chapter 4 accounting

on november 7, the firm purchased equipment for $5,000, issued Check 1001 for $2,500, and agreed to pay the balance in 30 days

- The asset account Equipment is increased by $5,000. The asset account Cash is decreased by $2,500. The liability account Accounts Payable is increased by $2,500 (increases to assets are recorded as debits (debit equipment for 5000.) (decreases to assets are credits. credit cash for $2,500. increases to liabilities are credits. credit accounts payable for $2,500)

in the general ledger, accounts are typically in financial statement order. place the accounts in the order they would appear in the ledger

- assets - liabilities - owner's equity - revenue - expenses

louis guzman invested $10,000 into his company. this transaction would be recorded by the company with which of the following entries?

- credit to louis guzman, capital for 10,000 - debit to cash for 10,000

guzman consulting services issued a check for $2000 to purchase equipment. this transaction would be recorded with which of the following entries?

- debit to equipment for $2000 - credit to cash for $2000

woo consulting services purchased office equipment on account for $3500. this transaction would be recorded with which of the following entries?

- debit to equipment for $3,500 - credit to accounts payable for $3,500

correcting journal and ledger errors

- if an error is discovered before the entry is posted, neatly cross out the incorrect item and write the correct data above it - to ensure honesty and provide a clear audit trail, erasures are not made in the journal

recording a business transaction

1. analyze the financial event - identify the accounts affected - classify the accounts affected - determine the amount of increase or decrease for each account affected 2. apply the rules of debit and credit - which account is debited? for what amount? - which account is credited? for what amount? 3. make the entry in t-account form 4. record the complete entry in general journal form

place the steps to post from the general journal to the general ledger in the correct order:

1. enter the date 2. enter the amount in the appropriate debit or credit column 3. compute the balance

five steps for posting

1. on the ledger form, enter the date of the transaction. enter a description of the entry, if necessary. usually, routine entries do not require descriptions. 2. on the ledger form, enter the general journal page in the Posting Reference column. 3. on the ledger form, enter the debit amount in the debit column or the credit amount in the credit column 4. on the ledger form, compute the balance and enter it in the debit balance column or the credit balance column 5. on the general journal, enter the ledger account number in the posting reference column

Accounts Payable

Amounts to be paid in the future for goods or services already acquired

Accounts Receivable

Amounts to be received in the future (owed to the creditor) due to the sale of goods or services

steps to complete the journal entry for a business transaction

Analyze the financial event: Identify the accounts affected. Classify the accounts affected. Determine the amount of increase or decrease for each account affected. Apply the rules of debit and credit: Which account is debited? For what amount? Which account is credited? For what amount? Make the entry in T-account form. Record the complete entry in general journal form.

compound entry

a journal entry that contains more than one debit or credit. in a compound entry, record all debits first, followed by the credits.

accounting cycle

a series of steps performed during each accounting period to classify, record, and summarize data for a business and to produce needed financial information step #1 - analyze/classify business transactions step #2 - prepare a record of business transactions (journalize transactions) step #3 - post transactions to the ledger step #4 - prepare a worksheet step #5 - prepare financial statements step #6 - journalize adjusting entries step #7 - journalize closing entries step #8 - prepare a postclosing trial balance step #9 - evaluate and communicate financial information

Simmons associates paid $2000 to Office Mart as payment on account for Invoice 9923. This transaction would be recorded with a debit to which account?

accounts payable (keywords: as payment on account) credit to cash for $2000

singh consulting purchased $3000 of office equipment by paying $1000 cash and agreeing to pay the balance within 30 days. this transaction would be recorded with a credit to which accounts?

accounts payable and cash

jones consulting provided $1000 of consulting services on credit to a customer. this transaction would be recorded with a debit to which account?

accounts receivable

journalizing

aka the record of entry , the process of recording transactions in the general journal (details must be in chronological order of the economic events of the business)

a ledger account form that shows the balance of the account after each entry is posted is called a:

balance ledger form

ledger account forms

constituents: - account name and number - columns for date, description, and posting reference - columns for debit, credit, debit balance, and credit balance

if an error is discovered before the entry is posted, the correction will be made by:

crossing out the incorrect item and writing the correct data above it

debit-credit rules

debit - increases to asset accounts are recorded as debits credit - increases to owner's equity accounts are recorded as credits

nayak associates performed services for $1,500 on account. this transaction would be recorded with which of the following entries?

debit accounts receivable for $1500 credit fees income for $1500

a company collects $500 from a credit customer for an outstanding balance this transaction would be journalized with a debit to the _____ account and a credit to the _____________ account

debit to cash, credit to accounts receivable

a company provides consulting services to a customer and collects $500 cash. this transaction would be recorded with a debit to the _____ account and a credit to the ________________ account

debit to cash, credit to the fees income account

mitra associates purchased equipment for $5000, by paying $1000 cash and agreeing to pay the balance in 30 days. this transaction would be recorded with which of the following entries?

debit to equipment for $5000 credit to accounts payable for $4000 credit to cash for $1000

sana gill withdrew $1000 from her company for personal expenses. this transaction would be recorded with which of the following entries?

debit to sana gill, drawing for $1000 credit to cash for $1000

a company purchased equipment for $2000 cash this transaction would be journalized with a debit to the __________ account and a credit to the _________ account

debit to the equipment account credit to the cash account

a company pays $2,400 cash to prepay the next two months rent. this transaction would be journalized with a debit to the __________________ account and a credit to the __________ account

debit to the prepaid rent account and a credit to the cash account

a company pays $3500 for weekly salaries. this transaction would be recorded with a debit to the salaries ________ account and a credit to the _______ account

debit to the salaries expense account and a credit to the cash account

A company purchases supplies for $500 cash. This transaction would be journalized with a debit to the ___________ account and a credit to the _________ account

debit to the supplies account credit to the cash account

a company pays $200 cash for monthly utilities. this transaction would be recorded with a debit to the _________ account and a credit to the ______ account

debit to the utilities expense account and a credit to the cash account

varsha associates purchased office equipment for $5000 cash. this transaction would be recorded with a debit to which account?

equipment

the ____ provides a permanent, classified record of all accounts used in a firm's operation

general ledger

general journal entry

is a financial record for entering all types of business transactions a general journal entry consists of: - in the date column: record the year first, then the month and day - the debit is recorded on the first line of the entry - in the description column: SHOULD REFER TO THE SOURCE OF THE INFORMATION. enter the account to be debited first, and enter the amount on the same line in the debit column. indent about one-half inch and record the credit. and enter the amount on the same line. indent again and write the description

jason thompson withdrew $500 from his company for personal expenses. this transaction would be recorded with a debit to which account?

jason thompson, drawing

the _____ keeps account records on a special form that makes it possible to record all data efficiently

ledger

an audit trail makes it possible to:

locate errors, prevent fraud, trace information

recall: DEBITS = CREDITS

no matter how many accounts are affected by a transaction, total debits must equal total credits

accounts payable keywords

on credit, on account,

the process of transferring data from the journal to the ledger is known as

posting

leah associates purchased $500 of supplies on account. this transaction would be recorded with a debit to which account?

supplies

leah associates purchased office supplies for $500 cash. this transaction would be recorded with a debit to which account?

supplies

On November 30, Eli's Consulting Services wrote Check 1004 for $8,000 to prepay rent for December and January.

the asset account Prepaid Rent is increased by $8000. the asset account Cash is decreased by $8000.

posting

the process of transferring data from a journal to a ledger