ACCT207 Lecture Notes - Lecture 1: General Ledger, The Ledger, Trial Balance

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violetmuskrat44

4 Aug 2018

School

University of Delaware

Department

Accounting

Course

ACCT207

Professor

Vin Mar

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Document Summary

If an individual asset is increased, there must be a corresponding: decrease in another asset. An account shows a credit balance if the total of the credit amounts exceed the debits. The transaction is then entered in the journal. It discloses in one place the complete effect of a transactions. In the ledger, enter the appropriate columns of the debited accounts and debt amount shown in the journal. If incorrect accounts are used in journalizing or posting. Improper adjusting entries: dividend accounts, sub-divisions of (cid:396)etai(cid:374)ed ea(cid:396)(cid:374)i(cid:374)gs, (cid:449)hi(cid:272)h a(cid:396)e (cid:396)epo(cid:396)ted i(cid:374) the sto(cid:272)kholde(cid:396)s" equity section of the balance sheet, because revenues, expenses and dividends relate only to a given account period, they are considered temporary accounts. In contrast, all balance sheet accounts are considered permanent accounting because their balances are carried forward into future accounting periods: closing entries transfer net income or net losses and dividends to r/e, so the balance in.

Related Questions

QUESTION 1

Accounting is an information and measurement system thatidentifies, records, and communicates relevant, reliable, andcomparable information about an organization's businessactivities.

True

False

QUESTION 2

We use the accounting equation to identify what a company ownsand owes. The accounting equation is:

Assets = Liabilities + Equity

Assets = Liabilities â Equity

Assets = Liabilities + Revenues

Equity = Liabilities + Revenues

QUESTION 3

______ are beliefs that distinguish right from wrong. Thesebeliefs are accepted standards of gauging good and dishonestbehavior.

Accounting Standards

Ethics

Generally Accepted Accounting Principles

FASB

QUESTION 4

The _____ is a collection of all accounts within a companyâsaccounting system.

We use the accounting equation to identify what a company ownsand owes. _____ are resources a company owns or controls, _____ areclaims creditors have against a companyâs assets, and _____ is theownerâs claim on a companyâs assets.

QUESTION 6

In double entry accounting a credit to an asset account willrepresent an increase in the asset account balance; and a debitwill represent a decrease in the asset account balance.

True

False

QUESTION 7

The purchase of supplies on credit will ____ assets and ____liabilities.

During the accounting cycle, we analyze transactions toprepare statements.

True

False

QUESTION 9

The supplies account for a company has a $1,000 debit balanceat the beginning of the year. Supplies of $2,000 were purchasedduring the year and debited to the Supplies account. A December 31physical count shows $500 of supplies remaining at the end of theyear. Assume no other adjusting entries are made during the year.Using the 3-step process for creating adjusting entries, calculatethe adjustment amount for supplies (no journal entry isrequired).

During the accounting cycle, to complete step 7 youwould:

Prepare post-closing trial balance--Test clerical accuracy ofthe closing procedures.

Prepare adjusted trial balance--Summarize adjusted ledgeraccounts and amounts.

Prepare statements--Use adjusted trial balance to preparefinancial statements.

Close--Journalize and post entries to close temporaryaccounts.

QUESTION 11

The three financial statements that should be prepared duringthe accounting cycle are the:

Balance sheet, adjusted trial balance, income statement

Balance sheet, unadjusted trial balance, Statement of OwnerâsEquity

Income statement, adjusted trial balance, Statement of OwnerâsEquity

Balance sheet, Income statement, Statement of OwnerâsEquity

QUESTION 12

An optional working paper, which is not a required report oran accounting record, but is used to prepare a company's unadjustedtrial balance, adjusting entries, adjusted trial balance, andfinancial statements is a(n):

Adjusted trial balance

Worksheet

Post-closing trial balance

Unadjusted trial balance

General ledger

QUESTION 13

The two goals for completing the closing process are:

To identify accounts for closing and record the closingentries

To journalize and post transactions

To post transactions and prepare post-closing trialbalance

To reset revenues, expenses, and withdrawal account balancesto zero at the end of each period, and help summarize an accountingperiodâs revenues and expenses.

QUESTION 14

Fill in the Blank: The _____ describes a companyâs financialposition â by the types and amounts of assets, liabilities, andequity -- at a point in time.

QUESTION 15

Return on Assets is useful in evaluating management, analyzingand forecasting profits, and planning activities.

True

False

QUESTION 16

The Income Statement:

Identifies cash inflows (receipts) and cash outflows(payments) over a period-of-time.

Summarize adjusted ledger accounts and amounts

Describes a companyâs revenues and expenses along with theresulting net income or net loss -- over a period-of-time due toearnings activities

Resets revenues, expenses, and withdrawal account balances tozero at the end of each period.

QUESTION 17

An internal control system consists of the policies andprocedures used to:

Protect assets and Ensure reliable accounting

Urge adherence to company policies and Promote efficientoperations

All of the above

None of the above.

QUESTION 18

The cost-benefit principle is the second limitation of_______.

Bank reconciliations

Petty cash controls

Voucher system of controls

Internal controls

QUESTION 19

The Unadjusted Trial Balance columns of a company's work sheetshows the Store Supplies account with a balance of $750. TheAdjustments columns shows a credit of $425 for supplies used duringthe period. The amount shown as Store Supplies in the Balance Sheetcolumns of the work sheet is:

A company shows a $600 balance in Prepaid Rent in theUnadjusted Trial Balance columns of the work sheet. The Adjustmentscolumns show expired rent of $200. This adjusting entry resultsin:

$200 decrease to net income

$200 increase to net income

$200 different between the debit and credit columns of theUnadjusted Trial Balance

An error in the Balance Sheet

QUESTION 21

This semester we have discussed four major financialstatements. List the 4 financial statements and describe them. Makesure to include how they flow together.

QUESTION 22

Explain the purpose of adjusting entries at the end of aperiod.

peararmadillo281

Recording Transactions (Including Adjusting and Closing Entries), Preparing Financial Statements, and Performing Ratio Analysis

Josh and Kelly McKay began operations of their furniture repair shop (Furniture Refinishers, Inc.) on January 1, 2016. The annual reporting period ends December 31. The trial balance on January 1, 2017, was as follows:

Account Titles	Debit	Credit
Cash	â5,000
Accounts receivable	â4,000
Supplies	â2,000
Small tools	â6,000
Equipment
Accumulated depreciation (on equipment)
Other assets (not detailed to simplify)	â9,000
Accounts payable		â7,000
Notes payable
Wages payable
Interest payable
Income taxes payable
Unearned revenue
Common stock (60,000 shares, $0.10 par value)		â6,000
Additional paid-in capital		â9,000
Retained earnings		â4,000
Service revenue
Depreciation expense
Wages expense
Interest expense
Income tax expense
Remaining expenses (not detailed to simplify)
âTotals	26,000	26,000

Transactions during 2017 follow:

A.Borrowed $20,000 cash on July 1, 2017, signing a one-year, 10 percent note payable.

B.Purchased equipment for $18,000 cash on July 1, 2017.

C.Sold 10,000 additional shares of capital stock for cash at $0.50 market value per share at the beginning of the year.

D.Earned $70,000 in revenues for 2017, including $14,000 on credit and the rest in cash.

E.Incurred remaining expenses of $35,000 for 2017, including $7,000 on credit and the rest paid with cash.

F.Purchased additional small tools, $3,000 cash.

G.Collected accounts receivable, $8,000.

H.Paid accounts payable, $11,000.

I..Purchased $10,000 of supplies on account.

J.Received a $3,000 deposit on work to start January 15, 2018.

K.Declared and paid a cash dividend, $10,000.

Data for adjusting entries:

L.Supplies of $4,000 and small tools of $8,000 were counted on December 31, 2017 (debit Remaining Expenses).

M.Depreciation for 2017, $2,000.

N.Interest accrued on notes payable (to be computed).

O.Wages earned since the December 24 payroll but not yet paid, $3,000.

P.Income tax expense was $4,000, payable in 2018.

Required:

1.Set up T-accounts for the accounts on the trial balance and enter beginning balances.

2.Prepare journal entries for transactions (a) through (k) and post them to the T-accounts.

3.Journalize and post the adjusting entries (l) through (p).

4.Prepare an income statement (including earnings per share rounded to two decimal places), statement of stockholdersâ equity, and balance sheet.

5.Identify the type of transaction for (a) through (k) for the statement of cash flows (O for operating, I for investing, F for financing), and the direction and amount of the effect.

6.Journalize and post the closing entry.

7.Compute the following ratios (rounded to two decimal places) for 2017 and explain what the results suggest about the company:

a,Current ratio

b,Total asset turnover

c,Net profit margin

greyscorpion846

Hello...I am in need of help with the adjusting entries please 100000	Bank Account
110100	Accounts Receivable (Direct Posting Account)
110150	Allowance for Bad Debts
110200	Interest Receivable
200600	Inventory-Operating Supplies
200900	Inventory-Raw Materials (Direct Post)
200910	Inventory-Finished Goods (Direct Post)
200920	Inventory-Trading Goods (Direct Post)
200930	Inventory-Semi-finished Goods (Direct Post)
210000	Prepaid Insurance
211000	Prepaid Supplies
212000	Prepaid Advertising
215000	Prepaid Rent
216000	Deposits on Purchases
220000	Notes Receivable
220110	Land (Direct Post)
220210	Production Machinery, Equip & Fixtures (Dir.Post)
220310	Accumulated Depreciation-Machinery (Direct Post)
220400	Office Furniture
220500	Accumulated Depreciation-Office Furniture
220600	Office Equipment and Computers
220700	Accumulated Depreciation - Office Equipment
300100	Payables-Income Taxes
300200	Accounts Payable (Direct Posting Account)
300300	Payables-Interest
300400	Payables-Short-Term Notes
300500	Payables-Long-Term Notes
300600	Payables-Commissions
300700	Payables-Salaries and Wages
300800	Accrued Expenses
310000	Goods Receipt / Invoice Receipt Account
320000	Accrued Tax â Output
321000	Accrued Tax- Input
322000	Unearned Revenues
329000	Common Stock
329100	Additional Paid-in-Capital
330010	Retained Earnings (Direct Post)
600000	Sales Revenue
610000	Sales Discount
620000	Miscellaneous Revenue
630000	Revenue Deductions
640000	Gain or Loss on Sale of Assets
650000	Customer Service Revenue
650100	Customer Service Revenue Settlement
700000	Labor
720000	Raw Material Consumption Expense
720100	Finished Product Consumption Expense
720200	Trading Good Consumption Expense
720300	Semi-Finished Consumption Expense
740000	Supplies Expense
740100	Telephone and Internet Expense
740200	Legal and Professional Expense
740300	Rent Expense
740400	Insurance Expense
740500	Payroll Expense-Office
740600	Payroll Expense-Administrative
740700	Sales Expense
740800	Tax Expense - Property
740900	Tax Expense- Income
741000	Miscellaneous Expense
741200	Bad Debt Expense
741300	Information Technology Expense Account
741400	Production Order Variance Expense Account
741500	Utilities (electricity & phone) Expense
741600	Manufacturing Output settlement
741700	Manufacturing Output Settlement Variance
741800	Depreciation Expense
741900	Advertising Expense
742000	Vendor Discounts Missed
742100	Shipping Expense
760000	Purchase Price Difference
760100	Production Variance
770000	Research and Development
780000	Cost of Goods Sold

Detailed Assignment Requirements

The next few pages show the balances in GBI accounts as of December 31st and then the descriptions of events occurring during January for which you are to make general journal entries in a manual accounting system. Your manual accounting system needs to include a general journal, Pivot Tables (that acts as a General Ledger), and a trial balance, all of which will be generated in Excel, (see the sample problem for the format).

After you have created your entries in your manual system, you will enter all the data into the SAP ERP system. When you enter your data into the SAP system the resulting financial information from the manual system and the SAP system should match exactly.

Assignment Steps

Record the daily transactions if appropriate, (some events may not involve journal entries), as general journal entries into Excel. Summarize the effects of the journal entries in a Pivot Table summary. Link the Pivot Table into your Excel worksheet as a trial balance. You should create links between your spreadsheets to expedite this process and minimize the risk of an error in data entry. Looking over the answer to the sample problem may be helpful in reviewing your Excel skills.

The next step is to record the adjusting entries into the general journal and then summarize them into a Pivot Table and then the trial balance.

Record closing entries in your trial balance as if this were a year-end close. (Do not enter the closing entries in your General Journal).

Prepare the SAP ERP system for data entry.

Now use the SAP ERP system to make all above entries using the general ledger system in SAP. This should be done in a series of steps as follows:

Examine the GLXX chart of accounts where XX is your assigned SAP student login ID#. (Whenever you see XX in the instructions, substitute your SAP login ID#.)

Record beginning account balances in the SAP general ledger. This should be done as one composite journal entry (the first journal entry). Use January 1, as the journal entry date for the beginning account balances. Be sure to compare this to your Excel spreadsheet to make sure the entries are correct.

Display the trial balance (you should compare this to your manual entries). If the trial balance does not match your manual entries, research the errors and make necessary corrections.

Record the daily transactions for January in the SAP general ledger (do each journal entry as a separate entry, not as one giant composite entry, be sure to use appropriate dates â this allows for a good audit trail).

Display the trial balance (you should compare this to your manual entries).

Record the adjusting entries.

Display the trial balance (you should compare this to your manual entries).

Simulate closing the books as of January 31 using the SAP utility. (Do not enter closing entries into the general ledger. These entries would be done automatically through the SAP month-end closing function.)

Instructions for using the SAP ERP system start on page 13 of this document.

Account Balances as of December 31^st


		Debit Balance	Credit Balance
100000	Bank Account	$300,318
110100	Accounts Receivable (Direct Posting Account)	94,670
110150	Allowance for Bad Debts		2,600
200600	Inventory-Operating Supplies	8,832
200900	Inventory-Raw Materials (Direct Post)	52,000
200910	Inventory-Finished Goods (Direct Post)	281,298
200920	Inventory-Trading Goods (Direct Post)	66,474
210000	Prepaid Insurance	3,000
212000	Prepaid Advertising	2,400
220110	Land (Direct Post)	528,000
220210	Production Machinery, Equip & Fixtures (Dir.Post)	915,000
220310	Accumulated Depreciation-Machinery (Direct Post)		408,000
300200	Accounts Payable (Direct Posting Account)		48,000
300700	Payables-Salaries and Wages		94,313
300800	Accrued Expenses		2,200
320000	Accrued Tax â Output		4,000
329000	Common Stock		1,010,000
329100	Additional Paid-in-Capital		52,870
330010	Retained Earnings (Direct Posting)		630,009

Events During January

Event Date Description of Event

1	January 3	Employees are paid monthly on the first business day of the month for work done in the previous month. (Ignore payroll taxes for this assignment.) Accounting wrote and distributed the paychecks.
2		GBI received $60,000 in safety product inventory and $40,000 in raw materials from Dallas Bike Basics. This inventory was ordered on December 28. The payment terms for the invoice total of $100,000 are net 10 days. GBI paid the CWX shipping company $1500 with a manual check for the shipment of the goods base on the weight. The bill of lading showed that the safety product inventory arrived in 5 boxes with an average weight of 40 lbs per box. and the raw materials came on a pallet and weighed 300 lbs.
3		Windy City Bikes in Chicago, IL ordered $22,500 of bicycle accessories from GBI. The cost of the accessories (to GBI) is $15,000. The goods were shipped to Windy City immediately via UPS using Windy Cityâs UPS shipping number. The terms of payment for Windy Cityâs order are 3/10 net 30 days.
4	January 7	GBI received payment of $24,000 from Northwest Bikes in Seattle, WA for the balance due on their account.
5	January 10	GBIâs account on the utility company website is updated at the end of each month when the meter is read. GBI uses this data to accrue the expenses at the end of each month (in this case on December 31^st.) This allows recognition of the expense in the correct period. Expenses are usually accrued at the end of the month as âAccrued Expensesâ. GBI paid the December utility bill via the companyâs automatic electronic bill pay program.
6		GBIâs advertisement in the English language edition of Italian Cycling Journal was published today. This ad was prepaid at the end of August for six months of advertising, September through February, (Four months of advertising have already been used.)
7	January 11	The office manager in San Diego ordered $380 of office (operating) supplies from Staples. While on the way back from a delivery, one of the warehouse staff picked up the Staples order and brought it to GBIâs office. GBI has an account with Staples and payment terms are net 10. Operating supplies expense is figured at the end of the month determined by the amount of supplies used during the month.
8		GBI ordered $75000 in raw materials from Space Bike Composites in Houston, TX. Terms of payment to Space Bikes are net 30.
9		GBI received payment from Windy City Bikes for their order from January 3. Windy City paid the invoice amount less the discount for paying within 10 days.
10	January 12	GBI paid for the inventory order (via bank transfer) that they received from Dallas Bike Basics back on January 3.
11	January 13	In order to better track inventory, GBI ordered a bar-coding and tracking system which will be installed and tested by Computer Specialists, Inc. (CSI). The system will allow employees to track inventory using mobile devices and special software which will link into their new computerized accounting system. The barcode system costs $7,500 (including sales tax) and CSI will charge GBI $1,300 for the installation and tests. GBI paid a deposit of $2,000 on the system and the remainder is due and payable when the system is installed. GBI will classify the bar-coding system as âProduction Machinery, Equipment and Fixturesâ.
12	January 17	GBI paid an invoice from Lightbulb Accessory Kits for ordered goods that were received on December 20. The amount of the invoice from Lightbulb is $15,890 due net 30.
13		The city of Denver will be hosting a decathlon at the end of February. The event is expected to create demand for high quality bikes. Rocky Mountain Bikes in Denver, CO placed an order with GBI for $128,000 worth of bicycles to be delivered immediately. Rocky Mountain will pay the shipping. The bikes cost GBI $78,000. GBI shipped the order immediately so that Rocky Mountain can start promoting the bikes. Because Rocky Mountain is a good customer, GBI is giving them special terms of net 45 days on this order.
14		GBI received raw materials inventory ordered from Space Bike Composites January 11. Shipping charges of $600 were included in the invoice from Space Bike.
15		GBI received notice that Bunkyâs Bicycle Emporium had declared section 13 bankruptcy which meant GBI would not be able to collect the $4,200 that Bunkyâs owed them.
16	January 18	GBI received a $90,000 funds transfer from Silicon Valley Bikes in Palo Alto for the balance due on their account.
17	January 19	GBI paid Staples for the office supplies they received January 11.
18		SoCal Bikes in Irvine, CA placed an order for $2,750 in bicycle helmets for a special event in February. The merchandise cost GBI $1,300. SoCal sent a truck to the GBI distribution center in San Diego, CA and picked up the merchandise directly from GBIâs warehouse. Terms of payment are net 30. (Donât forget to charge sales tax of 7.75% for this order.)
19	January 24	Beantown Bikes in Boston, MA placed an order with GBI for $27,000 in bicycles. The cost of the bicycles is $17,000. Beantown Bikes is a new customer. Its buyers saw GBIâs booth at a trade show. Because Beantown is a new customer, they must either wait until their credit can be approved or pay for the order before GBI will ship the bikes to them.
20	January 25	GBI has been offered the opportunity to advertise in the Bicycle Times online magazine for a reduced price if they pay for three months in advance. In light of the upcoming Tour de France, the advertising is a great opportunity for GBI to get additional recognition. The advertising will start in February. GBI wrote a check for $9,000 for three months of advertising.
21	January 26	GBI received notification from their bank that Beantown Binkes had transferred funds into their account for their prior order, so GBIâs warehouse personnel shipped Beantownâs order. Beantown will be responsible for paying Fed-X $400 for shipping the order.
22	January 27	The county approved GBIâs building plans for their new warehouse. Estimated building costs are $1,300,000 which will be funded via a mortgage from Bank of America. GBI plans to break ground on the new building April 18^th of this year.
23		GBI sent a $32,000 check to Night Rider Aluminum Products for an order of bicycle parts GBI received December 30th.
24		Big Apple Bikes in New York City is expanding to another location in New York and needs to stock the new location. GBI received a phone order from Big Apple for $250,000 in bicycles and $108,500 in bicycle accessories and safety gear at special discount prices. The cost of the bicycles in this order is $185,000 and the cost of the accessories is $65,000. Big Apple will have a contract trucking company pick up the order when it is ready. The order is sent to GBIâs warehouse for picking and packing, which may take a couple days. Payment terms to Big Apple for this order are net 30.
25	January 31	GBI pays sales tax once a quarter via the stateâs electronic filing and payment system. GBI filed its return and paid its sales tax for the quarter ending December 31.
26		GBI paid Februaryâs rent of $4,000 for the office and warehouse space in San Diego.
27		CSI installed and tested the new barcode system. The warehouse manager approved the installation and commented that she thinks it works great. GBI wrote a check to CSI for the balance owed and gave it to the installer.
28		Big Appleâs truck arrived at GBIâs warehouse and picked up the order from January 27^th.

Adjustment information as of January 31, not already given in the original transaction(s):

1.Based on prior experience, GBI estimates that approximately 1.5 % of the credit sales from each month will become bad debt. GBI writes off bad debts as they occur and recognizes bad debt expense based on percentage of credit sales as an adjusting entry each month.

2. As a control measure, physical inventories are taken on a periodic basis alternating between the raw materials inventory, finished goods inventory and trading goods inventory. Physical inventory of the finished goods inventory was taken at the end of January. It was determined that the value of the finished goods merchandise on hand was $1,200.

3. GBI counted the office (operating) supplies on hand after the close of business on the last day of the month and determined the cost of the unused office supplies to be $1000.

4. Production Machinery, Equipment and Fixtures were placed in service on January 1, 2013, with no salvage value. The bar-code system has a 5-year life and no salvage value. GBI depreciates fixed assets on a straight-line basis and those assets placed in service in the first half of the months are depreciated for the entire month, while fixed assets placed in service during the last half of the month are not depreciated until the second month. Depreciation is rounded to the nearest dollar and assets are depreciated on a monthly basis (i.e. number of days in the month is not of consequence).

5. GBI used the Internet to review the monthly charges for utilities the business consumed during January. Based on the Internet report, the amount to be billed by the utilities company for January usage is the same as was billed for December.

6. Liability insurance for the six-month period ending on January 31 was paid last August on the first of the month. Liability insurance is assumed to be utilized uniformly over the six-month policy period.

7. GBI needs to recognize the wages expense for the month. Since all employees are paid salaries and no changes have been made, this amount is the same as the previous month salaries. (For purposes of this assignment, ignore manufacturing, office, and administrative payrolls and assume all wages expense is towards labor expense.)

****Hello, there was a comment that said "Lack of information on year". For this case study you can use 2018 for all the January transactions and 2017 for anything refering to December. All adjustments need to be dated January 31, 2018. Thank you

viridianreindeer995

ACCT207 Lecture Notes - Lecture 1: General Ledger, The Ledger, Trial Balance

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