Summary of Transactions

Slides:



Advertisements
Similar presentations
AC113 Seminar Unit 3 – Chapter 2.
Advertisements

Analyzing and Recording Transactions Last Revised: 3/1/2011
CAPTURING ECONOMIC EVENTS
Question Answer Accounting I Debits & Credits Analyzing.
Financial Accounting, Sixth Edition
Working with the Accounting Equation
Analyzing & Recording Business Transactions
Glorian Portraits Studios, Incorporated Transaction Worksheet For May 2007.
Week 1.  Account is to give an explanation of something, to report, to be responsible.  Accounting is analyzing, recording, reporting, and interpreting.
Chapter 3-1 The Accounting Information System Information System Accounting, Third Edition.
College of Business Administration, Al-Kharj
Analyzing and Recording Transactions Pr. SAMLAL Zoubida.
Chapter 2 Recording Business Transactions
Chapter 3: Processing Accounting Information
Chapter 1 Accounting in Action Accounting Principles, 7 th Edition Weygandt Kieso Kimmel.
WHAT IS ACCOUNTING? Accounting is an information system that
Prepared by: C. Douglas Cloud Professor Emeritus of Accounting Pepperdine University © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned,
3-1 THE ACCOUNTING INFORMATION SYSTEM Accounting, Fifth Edition 3 Fall 2015.
2-1 Skyline College Chapter Business Transactions The accounting process starts with the analysis of business transactions. A business transaction.
Assets = Liabilities Stock- holders’ Equity + The Financial Obligations or Debts of a Business The Basic Accounting Equation Economic Resources Owned by.
BusinessAllstars.com1 Basic Accounting Copyright © 2007 by WACGA All right reserved This material may not be used or reproduced without permission of the.
Financial Statements. Income statement Statement of owner’s equity Balance sheet Statement of cash flows.
John Wiley & Sons, Inc. © 2005 Chapter 1 Accounting in Action Accounting Principles, 7 th Edition Weygandt Kieso Kimmel Prepared by Naomi Karolinski Monroe.
Prepared by: Jan Hájek Accounting Lecture no 3. A Starting Point: Statement of Financial Position.
3 The Accounting Information System Kimmel ● Weygandt ● Kieso
GLENCOE / McGraw-Hill. Analyzing Business Transactions.
The Recording Process. 3-1 Three Parts of an Account (1) ACCOUNT TITLE (Left Side) (2) DEBIT (Right Side) (3) CREDIT Total Debits > Total Credits = Debit.
Income Statement: Results of Operating Performance Revenue Recognition: Earnings process substantially complete Cash collection.
Introduction to Accounting Preparing for a User’s Perspective
Accounting Principles
Processing Accounting Information
Basic Accounting Concepts
Lesson 1-1 The Accounting Equation
System to Analyze Transactions
ANALYZING TRANSACTIONS: The Accounting Equation
Starting a Proprietorship: Changes That Affect the Accounting Equation
Chapter 1 Accounting Concepts and Procedures
Distributing Dividends & Preparing Work Sheet
Processing Accounting Information
Accounting Concepts and Procedures
Accrual Accounting Concepts
© McGraw-Hill Ryerson. All rights reserved.
Analyzing Transactions
Hospitality Accounting in Action
Basic Accounting for Business Decision
University of California, Santa Barbara
University of 6th of October, Egypt
Processing Accounting Information
ANALYZING AND RECORDING TRANSACTIONS
The Accounting Cycle: Step 2
The Accounting Cycle – Step 1
Chapter 3 The Recording Process.
Lesson 1-1 The Accounting Equation
BASIC ACCOUNTING CONCEPTS
There is no “Bob” narration on this series of slides (yea!)
Chapter 2 Recording Business Transactions
Accounting, Fifth Edition
Chapter 3: Reporting Operating Results on the Income Statement Learning Objective 1 Describe common operating transactions and select appropriate income.
Chapter 3 Financial Statements
Financial Accounting: Tools for Business Decision Making, 3rd Ed.
2 Analyzing Transactions Financial and Managerial Accounting 13e
Accounting, Fifth Edition
Financial Accounting, Sixth Edition
Introduction to Accounting and Business
Student Version Repetition is an important component, a key part of learning. In memory, the more times patterns of thought are repeated, the more likely.
CHAPTER1 Accounting in Action.
1 Accounting in Action Learning Objectives
ANALYZING TRANSACTIONS: The Accounting Equation
Analyzing Transactions
Chapter 2 Recording Business Transactions
Presentation transcript:

Summary of Transactions No sound (narration from me) in this set of slides (yea !)

Summary of Transactions No narration from me in this set of slides (yea !) These next slides take you through “transaction analysis” (sounds painful don’t it). Analyze each transaction, in terms of its effect on: Assets = Liabilities + Stockholders (Owners) Equity Focus on which specific accounts are affected. FYI: at least 2 “accounts” are affected (could be more but at least two) Pay attention to the EQUAL sign in the equation. Each side MUST be = when you are done. If they are not = you are wrong! Note: we are NOT looking for two plusses or two minuses or one minus and one plus. We want a combination that keeps the equation equal. The “answers“ and explanations are on the slide following each one that you will do)

Transaction Analysis #1 … On Sept 01, 2017, Ray invests $15,000 cash in exchange for common stock to begin a business. Common stock indicates an “ownership” interest … which is also called “equity” in business and finance). Transaction results in an equal increase in both assets and stockholders’ equity. Assets = Liabilities + Stockholders’ Equity Trans- action Cash + Accounts Receivable + Supplies + Equipment = Accounts Payable + Common Stock + Retained Earnings Rev. – Exp. – Div. 1. +15,000 +15,000

Transaction Analysis #1 … On Sept 01, 2017, Ray invests $15,000 cash in exchange for common stock to begin a business. Since Ray is starting a new business (a corp), he basically gives himself common stock. He gives up CASH and receives COMMON STOCK … so both accounts are increased. Assets = Liabilities + Stockholders’ Equity Trans- action Cash + Accounts Receivable + Supplies + Equipment = Accounts Payable Common Stock + Retained Earnings Rev. – Exp. – Div. + 1. +15,000 +15,000 For you over-achievers - If Ray started a business (a sole-proprietorship) his ownership account would be called CAPITAL (not common stock). He still gives up CASH and receives CAPITAL.

#2 … Business buys equipment for $7,000 in cash. Assets = Liabilities + Stockholders’ Equity Trans- action Cash + Accounts Receivable + Supplies + Equipment = Accounts Payable + Common Stock + Retained Earnings Rev. – Exp. – Div. 1. +15,000 +15,000 2. -7,000 +7,000 3. +1,600 +1,600 4. +1,200 +1,200 5. +250 -250 6. +1,500 +2,000 +3,500 7. -1,700 -600 -900 -200 8. -250 -250 9. +600 -600 10. -1,300 -1,300 + + + = + + - - $8,050 $1,400 $1,600 $7,000 $1,600 $15,000 $4,700 $1,950 $1,300

#2 … Business buys equipment for $7,000 in cash. Assets = Liabilities + Stockholders’ Equity Trans- action Cash + Accounts Receivable Supplies Equipment = Accounts Payable Common Stock Retained Earnings Rev. – Exp. – Div. + 1. +15,000 +15,000 2. -7,000 +7,000 The business is basically “trading” the asset cash for the asset equipment. Cash is paid (decreased) while Equipment is purchased (increased).

#3 … Business buys $ 1,600 of supplies ON CREDIT (also called “On Account”) (the accessories are expected to last several months). Assets = Liabilities + Stockholders’ Equity Trans- action Cash + Accounts Receivable + Supplies + Equipment = Accounts Payable + Common Stock + Retained Earnings Rev. – Exp. – Div. 1. +15,000 +15,000 2. -7,000 +7,000 3. +1,600 +1,600 4. +1,200 +1,200 5. +250 -250 6. +1,500 +2,000 +3,500 7. -1,700 -600 -900 -200 8. -250 -250 9. +600 -600 10. -1,300 -1,300 + + + = + + - - $8,050 $1,400 $1,600 $7,000 $1,600 $15,000 $4,700 $1,950 $1,300

#3 … Business buys $ 1,600 of supplies ON CREDIT (also called “On Account”) (the accessories are expected to last several months). Assets = Liabilities + Stockholders’ Equity Trans- action Cash Accounts Receivable Supplies + Equipment = Accounts Payable + Common Stock + Retained Earnings Rev. – Exp. – Div. 1. +15,000 +15,000 2. -7,000 +7,000 3. +1,600 +1,600 Here the business is buying an asset Supplies … BUT no cash is involved. The business will OWE the $1,600 to the supplier of the supplies (like WalMart, Office-Max, Staples?). Over-achievers: Buying “on account” (same as “on credit”) is VERY typical in a “business-to-business” transaction. Staples decides IF they will give credit to a new business. If not, then new business must pay cash. (My ability to buy “on account” means that I have CASH to use for other things to improve or expand my business).

#4 … Business receives $1,200 from customers for work that has been completed. Assets = Liabilities + Stockholders’ Equity Trans- action Cash + Accounts Receivable + Supplies + Equipment = Accounts Payable + Common Stock + Retained Earnings Revenue – Exp. – Div. 1. +15,000 +15,000 2. -7,000 +7,000 3. +1,600 +1,600 4. +1,200 +1,200 5. +250 -250 6. +1,500 +2,000 +3,500 7. -1,700 -600 -900 -200 8. -250 -250 9. +600 -600 10. -1,300 -1,300 + + + = + + - - $8,050 $1,400 $1,600 $7,000 $1,600 $15,000 $4,700 $1,950 $1,300

#4 … Business receives $1,200 from customers for work that has been completed. Assets = Liabilities + Stockholders’ Equity Trans- action Cash Accounts Receivable Supplies Equipment = Accounts Payable + Common Stock Retained Earnings Revenue – Exp. – Div. 1. +15,000 +15,000 2. -7,000 +7,000 3. +1,600 +1,600 4. +1,200 +1,200 The business completed work for a customer and EARNED Revenue. In this case the business instantly received the revenue in the form of Cash.

#5 … Business receives a bill for $250 to advertise on a website #5 … Business receives a bill for $250 to advertise on a website. (The business postpones payment until a later date). Assets = Liabilities + Stockholders’ Equity Trans- action Cash + Accounts Receivable + Supplies + Equipment = Accounts Payable + Common Stock Retained Earnings Rev. – Expense. – Div. + 1. +15,000 +15,000 2. -7,000 +7,000 3. +1,600 +1,600 4. +1,200 +1,200 5. +250 -250 6. +1,500 +2,000 +3,500 7. -1,700 -600 -900 -200 8. -250 -250 9. +600 -600 10. -1,300 -1,300 + + + = + + - - $8,050 $1,400 $1,600 $7,000 $1,600 $15,000 $4,700 $1,950 $1,300

#5 … Business receives a bill for $250 to advertise on a website #5 … Business receives a bill for $250 to advertise on a website. (The business postpones payment until a later date). Assets = Liabilities + Stockholders’ Equity Trans- action Cash Accounts Receivable Supplies Equipment = Accounts Payable + Common Stock Retained Earnings Revenue – Exp. – Div. 1. +15,000 +15,000 2. -7,000 +7,000 3. +1,600 +1,600 4. +1,200 +1,200 5. +250 -250 The business has “used up” the advertising therefore this is an “expense”. (How do I know the advertising was “used-up”? Because the ad company sent us a bill – indicating they had completed the work). Regardless of when I pay this amount, the “expense” occurred in this period (month) and I recognize it (enter it in my books) as such. However, since I am not paying this bill until later I will also acknowledge that this bill is a “debt” that I owe hence the accounts payable.

#6 … Business provides $3,500 of services to a customer #6 … Business provides $3,500 of services to a customer. (Business receives cash of $1,500 and bills “the balance” on account). Assets = Liabilities + Stockholders’ Equity Trans- action Cash + Accounts Receivable + Supplies + Equipment = Accounts Payable + Common Stock Retained Earnings Revenue – Exp. – Div. + 1. +15,000 +15,000 2. -7,000 +7,000 3. +1,600 +1,600 4. +1,200 +1,200 5. +250 -250 6. +1,500 +2,000 +3,500 7. -1,700 -600 -900 -200 8. -250 -250 9. +600 -600 10. -1,300 -1,300 + + + = + + - - $8,050 $1,400 $1,600 $7,000 $1,600 $15,000 $4,700 $1,950 $1,300

#6 … Business provides $3,500 of services to a customer #6 … Business provides $3,500 of services to a customer. Business receives cash of $1,500 and sends a bills for “the balance” on account. (In this context, “the balance” is the rest of the amount owed) Assets = Liabilities + Stockholders’ Equity Trans- action Accounts Receivable Supplies Equipment = Accounts Payable + Common Stock Retained Earnings Revenue – Exp. – Div. 1. +15,000 +15,000 2. -7,000 +7,000 3. +1,600 +1,600 4. +1,200 +1,200 5. +250 -250 6. +1,500 +2,000 +3,500 The business has “completed work” for a customer therefore has EARNED Revenue of 3,500. The Revenue is partially in the form of Cash, the 1,500 … and partially in the form of an account receivable 2,000 (which is my Right-To-Collect from the customer since I completed the work) Over-achievers only: Does my account “receivable” (my right-to-collect from a customer) mean that my customer has a debt (obligation to pay) … as in my customers now has an account “payable” … yep.

#7 … Business pays these expenses in cash for Sept #7 … Business pays these expenses in cash for Sept.: office rent $600, salaries & wages of $900, and utilities $200. Assets = Liabilities + Stockholders’ Equity Trans- action Cash + Accounts Receivable + Supplies + Equipment = Accounts Payable + Common Stock + Retained Earnings Rev. – Expense – Div. 1. +15,000 +15,000 2. -7,000 +7,000 3. +1,600 +1,600 4. +1,200 +1,200 5. +250 -250 6. +1,500 +2,000 +3,500 7. -1,700 -600 -900 -200 8. -250 -250 9. +600 -600 10. -1,300 -1,300 + + + = + + - - $8,050 $1,400 $1,600 $7,000 $1,600 $15,000 $4,700 $1,950 $1,300

#7 … Business pays these expenses in cash for Sept #7 … Business pays these expenses in cash for Sept.: office rent $600, salaries & wages of $900, and utilities $200. Assets = Liabilities + Stockholders’ Equity Trans- action Cash Accounts Receivable Supplies Equipment = Accounts Payable + Common Stock Retained Earnings Revenue – Exp. – Div. 1. +15,000 +15,000 2. -7,000 +7,000 3. +1,600 +1,600 4. +1,200 +1,200 5. +250 -250 6. +1,500 +2,000 +3,500 7. -1,700 -600 -900 -200 I added the amounts from 3 checks since each is subtracted from Cash. Could I have used three separate minus amounts (-600 then -900 then -200) instead of just the one -1,700 … yes (if you like to write more than you have to). Then why use three separate “expenses” why not just one “catch-all” expense account. (A manager cannot control one huge “expense” account – the manager wants and needs “details”. They need to know that “gas exp” is up while “rent exp” is down etc. If you did not want the detail – you could use just one massive “expense” account.

#8 … Business pays its $250 “News” bill (from #5) in cash #8 … Business pays its $250 “News” bill (from #5) in cash. Company had recorded bill as increase in Accounts Payable. Assets = Liabilities + Stockholders’ Equity Trans- action Cash + Accounts Receivable + Supplies + Equipment = Accounts Payable + Common Stock Retained Earnings Rev. – Exp. – Div. + 1. +15,000 +15,000 2. -7,000 +7,000 3. +1,600 +1,600 4. +1,200 +1,200 5. +250 -250 6. +1,500 +2,000 +3,500 7. -1,700 -600 -900 -200 8. -250 -250 9. +600 -600 10. -1,300 -1,300 + + + = + + - - $8,050 $1,400 $1,600 $7,000 $1,600 $15,000 $4,700 $1,950 $1,300

#8 … Business pays its $250 “News” bill (from #5) in cash #8 … Business pays its $250 “News” bill (from #5) in cash. Company had recorded bill as increase in Accounts Payable. Assets = Liabilities + Stockholders’ Equity Trans- action Cash + Accounts Receivable + Supplies + Equipment Accounts Payable Common Stock + Retained Earnings Rev. – Exp. – Div. 1. +15,000 +15,000 2. -7,000 +7,000 3. +1,600 +1,600 4. +1,200 +1,200 5. +250 -250 6. +1,500 +2,000 +3,500 7. -1,700 -600 -900 -200 8. -250 -250 You pay off your debt (the word “pay” or “paid” in the transaction) tells you Cash is decreased. But isn’t this also an “expense” – yes … which you already entered that in your records back in transaction #5

#9 … Business receives $600 in cash from customers who had been billed for services (in Transaction 6). Assets = Liabilities + Stockholders’ Equity Trans- action Cash + Accounts Receivable + Supplies + Equipment = Accounts Payable + Common Stock Retained Earnings Rev. – Exp. – Div. + 1. +15,000 +15,000 2. -7,000 +7,000 3. +1,600 +1,600 4. +1,200 +1,200 5. +250 -250 6. +1,500 +2,000 +3,500 7. -1,700 -600 -900 -200 8. -250 -250 9. +600 -600 10. -1,300 -1,300 + + + = + + - - $8,050 $1,400 $1,600 $7,000 $1,600 $15,000 $4,700 $1,950 $1,300

#9 … Business receives $600 in cash from customers who had been billed for services (in Transaction 6). Assets = Liabilities + Stockholders’ Equity Trans- action Cash Accounts Receivable Supplies Equipment Accounts Payable Common Stock Retained Earnings Rev. – Exp. – Div. 1. +15,000 +15,000 2. -7,000 +7,000 3. +1,600 +1,600 4. +1,200 +1,200 5. +250 -250 6. +1,500 +2,000 +3,500 7. -1,700 -600 -900 -200 8. -250 -250 9. +600 -600 When do I no longer have “the right-to-collect? … When I actually collect – (the customer pays which in his books, eliminate HIS debt (the customers account payable) as well as my right-to-collect (my accounts receivable.)

#10 … Business pays a dividend of $1,300 in cash. Assets = Liabilities + Stockholders’ Equity Trans- action Cash + Accounts Receivable + Supplies + Equipment = Accounts Payable + Common Stock + Retained Earnings Rev. – Exp. – Dividend 1. +15,000 +15,000 2. -7,000 +7,000 3. +1,600 +1,600 4. +1,200 +1,200 5. +250 -250 6. +1,500 +2,000 +3,500 7. -1,700 -600 -900 -200 8. -250 -250 9. +600 -600 10. -1,300 -1,300 + + + = + + - - $8,050 $1,400 $1,600 $7,000 $1,600 $15,000 $4,700 $1,950 $1,300 $18,050 $18,050

(Homework will give you another chance). The following few slides gives you a chance to work one of these problems on your own (Homework will give you another chance).

4 Tabular Analysis Transactions made by Virmari & Co., a public accounting firm, for the month of August are shown below. Prepare a tabular analysis which shows the effects of these transactions on the expanded accounting equation, similar to that shown in Illustration 1-9. Stockholders purchased shares of stock for $25,000 cash. The company purchased $7,000 of office equipment on credit. The company received $8,000 cash in exchange for services performed. The company paid $850 for this month’s rent. The company paid a dividend of $1,000 in cash to stockholders. LO 4

4 Tabular Analysis Stockholders purchased shares of stock for $25,000 cash. Assets = Liabilities + Stockholders’ Equity Trans- action Cash + Equipment = Accounts Payable + Common Stock + Retained Earnings Rev. – Exp. – Div. 1. +25,000 +25,000 2. +7,000 +7,000 3. +8,000 +8,000 4. -850 -850 5. -1,000 -1,000 + = + + - - $31,150 $7,000 $7,000 $25,000 $8,000 $850 $1,000 $18,050 $18,050 LO 4

4 Tabular Analysis The company purchased $7,000 of office equipment on credit. Assets = Liabilities + Stockholders’ Equity Trans- action Cash + Equipment = Accounts Payable + Common Stock + Retained Earnings Rev. – Exp. – Div. 1. +25,000 +25,000 2. +7,000 +7,000 3. +8,000 +8,000 4. -850 -850 5. -1,000 -1,000 + = + + - - $31,150 $7,000 $7,000 $25,000 $8,000 $850 $1,000 $18,050 $18,050 LO 4

4 Tabular Analysis The company received $8,000 cash in exchange for services performed. Assets = Liabilities + Stockholders’ Equity Trans- action Cash + Equipment = Accounts Payable + Common Stock + Retained Earnings Rev. – Exp. – Div. 1. +25,000 +25,000 2. +7,000 +7,000 3. +8,000 +8,000 4. -850 -850 5. -1,000 -1,000 + = + + - - $31,150 $7,000 $7,000 $25,000 $8,000 $850 $1,000 $18,050 $18,050 LO 4

4 Tabular Analysis The company paid $850 for this month’s rent. Assets = Liabilities + Stockholders’ Equity Trans- action Cash + Equipment = Accounts Payable + Common Stock + Retained Earnings Rev. – Exp. – Div. 1. +25,000 +25,000 2. +7,000 +7,000 3. +8,000 +8,000 4. -850 -850 5. -1,000 -1,000 + = + + - - $31,150 $7,000 $7,000 $25,000 $8,000 $850 $1,000 $18,050 $18,050 LO 4

4 Tabular Analysis The company paid a dividend of $1,000 in cash to stockholders. Assets = Liabilities + Stockholders’ Equity Trans- action Cash + Equipment = Accounts Payable + Common Stock + Retained Earnings Rev. – Exp. – Div. 1. +25,000 +25,000 2. +7,000 +7,000 3. +8,000 +8,000 4. -850 -850 5. -1,000 -1,000 + = + + - - $31,150 $7,000 $7,000 $25,000 $8,000 $850 $1,000 $38,150 $38,150 LO 4