Textbook Notes (369,099)
BUS 251 (101)
Chapter 3

Chapter 3 notes.docx

5 Pages
104 Views

Department
Course Code
BUS 251
Professor
Steve Gibson

This preview shows pages 1 and half of page 2. Sign up to view the full 5 pages of the document.
Description
BUS 251 Chapter 3 Notes Processing Data Through the Accounting System User Relevant  We need to understand how to store and analyze accounting data because they shows the financial statement of the company Double-entry accounting systems  Synoptic journal: recording of simple transactions by columns on spreadsheet to reflect the basic accounting equation  Double-entry accounting system: using debits and credits to record the effects of transactions in accounts rather than columns  Debits and Credits o T-accounts are used to demonstrate debit-credit system o Debit = left (usually increase), credit = right (usually decrease) o All accounts in the basic accounting equations have specific T-accounts o Rule: for asset balance, record on the debit side, for liabilities and shareholder’s equity balances, record on the credit side o Debit = credit (assets = liabilities and shareholder’s equity) o Abbreviations: assets (A), liabilities (L), shareholder’s equity (SE), contra-assets (XA) o Rules: increases are recorded in the same side and decreases are recorded in the opposite side of the balance account  Assets accounts have debit balances, increase in asset accounts are recorded as debits, and decreases in assets are recorded as credits.  Liabilities and shareholder’s equity have credit balances, increase in these accounts is recorded as credits, and decrease is recorded as debits.  Statement of financial position o If you add something to the right side you have to add the same amount on the left side to balance it out o Permanent accounts: entity that is carried forward to the future period  Example: retained earnings o Temporary accounts are used to keep track of sub accounts of permanent accounts  Example: revenues, expense, dividends o Rules:  Revenues increases retained earnings (SE) = debit  Expenses and dividends decrease retained earnings (SE) = credits o At the end of the fiscal period, all accounts on the statement of earnings are transferred to retained earnings (accumulated amount of temporary revenues and expenses less dividends) o If expenses > revenues then retained earnings has accumulated deficit Understanding the accounting cycle  Accounting cycle: the system which transactions are measured, recorded and summarized and communicate to users through financial statements 27. BUS 251 Chapter 3 Notes   T28.ch1rt We have an event or transaction: o ChSell inventory on account / on credit for \$2,500recorded in accounting system o DyThe inventory costs \$1,800 that we sellved accounts) o F2rstAnalyze ithe accounting cycle - 4 entries o Numbers are assigned to accounts for easy identification  T29. What accounts are impacted? _______________________ forward from the ___________________________ting accounts ________________________ave zero balance____________________________ Transactions  Evident by some “source documents” indicating that something needs to be recorded has happened and the event must be analyzed and recorded. 30o Example: invoices, cheques, cash tapes, bank deposit, shipping infoother example of the o Analyzing transactions.  Routine transactions need to be analyze once 31. When avAnalyze effects of the transactions and how they are recorded (DR/CR) o Recording transaction in a journal Revenue \$3,000  Journal: chronological listing of all the transactions that are recorded COGS  Journal entry shows each complete effect of transaction Gross roInclude: date, entry no., debit (first) and credit (second-indented) account Expenses names, amount, description or explanation Wages 32. Journal Entry (JE) Format XXX Date Account Name Debit Credit XXX 1. Jan xx Account to be debited XX Account to be credited XX Brief explanation Debitsalwaysfirst 7  Transaction 1: Repayment of loan of \$1000 in cash o Analysis –33.crease aPerform Journal Entriesiabilities (bank loan) by \$1000 3 Date Account Name Debit Credit 1 Jan 31 Accounts receivable Sales revenue BUS 251 Chapter 3 Notes  Transaction 2: repayment of rent in advance \$900 o Analysis – decrease cash(A) by \$900 CR, increase prepaid rent (A) by \$900 DR  Transaction 3: purchase of inventory on account for \$30000 o Analysis – accounts payable (L) by \$30000 CR, increase inventory (A) by \$30000 DR  Transaction 4: sales for cash \$4000, sales for on account \$36000 o Analysis – cash (A) increase by \$4000 DR, accounts receivable (A) increase by \$36000 DR, retained earnings (SE- record as sales revenue on journal entry) increase by \$40000 o Compound journal entry: have more than 2 parts  Transaction 5: cost of goods sold is \$27000 o Analysis – retained earnings (SE-recorded as cost of goods sold on JE) decreased by \$27000 DR, inventory (A) decreased by \$27000 CR o Gross profit: net revenues – cost of goods sold (initial amount of item)  Transaction 6: purchase supplies for \$500 cash o Analysis – cash (A) decreased by
More Less

Only pages 1 and half of page 2 are available for preview. Some parts have been intentionally blurred.

Unlock Document

Unlock to view full version

Unlock Document
Me

OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Join to view

OR

By registering, I agree to the Terms and Privacy Policies
Just a few more details

So we can recommend you notes for your school.