701 acct, assessment 2

unearned revenue (liability)

previously recorded unearned revenue to earned revenue ex* James Gym received member fee

accrued expenses

recording operating expenses that have not yet been paid or recorded ex* used electricity & billed by the utility firm

Income statements are used to get...

Net Income

Super Grill borrows 10,000 from the bank on November 1, 2019. The interest rate is 6% annually. What is the interest expense in 2019?

100

Accounting Cycle 1-5

1. Analyze 2. Record 3. Adjust 4. Report 5. Close

List order of financial statements

1. Income statement 2. Statement of SE 3. Balance Sheet 4. Cash Flow Statement

James Gym borrow 40,000 from the bank as 3yrs loan, interest is 6% annually. adjust interest for the year

40,000 x 0.06 / 12 = 200 Int exp 200 Int payable 200

Accrued Revenue

A revenue that has been earned but for which the cash has not yet been collected. ex* Dentist provide service & billed the patient

The payroll paid $3,000 cash for salary on Dec. 30. What is the effect on the expanded accounting equation

Asset decreased by 3,000 and expense increased by 3,000.

In applying the rules of debits and credits, what are all debited for increase?

Asset, expense, and dividends are debited for increase

Analyze

Analyze transactions from source documents

The Midlothian Trash Company of Richmond, Virginia, charges customers $100 per month to pick up trash for one month. Money is due on the first day of each month. By the beginning of the current month, the company has received $49,000. If financial statements are made immediately, what reporting is appropriate for the company?

Assets increase and liabilities increase

Dec. 2 James Gym borrow 40,000 from the bank as three years loan, what is the effect to the accounting equation?

Assets increased by 40,000 and liabilities increased by 40,000.

expanded accounting equation is:

Assets= Liabilities+ Common Stock +Revenue - Expenses -Dividend

Assets =

Cash

Dec 1 James invest 50,000 into Gym

Cash 50,000 Common Stock 50,0000

James received 6,000 for membership for one year

Cash 6,000 Unearned Revenue 6,000

Debit increase, Credit Increase Chart name?

D E A - L OR Dividends Expense Asset Liabilities Owners Equity Revenue

Asset Increase

Debit

ABC company took a loan $5,000 from the bank on Jan. What is the correct accounting treatment?

Debit Cash 5,000 and Credit Notes Payable 5,000.

James purchased 30,000 in equipment

Equipment 30,000 Cash 30,000

Dec. 3 James Gym purchased 30,000 equipment using cash. What is the journal entry to record the transaction?

Equipment 30,000 Cash 30,000

matching principle

Expenses are reported in the same period as the revenues they help to generate

The closing entries CANNOT bring the following accounting balance to zero.

Liabilities

On November 1, 2019, a company receives $1,800 for services to be provided evenly over the next six months. The December 31, 2019, adjusting entry for the company would include a credit to Deferred Revenue for $600.

False, deferred revenue is a liability. would make debit entries to liability

Which three items are Credit when increase?

Liabilities, Equities and Revenue

Revenues have what effect on the accounting equation?

Increase Stockholder's equity

Providing services and receiving cash will:

Increase assets and increase stockholders' equity.

James Gym paid 12,000 rent for one year

Prepaid Rent 12,000 Cash 12,000

James gym paid 12,000 rent fo the place for only 1 year, what is rent for december

Rent expenses 1000 Prepaid Rent 1000 12,000/12 = 1000

can find the following account in Post-Closing Trail Balance

Retained Earnings

statement of stockholders' equity is used to get

Retained Earnings Income

Adjusting entries are prepared at the end of the period. Usually, two types of accounts are adjusted:

Revenue and Expenses

What accounts are considered temporary

Revenue, Expenses, Dividends

basic rule for accrual accounting

Revenues are recorded in the period in which the goods or services are provided to customers

The payroll paid 3,000 for salary

Salary Exp 3,000 Cash 3,000

Retained earnings is an account under ______________.

Stock holders' equity

What is the purpose of prepare closing entry?

To Reduce the balances of the temporary accounts to zero to prepare them for the next period

Dec 31. James gym was billed 1,000 for utility & will pay on Jan.10

Utility exp 1000 Utility Revenue 1000

prepaid expenses

allocating previously recorded assets to expenses ex* Yummy grill paid 12 month rent in advance, something that was earned and will bring future benefit

Journal entry

convention used to record transactions of company

liability, equity increased

credit

Matching Principle

directs a company to report an expense on its income statement in the same period in when revenue was earned. ex* sell a car & earn a revenue then you should report cost of producing that car as an expense in same period it was sold

What does a trial balance prove?

ending balance of all assets, liability and equity

adjust

journalize adjusting entries and prepare adjusted trial balance

close

journalize closing entries and prepare post-closing trial balance

Record

journalize transaction and prepare unadjusted trial balance

debits go on the

left

Trial Balance

list of all the accounts showing that debits equals to credits

What do we do in post-closing trial balance

only consist of liabilities, assets and SE & all income items are 0.

report

prepare financial statements

credits go on the

right

What does the closing entries do?

transfer balance of temporary acts to the balance of Retained Earnings and reduce balances to 0 to prepare for next period