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