Business 2257 Financial Accounting Midterm Cheatsheet.docx

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Business Administration
Business Administration 2257
Brian Langen

Adjusting Entries Accounts Receivables Record revenues in the period earned Record expenses in the period incurred Opening Balance Type of Adjustment I.E. Entry During Adjusting Entry Credit Sales Period Write off Deferred revenue Unearned rev. Dr Cash Dr Unearned rev. Recoveries Cr Unearned rev. Cr Revenue Accounts to notes Deferred expense Amortization Dr Asset Dr Expense Cash collection Prepaid expense Cr Cash or A/P Cr Asset Ending balance Accrued revenue Interest receivable No entry Dr Asset Cr Revenue Accrued expense Payables No entry Dr Expense Purchase on credit Dr Accounts receivables Cr Sales revenue Cr Liability Write-off Entry Closing Entries Dr Allowance for Doubtful accounts (net realizable value of account receivables) 1. Close revenue to income summary (in revenues section) [C1] Cr Accounts receivable 2. Close expense to income summary [C2] 3. Subtotal income summary, and record taxes to income tax expense and payable[C3] Recovering from Write-Off 4. Close income tax expenses to income summary [C4] 1. Dr Accounts receivable Cr A4DA 5. Close income summary to retained earnings [C5] 2. Dr Cash Cr Accounts receivable 6. (Skip 3 and 4 if there is a net loss) Summary of Bad Debt Expense (Periodic) Accounting for Petty Cash 1. Calculate trial balance of A4DA  Establishing a petty cash account: Dr Petty Cash (Asset) Cr Cash 2. Calculate ending balance of A4DA  End of period adjustment: Dr Various Expenses Cr Cash (E/B A4DA = E/B of Accounts receivable x estimated %)  No other transactions go through petty cash 3. Calculate bad debt expense (Bad debt expense = T/B A4DA – E/B A4DA) Income Summary 4. Dr Bad Debt Expense Cr Allowance for doubtful accounts Expense accounts total [C2] Revenue accounts total [C1] Subtotal net loss [T/B] Subtotal net income [T/B] Income taxes [C4] (Expensed) Notes Receivables (Principal) Net income after tax Dr Notes receivables Cr Cash or Accounts receivables Closed to retained earnings [C5] Interest accrual (Fiscal year end)  Notes receivable principal x Interest rate x n / 12 months Bank Reconciliation  Dr Interest receivable Cr Interest revenue 1. Go to last month’s bank reconciliations. Ensure late deposits and outstanding cheques are listed on the bank statement. Note Maturity Circle ones that are not. Check items off on the bank statement. Account for:  Interested earned up to the maturity date  Collection of Notes and earned interest OR notes and interest are not collected and 2. Go to cash disbursement list (cheques register) Check off each cheque as it appears. becomes an outstanding accounts receivable. Circle errors and cheques that do not appear on the bank statement  (Similar to A4DA accounting) 3. Go to cheque receipts list (bank deposits) Check off each deposit as it appears in bank statement. Sales Discounts & Returns and Allowances Circle any errors and any statements that does not appear. To record total sales, Dr Cash, Dr Accounts Receivable Cr Sales Revenue 4. Go to bank statement Circle items that are not checked off. To record a discount, Dr Cash Dr Sales discount Cr Accounts receivable Look for: To record a sales return or allowance, Dr Sales R & A Cr Accounts Receivable or Cash  Outstanding cheque’s from the previous period’s bank reconciliations  Additional errors in disbursements or receipts lists Discount Terms: x/y n/z  Errors in copying numbers  x% discount granted if paid within y days  Cash on hand or petty cash account  Net amount due in z days  Once both balances reconcile, record any changes on the company’s books.  Start the day goods are shipped (FOB shipping point) or the day goods are received (FOB destination). Bank Reconciliation Summary  Opening balance taken from last adjusted balance on bank reconciliation  Add cash receipts AND less cash disbursements FOB Shipping point: Buyer is responsible for and claims ownership of the goods while in transit  Adjust balance for any items the bank added or subtracted we did not know about FOB Destination: Seller is responsible for and claims ownership of goods when they are in transit o Receivables / Notes collected for company by bank o Service charges and NSF cheques (cheques are good for 6 months) o Automatic payments for loans, interest, payroll, etc.  Add or subtract from balance to get new adjusted balance.  Check for recording errors. Purchase of Inventory Fixed Assets Dr Inventory Cr Accounts Payable or Cash HC = Historical cost RV = Residual value If payment is made in time for discount: BV = Book value (HC – Accumulated Depreciation) Dr Accounts Payable Cr Inventory Cr Cash
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