Financial Accounting Chapter 2
(3) What is the Financial Accounting Equation if you Hire a new employee, who will be paid $500 at the end of each month.
$0 = $0 + $0
What is the Financial Accounting Equation if you Receive a bill of $200 for utility costs in the current period.
$0 = +$200 + -$200
What is the Financial Accounting Equation if you Receive cash of $1,000 from customers in (1) above.
+$1,000 and -$1,000 = $0 + $0
What is the Financial Accounting Equation if you Provide services to customers on account, $1,600.
+$1,600 = $0 + +$1,600
What is the Financial Accounting Equation if you Issue common stock for $10,000 cash.
+$10,000 = $0 + +$10,000
What is the Financial Accounting Equation if you Purchase office supplies for $400 cash.
+$400 and -$400 = $0 + $0
What is the Financial Accounting Equation if you Obtain a loan from the bank for $7,000.
+$7,000 = +$7,000 + $0
What is the Financial Accounting Equation if you Pay $100 for advertising aired in the current period.
-$100 = $0 + -$100
What is the Financial Accounting Equation if you Pay $400 for current month's rent.
-$400 = $0 + -$400
What is the Financial Accounting Equation if you Pay $500 to employee in (3) above.
-$500 = $0 + -$500
Determine the amount to post to the Cash T-account. Pay back bank note of $20,000 in #1 above.
20,000 Credit
Determine the amount to post to the Cash T-account. Pay utilities of $2,000 for the current month.
2000 Credit
Determine the amount to post to the Cash T-account. Provide services to customers for $26,000 cash.
26,000 Debit
Determine the amount to post to the Cash T-account. Assuming the beginning balance in the Cash T-account is $0, what is the ending balance in the Cash T-account after the five transactions above?
3300 Debit
Determine the amount to post to the Cash T-account. Instead of a beginning balance of $0, what if the beginning balance in the Cash T-account was $3,000. Now, what is the ending balance in the Cash T-account after the five transactions above?
6300 Debit
Determine the amount to post to the Cash T-account. Purchase supplies for $700 cash.
700 Credit
Journal
A chronological record of all transactions affecting a firm
Chart of accounts
A list of all account names used to record transactions of a company
(pic )Trial balance
A list of all the accounts and their balances at a particular date, showing that total debits equal total credits
T-account
A simplified form of a general ledger account with space at the top for the accounts title and two sides for recording debits and credits
Account
A summary of the effects of all transactions related to a particular item over a period of time
General ledger
All accounts used to record the company's transactions (shown in chart of accounts)
Measurement Process Step 2
Analyze the impact of the transaction on the accounting equation.
Measurement Process Step 3
Assess whether the impact of the transaction results in a debit or credit to the account balance.
What happens to assets, liability, and equity when you pay a account payable?
Assets (cash) decrease, Liabilities (accounts payable)Decrease, no change in equity.
Pay employees $6,000 for the first month's salaries.
Assets decrease and stockholders' equity decreases.
Purchase land for $19,000. A note payable is signed for the full amount.
Assets increase and liabilities increase
Purchase office supplies for $2,000 on account.
Assets increase and liabilities increase.
Receive cash for $12,000 in rental fees for the current month
Assets increase and stockholders' equity increases.
What happens to assets, liability, and equity when you issue stock for cash?
Assets increase, Equity increases, no effect on Liabilities
What happens to assets, liability, and equity when you buy land by singing a note to the bank?
Assets increase, Liabilities increase, Equity has no effect
What happens to assets, liability, and equity when you recieve cash in advance from customers?
Assets increase, Liabilities increase, No effect on equity.
Whats the impact of assets, liabilities and equity equation if you pay utilities of $2000 for the current month?
Assets(-2000)=Liabilities(0)+Equity(-2000)
Whats the impact of assets, liabilities and equity equation if you paid back bank note of 20,000$ from the first transaction?
Assets(-20000)=Liabilities(-20000)+Equity(0)
Whats the impact of assets, liabilities and equity equation if you purchase supplies for 700$ cash?
Assets(0)=Liabilities(0)+Equity(0)
Whats the impact of assets, liabilities and equity equation if you purchase equipment by signing a note with the bank for 20000$?
Assets(20000)=Liabilities(20000)+Equity(0)
Whats the impact of assets, liabilities and equity equation if you provide services to customers for 26,000$?
Assets(26000)=Liabilities(0)+Equity(26000)
International Accounting Standards Board
Body that is attempting to develop a single set of high-quality, understandable global accounting standards.
Accounts Payable is..?
Credit
Common Stock is..?
Credit
Retained Earnings is..?
Credit
Service Revenue is..?
Credit
Which of the following is used to increase the balance of a liability account? Debit or Credit?
Credit
Which of the following is used to increase the balance of a revenue account? Debit or Credit?
Credit
Prepare a trial balance by indicating whether each account balance is listed in the debit column or credit column. Accounts Payable = $3,000.
Credit 3000
The balance of a stockholders' equity account increases with a ... and decreases with a .....
Credit,Debit
Accounts receivable is..?
Debit
Cash is..?
Debit
Dividends is..?
Debit
Equipment is..?
Debit
Salaries Expense is..?
Debit
Utilities Expense is..?
Debit
Which of the following is used to increase the balance of an asset account? Debit or Credit?
Debit
Which of the following is used to increase the balance of an expense account? Debit or Credit?
Debit
Prepare a trial balance by indicating whether each account balance is listed in the debit column or credit column. Buildings = $15,000.
Debit 15000
Prepare a trial balance by indicating whether each account balance is listed in the debit column or credit column. Cash = $4,000.
Debit 4000
When you Provide services to customers on account it is...?
Debit accounts receivable; credit service revenue
When you Pay a cash dividend it is...?
Debit dividends; credit cash
When you Pay rent in advance for the next three months it is...?
Debit prepaid rent; credit cash
When you Pay salaries for the current month it is...?
Debit salaries expense; credit cash
Determine which account to debit and which account to credit. Purchase equipment by signing a note with the bank for $20,000.
Debit-Equipment, Credit-Notes Payable
Determine which account to debit and which account to credit. Paid back bank note of $20,000 from the first transaction above.
Debit-Notes Payable, Credit-Cash
Determine which account to debit and which account to credit. Purchase supplies for $700 cash.
Debit-Supplies, Credit-cash
Determine which account to debit and which account to credit. Pay utilities of $2,000 for the current month.
Debit-Utilities expense, Credit-Cash
Determine which account to debit and which account to credit. Provide services to customers for $26,000 cash.
Debit-cash, Credit-Service Revenue
indicate whether a debit or credit is used to increase (+) or decrease (-) the balance of the account. Dividend
Decrease in Credit , increase in Debit
Internal transactions
Events that affect the financial position of the company but do not include an exchange with a separate economic entity
(pic) Cash T-Account
For assets (such as cash), an amount in the debit or left column always means an increase in the balance. An amount in the credit or right column always means a decrease in the balance. • Just the opposite is true for liabilities and stockholders' equity: A debit to a liability or stockholders' equity T-account always means a decrease, and a credit always means an increase. 5-purchase supplies on account 2300 7-provide golf training to customers on account 2500 notice that transactions (5) and (7) are not posted to Eagle's Cash T-account. These transactions did not include the receipt or payment of cash, and therefore they do not affect the balance of cash
Securities and Exchange Commission
Group that has been given power by Congress to enforce the proper application of financial reporting rules for companies whose securities are publicly traded.
Indicate how to increase and decrease each account listed below by selecting debit or credit. Common Stock
Increase in Credit, Decrease in Debit
Indicate how to increase and decrease each account listed below by selecting debit or credit. Salaries Payable
Increase in Credit, Decrease in Debit
Indicate how to increase and decrease each account listed below by selecting debit or credit. Unearned Revenue
Increase in Credit, Decrease in Debit
indicate whether a debit or credit is used to increase (+) or decrease (-) the balance of the account. Retained Earnings
Increase in Credit, Decrease in Debit
Indicate how to increase and decrease each account listed below by selecting debit or credit. Accounts Receivable
Increase in Debit, Decrease in Credit
Indicate how to increase and decrease each account listed below by selecting debit or credit. Equipment
Increase in Debit, Decrease in Credit
Auditors
Independent intermediaries that help to ensure that management appropriately applies financial reporting rules in preparing the company's financial statements.
Financial Accounting Standards Board
Independent, private-sector group that is primarily responsible for setting financial reporting standards in the United States.
(#1) Determine the amount to post to the Cash T-account. Purchase equipment by signing a note with the bank for $20,000.
No Entry
What happens to assets, liability, and equity when you purchase equipment for cash?
No effect on all 3
Hire three employees for $2,000 per month.
No effect on the accounting equation.
Purchase storage container equipment for $8,000
One asset increases and another asset decreases.
Measurement Process Step 5
Post the transaction to the T-accounts in the general ledger.
Measurement Process Step 6
Prepare a trial balance.
Account recievable
Record of cash that will be received from a customer to whom a business has sold products on credit
Measurement Process Step 4
Record transactions using debits and credits.
Posting
The process of transferring the debit and credit information from the journal to individual accounts in the general ledger
External transactions
Transactions the firm conducts with a separate economic entity
Measurement Process, Step 1
Use source documents to identify accounts affected by external transactions.
Account payable
a liability account showing how much is owed for goods and services purchased on credit
Note payable
a note promising to pay a certain amount of money at a certain time
Issue 10,000 shares of common stock in exchange for $32,000 in cash
assets increase, and stockholders' equity increases.
When you Pay for office supplies that were purchased on account it is...?
debit accounts payable; credit cash.
When you Collect cash from customers for services (on account) it is...?
debit cash; credit accounts receivable.
When you Issue common stock in exchange for cash it is...?
debit cash; credit common stock
When you Borrow cash from the bank and sign a note it is...?
debit cash; credit notes payable
When you Purchase office supplies on account it is...?
debit supplies; credit accounts payable.
When you Pay for the current month's utilities it is...?
debit utilities expense; credit cash.
What happens to assets, liability, and equity when you pay rent in advance with cash?
no effect on all 3
(pic) Journal Format 1 transaction
transaction (1) causes total assets to increase (+A) and total stockholders' equity to increase (+SE). For each transaction, total debits must equal total credits.
