: Automated Accounting Cycle (Merchandising Business organized as a Partnership The students will be able to: 14. Complete a worksheet utilizing Microsoft Excel 15. Utilize South and Western Automated Accounting Software to enter transactions and produce reports Key Vocabulary Unit 2 partnership (p. 246) - A business in which two or more persons combine their assets and skills. partner (p. 246) - Each member of a partnership. merchandising business (p. 246) - A business that purchases and sells goods. merchandise (p. 246) - Goods that a merchandising business purchases to sell. special journal (p. 246) - A journal used to record only one kind of transaction. cost of merchandise (p. 246) - The price a business pays for goods it purchases to sell. markup (p. 247) - The amount added to the cost of merchandise to establish the selling price. vendor (p. 247) - A business from which merchandise is purchased or supplies or other assets are bought. purchase on account (p. 247) - A transaction in which the merchandise purchased is to Accounting Unit 1 p. 17

18 be paid for later. purchases journal (p. 248) - A special journal used to record only purchase on account transactions. special amount column (p. 248) - A journal amount column headed with an account title. invoice (p. 248) - A form describing the goods sold, the quantity, and the price. purchase invoice (p. 248) - An invoice used as a source document for recording a purchase on account transaction. terms of sale (p. 249) - An agreement between a buyer and a seller about payment for merchandise. cash payments journal (p. 251) - A special journal used to record only cash payment transactions. general amount column (p. 251) - A journal amount column that is not headed with an account title. correcting entry (p. 262) - A journal entry made to correct an error in the ledger. customer (p. 271) - a person or business to whom merchandise or services are sold. sales tax (p. 271) - a tax on a sale of merchandise or services. sale on account (p.272) - a sale for which cash will be received at a later date. sales journal (p. 272) - a special journal used to record only sales on account transactions. sales invoice (p. 272) - an invoice used as a source document for recording a sale on account. cash receipts journal (p. 275) - a special journal used to record only cash receipt transactions. cash sale (p. 277) - a sale in which cash is received for the total amount of the sale at the time of the transaction. credit card sale (p. 277) - a sale in which a credit card is used for the total amount of the sale at the time of the transaction. subsidiary ledger (p. 290) - a ledger that is summarized in a single general ledger account. Accounting Unit 1 p. 18

19 accounts payable ledger (p. 290) - a subsidiary ledger containing only accounts for vendors from whom items are purchased or bought on account. accounts receivable ledger (p. 290) - a subsidiary ledger containing only accounts for charge customers. controlling account (p. 290) - an account in a general ledger that summarizes all accounts in a subsidiary ledger. schedule of accounts payable (p. 304) - a listing of vendor accounts, account balances and total amount due all vendors. schedule of accounts receivable (p. 313) - a listing of customer accounts, account balances, and total amount due from all customers. salary (p. 341) - The money paid for employee services. pay period (p. 341) - The period covered by a salary payment. payroll (p. 341) - The total amount earned by all employees for a pay period. total earnings (p. 343) - The total pay due for a pay period before deductions. payroll taxes (p. 344) - Taxes based on the payroll of a business. withholding allowance (p. 346) - A deduction from total earnings for each person legally supported by a taxpayer. Medicare (p. 346) - The federal health insurance program for people who have reached retirement age. FICA tax (p. 347) - A federal tax paid by employees and employers for old-age, survivors, disability, and hospitalized insurance. federal unemployment tax (p. 348) - A federal tax used for state and federal administrative expenses of the unemployment program. state unemployment tax (p. 348) - A state tax used to pay benefits to unemployed workers. payroll register (p. 348) - A business form used to record payroll information. tax base (p. 350) - The maximum amount of earnings on which a tax is calculated. net pay (p. 352) - The total earnings paid to an employee after payroll taxes and other Accounting Unit 1 p. 19

20 deductions. automatic check deposit (p. 354) - Depositing payroll checks directly to an employee s checking or savings account in a specific bank. employee earnings record (p. 355) - A business form used to record details affecting payments made to an employee. inventory (p. 407) the amount of goods on hand. merchandise inventory (p. 407) The amount of goods on hand for sale to the customer. cost of merchandise sold (p. 425) - The total original price of all merchandise sold during a fiscal period. gross profit on sales (p. 428) - The revenue remaining after cost of merchandise sold has been deducted. distribution of net income statement (p. 433) - A partnership financial statement showing net income or loss distribution to partners. owner s equity statement (p. 435) - A financial statement that summarizes the changes in owner s equity during a fiscal period. supporting schedule (p. 442) - A report prepared to give details about an item on a principal financial statement. cost of merchandise sold (p. 425) - The total original price of all merchandise sold during a fiscal period. gross profit on sales (p. 428)- The revenue remaining after cost of merchandise sold has been deducted. distribution of net income statement (p. 433) - A partnership financial statement showing net income or loss distribution to partners. owner s equity statement (p. 435)- A financial statement that summarizes the changes in owner s equity during a fiscal period. supporting schedule (p. 442) - A report prepared to give details about an item on a principal financial statement. Accounting Unit 1 p. 20