ACC 100 Chapter Notes - Chapter 3: Accounts Payable, Retained Earnings, Godaddy

34 views14 pages

tanpanda623

24 Feb 2021

School

Department

Course

Professor

For unlimited access to Textbook Notes, a Class+ subscription is required.

Document Summary

Using account names when recording transactions: summarize data in accounts, accounts financial reporting elements used to group information, ex. assets can be divided into cash and office supplies. Different accounts: asset, are always, owned or a legal right, have future benefit, due to a past transaction. Increase: : decrease: , assets accounts, cash, owned, has future benefit, due to past transaction, receive cash: , give away cash: , accounts receivable. Intangible assets: receive in the past, use in the future, legal right, receive: , use up: , examples, patents, licenses, copyrights, liabilities, are always, owed, settles with cash, goods, or services, due to a past transaction. Impact depends: basic vs. expanded accounting equation, examples, advertising, salary/wages, rent. Event: transaction = recorded, measurable, $ amount known, and, realized, exchange already occurred, event = not recorded, measurable, $ amount known, or, realized, exchange already occurred. The owner contributes 500 cash to start the business.

Related Questions

Assets	=	Liabilities + Equity
The left side of the accounting equation shows the economic resources of the company (what the company has).	=	The right side of the accounting equation summarizes who provided those assets: Creditors or the owners.

When a business is first formed, both sides of the equation are equal to zero. As transactions occur, they affect the accounting equation, but the accounting equation must always stay in balance. A transaction can increase both sides or decrease both sides. A transaction could also affect only one side by increasing and decreasing one side at the same time.

APPLYING THE CONCEPTS: Analyzing Changes to Assets, Liabilities and Equity

Thomas Company: The table below demonstrates the effect of the first three transactions for Thomas Company. Review the details of each transaction and determine the effect on the accounting equation. Then, enter the updated amounts for the assets, liabilities, and equity accounts (do not record the the transaction). Enter all amounts as positive numbers. If an updated balance is zero, enter "0".

Transaction	Assets	=	Liabilities	+	Equity
Beginning	$0	=	$0	+	$0
Investment in the Business The owner of the company has invested $26,000 cash into the business. This increases the assets of the business from its zero balance. The owner has a claim on the assets, so equity also increases from its zero balance. Make sure the equation stays in balance.	$	=	$	+	$
Borrow Cash The company borrows $13,000 cash from the local bank. This increases the assets from its balance after the first transaction. The company now owes the bank; therefore, the bank also has a claim on the assets. Thus, liabilities increase from their zero balance. Notice this transaction did not affect equity. The equation still needs to balance.	$	=	$	+	$
Purchase equipment The company pays cash for a piece of equipment costing $10,000. Make sure that the equation stays in balance. Remember, the left side of the equation summarizes the total assets. The company has merely exchanged one asset (cash) for another asset (equipment); the value of each asset is the same.	$	=	$	+	$

Jones Company: Analyze the accounting equation for another business, Jones Company. Assume that the assets are $66,000 and the liabilities are $26,400. By rearranging the accounting equation, you determine that equity is $.

During the year, the owner invested an additional $4,000 in the business. The company also paid off $2,500 of its debt. What would the accounting equation look like at the end of the year for Jones Company? Enter the updated amounts for Jones' accounting equation below.

Assets	=	Liabilities	+	Equity
$	=	$	+	$

APPLYING THE CONCEPTS: Analyzing the Effect of Revenues and Expenses

The equity component of the accounting equation can be affected by more than owner contributions. In any form of business, the owners take all revenues and expenses. Therefore, equity increases for revenue earned and decreases for expenses incurred. Also in any form of business, money can be distributed from the business to the owners. Distributions (in the form of cash or other assets) to the owner decrease the equity account. Smith Company had transactions affecting equity during the past year. The table below demonstrates the effect of these transactions for Smith Company. Review the details of each transaction and determine the effect on the accounting equation. Then, enter the updated amounts for the assets, liabilities, and equity accounts (do not record the the transaction). Enter all amounts as positive numbers.

Transaction	Assets	=	Liabilities	+	Equity
Beginning of the year	$320,000	=	$96,000	+	$224,000
Revenues earned: During the year, Smith Company earned revenues totalling $192,000. The cash has been collected from the customers for all revenue earned this year.	$	=	$	+	$
Expenses incurred: Smith Company incurred expenses totalling $134,400 during that same year. All of the expenses incurred this year were paid in cash.	$	=	$	+	$
Distributions: At the end of each quarter, the owner withdraws cash from Smith Company. The sum of those quarterly distributions was $5,760.	$	=	$	+	$

APPLYING THE CONCEPTS: Putting it all together

Letâs put all the pieces together now. Suppose that you are analyzing Martin Company. You know that at the beginning of the year, the assets equaled $320,000 and the liabilities equaled $176,000. During the year, assets increased by $48,000 and equity increased by $74,400. The change in equity includes all increases and decreases. Further analysis reveals that the changes in equity were caused by revenues of $172,800 and expenses totaling $112,320 during the year, and additional ownersâ investments of $50,400 in the first half of the year. Because of your understanding of the accounting equation, you realize that distributions (withdrawals) to the owner must have also occurred during the year. However, you must determine the amountfor those distributions.

What is the amount of distributions made to the owner of Martin Company during the year? $

Complete the equation below with amounts for the end of the year.

Assets	=	Liabilities	+	Equity
$	=	$	+	$

cyanbee498

ACC 100 Chapter Notes - Chapter 3: Accounts Payable, Retained Earnings, Godaddy

Document Summary

Get access

Related Documents

ACC 100 Chapter Notes - Chapter 3: Financial Statement, Retained Earnings, Accounting Equation

ACC 100 Lecture Notes - Lecture 3: Godaddy, Deferral, Accounts Payable

ACC 100 Lecture Notes - Lecture 3: Retained Earnings, Financial Statement, Deferral

Related Questions