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Chapter 2

Chapter 2 Condensed (Day 2)(2).docx

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ACCT 1201
Ronen Gal-or

Chapter 2 Condensed (Day 2) I. Overview of Accounting Concepts II. Accounting for Business Transactions III. Keeping Track of Account Balances A. Journal Entries – General Journal B. T-Accounts – General Ledger IV. Prepare a Classified Balance Sheet V. Current Ratio III. Keeping Track of Account Balances A. Journal Entries – General Journal - During the accounting period, transactions are analyzed and recorded in the General Journal (GJ) in chronological order and the related accounts are updated in the General Ledger (GL) 1. Direction of Transactional Effects Dr. Debit (dr) is on the left side of an account Cr. Credit (cr) is on the right side of an account 2. Acronym to help you remember how to account for increases and decreases in the different accounts. DEAD – Debits increase Expenses, Assets, and Dividends Thus, Credits decrease Expenses, Assets, and Dividends, Credits increase Liabilities, Contributed Capital, Retained Earnings, and Revenues Debits decrease Liabilities, Contributed Capital, Retained Earnings, and Revenues 3. Journal entry – an accounting method for expressing the effects of a transaction on accounts in a debits-equal-credits format i. It is useful to include a date or some form of reference for each transaction ii. The debited accounts are written first (on top) with the amounts recorded in the left column and the credited accounts are written below the debits and are usually indented with the credited amounts written in the right column iii. Compound entry – a journal entry that affects more than two accounts Do Chapter 2 Exercises 1 B. T-Accounts – General Ledger 1. T-account –Atool for summarizing transaction effects for each account, determining balances, and drawing inferences about a company’s activities i. By themselves, journal entries do not provide the balances in accounts ii. After journal entries are recorded, the dollar amounts are transferred (posted) to each account affected by the transaction to determine the new account balances iii. As a group, the accounts are called a General Ledger (GL) Make GL based on the Journal Entries recorded in Chapter 2 Exercises Assets             = Liabilities + Cash – + Notes Payable – BegBal 0 0 BegBal + Inventory – JaJ a2n 31 200k Janan 4+ BegBal 0 Jan 15 20k Stockholders’ Equity + Equipment – Jan 20 ­ Contributed Capital + EndBal Jan 31 BegBal 0 0 BegBa + Building – EndBal l Jan 5 EndBal 0180k Jan 2 + Land – Jan 4 EndBal BegBal 0 EndBal Total Assets =  Jan 4 Total Liabilities + Stockholders Equity =  EndBal IV. Prepare a Classified Balance Sheet 2 Papa John's International, Inc. and Subsidiaries Consolidated Balance Sheet (dollars in thousands) January 31, December 28, 2007 2006 ASSETS Current assets Cash $ 15,000 $ 13,000 Accounts receivable
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