Tutorials Amsterdam Business School Accounting 2016-2017 P 6011P0148 / PE 6011P0150 Tutorials Amsterdam Business School

Slides online katalinbuzasi.weebly.com Page: Accounting (for students) Password: ABS2016 Accounting week 45

Where are we? Last week Working with financial statements Understanding the relation between financial stetements Today (the aim of T2) Start to work with accounts Understanding the logical structure of accounts Going into deep Current assets Noncurrent assets Accounting week 45

Contents Today CH4: P4.21, P4.26 CH5: P5.29, P5.33 CH6:E6.18, P6.28 Accounting week 45

The logic of financial accounts Each line in the balance sheet and income statement has an account where we register the changes (increase and decreas) related to that line Main account types (how do they work?, what is their relationship with financial statements?) Asset accounts Liabilities accounts Owners equity accounts Revenue accounts Expense accounts Other account types Contra accounts Accounting week 45

The structure of accounts Accounting week 45

P4.21 (page 125-126) The aim is to practice how to use accounts to register simple economic events Understand the logic of accounts based on real examples Practicing the journal entry method Accounting week 45

P4.21 (page 125-126) A.) Issued 100,000 shares of $5 par value common stock for $500,000 in cash. Accounting week 45

B.) borrowed $250,000 from Oglesby National Bank and signed 12% note due in three years. Accounting week 45

C.) Incurred and paid $190,000 in salaries for the year. Accounting week 45

D.) Purchased $320,000 of merchandise inventory on account during the year. Accounting week 45

E.) Sold inventory costing $290,000 for a total of $455,000, all on credit. Accounting week 45

F.) Paid rent of $55,000 on the sales facilities during the first 11 month of the year. Accounting week 45

Accounting week 45

Accounting week 45

Accounting week 45

Accounting week 45

P5.29 (page 176) Practicing how to register bad debt Accounting week 45

Simple example for bad debts 1st May 2015-The company sells inventory of $60,000 for $100,000 on account The company expects that 5% of the sales will not be collectable 6th August 2015-It turns out that 3% of the sales on 1st May is really uncollectible Accounting week 45

Accounting week 45

Accounting week 45

P5.33 (page 178) – evaluating/costing inventories Inventory records: FIFO and LIFO method with periodic and perpetual system Periodic: costs of goods sold are calculated at the end of the period Perpetual: costs of goods sold are calculated when sales are made Accounting week 45

Information on inventory Accounting week 45

Tasks Calculate the value of costs of goods sold and the ending inventory under the periodic system with FIFO methods Calculate the value of costs of goods sold and the ending inventory under the periodic system with LIFO methods Calculate the value of costs of goods sold and the ending inventory under the perpetual system with FIFO methods Calculate the value of costs of goods sold and the ending inventory under the perpetual system with LIFO methods Accounting week 45

Accounting week 45

Accounting week 45

Accounting week 45

Accounting week 45

Accounting week 45

Accounting week 45

E 6.18 – goodwill Practice example (Book, page 200) A company bought another company for $1,000,000 cash and assuming a note payable liability of $100,000. The bought company had equipment of $200,000, inventory of $250,000 and the notes payable of $100,000. Record the changes in the buying company’s accounts. Accounting week 45

Solution Dr. Inventory 250,000 Dr. Equipment 200,000 Cr. Cash 1,000,000 Cr. Notes payable 100,000 Dr. Goodwill 650,000 Accounting week 45

E 6.18 Accounting week 45

P6.26 (page 222) How to record depreciation? Understanding the methods of depreciation Straight-line Accelerated Accounting week 45

Information on equipment Accounting week 45

Accounting week 45

Accounting week 45