accounting i (part i) -accounting cycle · 15 purchased additional office equipment for $4,000, ......

Accounting I (Part I)

-Accounting Cycle

Napaporn Likitwongkajon

Faculty of Management Science

Khon Kaen University

Accounting I

N Likitwongkajon

Account Titles

Assets สนิทรัพย์

Current Assets สนิทรัพย์หมนุเวียน

Cash เงินสด

Accounts Receivable ลกูหนีก้ารค้า

- Allowance for doubtful accounts คา่เผ่ือหนีส้งสยัจะสญู

Notes receivable ตัว๋เงินรับ

Inventory สนิค้าคงเหลอื

Prepaid Insurance คา่ประกนัภยัจ่ายลว่งหน้า

Prepaid Expense คา่ใช้จ่ายจ่ายลว่งหน้า

Accrued Revenues รายได้ค้างรับ

Supplies วสัดสุิน้เปลอืง

Property, plant, and equipment ที่ดิน,อาคารและอปุกรณ์

Land ที่ดิน

Equipments อปุกรณ์สาํนกังาน

Accumulated Depreciation—Equipments คา่เสือ่มราคาสะสม-อปุกรณ์สาํนกังาน

Buildings อาคาร

Accumulated Depreciation—Buildings คา่เสือ่มราคาสะสม-อาคาร

Vehicles ยานพาหนะ

Accumulated Depreciation— Vehicles คา่เสือ่มราคาสะสม-ยานพาหนะ

Other Assets สนิทรัพย์อื่น

Patents สทิธิบตัร

Copyrights ลขิสทิธ์ิ

Trademarks and Trade Names เคร่ืองหมายการค้า

Franchises and Licenses สมัปทาน

Goodwill คา่ความนิยม

Accounting I

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Liabilities หนีส้นิ

Current Liabilities หนีส้นิหมนุเวียน

Bank Overdraft เงินเบิกเกินบญัชี

Accounts Payable เจ้าหนีก้ารค้า

Notes Payable ตัว๋เงินจ่าย

Salaries Payable เงินเดือนค้างจ่าย

Income taxes payable ภาษีเงินได้ค้างจ่าย

Short-term Loans เงินกู้ ระยะสัน้

Unearned Revenue รายได้ค้างรับ

Accrued Expense คา่ใช้จ่ายค้างจ่าย

Non-Current Liabilities หนีส้นิไมห่มนุเวียน

Long-term Loans เงินกู้ ระยะยาว

Equity สว่นของเจ้าของ

Proprietorship กิจการเจ้าของคนเดียว

Capital-………(owner’s name) ทนุ-คณุ.......

Withdrawals ถอนใช้สว่นตวั

Net Income (Net Loss) กําไรสทุธิ (ขาดทนุสทุธิ)

Partnership ห้างหุ้นสว่น

Capital-………(partners’ name) ทนุ-คณุ.........

Unappropriated Retained Earnings สว่นแบง่กําไรท่ียงัไมไ่ด้จดัสรร

Corporation บริษัทจํากดั

Share Capital-Ordinary ทนุหุ้นสามญั

Common stock ทนุหุ้นสามญั

Dividends เงินปันผล

Accounting I

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Revenues รายได้

Merchandising Company กิจการซือ้มาขายไป

Sales Revenue ยอดขาย

Sales Returns and Allowances สนิค้ารับคืนและสว่นลด

Sales Discounts สว่นลดจ่าย

Service Company กิจการให้บริการ

Service Revenue รายได้คา่บริการ

Rent Revenue รายได้คา่เช่า, คา่เช่ารับ

Fee Revenue รายได้คา่ธรรมเนียม,คา่ธรรมเนียมรับ

Interest Revenue ดอกเบีย้รับ

Expenses คา่ใช้จ่าย

Merchandising Company

Cost of Goods Sold ต้นทนุขาย

Purchases ซือ้

Freight-in คา่ขนสง่เข้า

Purchases Returns and Allowances สนิค้าสง่คืนและสว่นลด

Purchases Discounts สว่นลดรับ

Freight-out คา่ขนสง่ออก

Merchandising and Service Company Salaries and Wages Expense คา่แรงและเงินเดือน

Advertising Expense คา่โฆษณา

Utilities Expense คา่สาธารณปูโภค

Insurance Expense คา่ประกนัภยั

Maintenance and Repairs Expense คา่ซอ่มแซมและบํารุงรักษา

Rent Expense คา่เช่าจ่าย

Bad Debts Expense หนีส้งสยัจะสญู

Supplies Expense คา่วสัด ุ

Depreciation Expense คา่เสือ่มราคา

Interest Expense ดอกเบีย้จ่าย

Miscellaneous Expense คา่ใช้จ่ายเบ็ดเตลด็

Accounting I

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What is accounting?

Accounting Standard

IFRS :

GAAP :

Measurement Principle

Cost Principle:

Fair value Principle:

Assumption

Monetary Unit:

Economic Entity:

Form of Business Ownership

1. Proprietorship:

2. Partnership: 3. Corporation:

Accounting Equation

Assets :

Liabilities :

Equity :

Accounting I

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Classify items

The following items were taken from the trial balance.

1 Cash $2,291.1 7 Inventories $2,357.0

2 Accounts

receivable 2,883.9 8

Income taxes

payable 86.3

3 Common stock 2,874.2 9 Property, plant, and

equipment 1,957.7

4 Notes payable 342.9 10 Retained Earnings 5,818.9

5 Other assets 3,759.9 11 Accounts payable 2,815.8

6 Other liabilities 1,311.5

(a) Classify each of these items as an asset, liability, or stockholders’ equity

and determine the total dollar amount for each classification.

Assets

Total assets

Liabilities

Total liabilities

Equity

Total equity

(b) Determine accounting equation by calculating the value of total assets,

total liabilities, and total stockholders' equity.

=

+

Accounting I

N Likitwongkajon

Financial Statement

1. Balance Sheet <IFRS> Statement of Financial Position

2. Income Statement < IFRS> Statement of Profit or Loss

3. Statement of Cash Flows

4. Statement of Change in Equity

5. Note to Financial Statement

Financial Statement

On June 1 Bear Service Co. was started with an initial investment in the

company of $22,100 cash.

Here are the assets and liabilities of the company at June 30, and the revenues

and expenses for the month of June, its first month of operations:

Cash $4,600 Notes payable $12,000

Accounts receivable 4,000 Accounts payable 500

Service revenue 7,500 Supplies expense 1,000

Supplies 2,400 Maintenance and repair

expense 600

Advertising expense 400 Utilities expense 300

Equipment 26,000 Salaries and wages

expense 1,400

In June, the company issued no additional stock, but paid dividends of$1,400.

Prepare an income statement and a retained Earnings statement for the

month of June and a balance sheet at June 30, 20x2.

Accounting I

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Bear Service Co.

Income Statement

For the Month Ended June 30, 20x2

Revenues

Expenses

Total expenses

Net income

Bear Service Co.

Retained Earnings Statement For the Month Ended June 30, 20x2

Retained Earnings, June 1

Add:

Less:

Retained Earnings, June 30

Bear Service Co.

Balance Sheet June 30, 20x2

Assets

Total assets

Liabilities and Equity

Liabilities

Equity

Total Liabilities and Equity

Accounting I

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Transactions

Step 1: Transactions Analysis (1)

On September 1, 20x1, Ray and Barbara decide to open a computer

programming company that they incorporate as Softbyte Inc. During

September the following transactions occurred.

(1) Investment by Shareholders: they invest $15,000 cash in exchange for

capital shares.

(2) Purchase of Equipment for Cash: Softbyte purchases computer equipment

for $7,000 cash.

(3) Purchase of Supplies on Credit: Softbyte purchases for $1,600 from Acme

Supply Company computer paper and other supplies expected to last several

months.

(4) Services Provided for Cash: Softbyte receives $1,200 cash from customers

for programming services it has provided.

(5) Purchase of Advertising on Credit: Softbyte receives a bill for $250 from

the Daily News for advertising but postpones payment until a later date.

(6) Services Provided for Cash and Credit: Softbyte provides $3,500 of

programming services for customers. The company receives cash of $1,500

from customers, and it bills the balance of $2,000 on account.

(7) Payment of Expenses: Softbyte pays the following Expenses in cash for

September: store rent $600, salaries of employees $900, and utilities $200.

(8) Payment of Accounts Payable: Softbyte pays its $250 Daily News bill in

cash.

(9) Receipt of Cash on Account: Softbyte receives $600 in cash from

customers who had been billed for services [in Transaction (6)].

(10) Dividends: Softbyte pays a dividend of $1,300 in cash.

Accounting I

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(1) The effect of this transaction on the basic equation is:

Assets

=

Liabilities

+

Stockholders’ Equity Explan- ations

Cash

+ Accounts Receivable

+ Supplies + Equipment Accounts Payable

Share Capital

+ Retained Earnings

Revenues - Expenses - Dividends

1. + + + = + + - -

2. + + + = + + - -

3. + + + = + + - -

4. + + + = + + - -

5. + + + = + + - -

6. + + + = + + - -

7. + + + = + + - -

8. + + + = + + - -

9. + + + = + + - -

10 + + + =

+ + - -

+

+

+

=

+

+

-

-

Accounting I

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Financial Statement (IFRS)

Prepare an income statement and a retained Earnings statement

for the month of June and a balance sheet at September 30, 20x1.

Softbyte Inc.

Income Statement

For the Month Ended September 30, 20x1

Revenues

Expenses

Total expenses

Net income

Softbyte Inc.

Retained Earnings Statement


Retained Earnings, September 1

Add:

Less:

Retained Earnings, September 30

Softbyte Inc.

Statement of Financial Position September 30, 20x1

Assets

Total assets

Equity and Liabilities Equity

Liabilities

Total Equity and Liabilities

Accounting I

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Softbyte Inc. Statement of Cash Flows


Cash flows from operating activities Cash receipts from revenues

Cash payments for expenses

Net cash provided by operating activities

Cash flows from investing activities

Purchase of equipment

Cash flows from financing activities

Sale of ordinary shares

Payment of cash dividends

Net increase in cash

Cash at the beginning of the period

Cash at the end of the period

Step 1: Transactions Analysis (2) - corporation

On April 1, 20x2, Vagabond Travel Agency Inc. was established. These

transactions were completed during the month.

(1) Stockholders invested $30,000 cash in the company in exchange for

common stock.

(2) Paid $900 cash for April office rent.

(3) Purchased office equipment for $3,400 cash.

(4) Purchased $200 of advertising in the Chicago Tribune, on account.

(5) Paid $500 cash for office supplies.

(6) Earned $12,000 for services provided: Cash of $3,000 is received from

customers, and the balance of $9,000 is billed to customers on account.

(7) Paid $400 cash dividends.

(8) Paid Chicago Tribune amount due in transaction (4).

(9) Paid employees’ salaries $1,800 in cash.

(10) Received $9,000 in cash from customers who have previously been billed

in transaction (6).

Accounting I

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Assets

=

Liabilities

+


Cash


+ Supplies + Equipment Accounts Payable

Share Capital

+ Retained Earnings

Revenues - Expenses - Dividends

1. + + + = + + - -

2. + + + = + + - -

3. + + + = + + - -

4. + + + = + + - -

5. + + + = + + - -

6. + + + = + + - -

7. + + + = + + - -

8. + + + = + + - -

9. + + + = + + - -

10 + + + =

+ + - -

+

+

+

=

+

+

-

-

Accounting I

N Likitwongkajon

Step 1: Transactions Analysis (3) - Proprietorship

Robin created a providing legal service, Robin Service., on July 1, 20x2.

On July 31 the balance sheet showed:

Cash $4,000

Office Equipment $5,000

Accounts Receivable $2,500

Accounts Payable $4,200

Supplies $500

Capital-Robin $7,800

During August the following transactions occurred.

Aug. 1 Collected $1,100 of accounts receivable due from customers.

4 Paid $2,700 cash for accounts payable due

9 Earned revenue of $5,400, of which $3,600 is collected in cash and

the balance is due in September.

15 Purchased additional office equipment for $4,000, paying $700 in

cash and the balance on account.

19 Paid cash for salaries $1,400.

20 Purchased $1,700 of additional office supplies on credit.

23 Withdrew $700 cash for personal use.

26 Received $5,000 from Standard Federal Bank; the money was

borrowed on a 4-month note payable.

28 Paid cash for advertising expenses $350.

31 Paid cash for utility expenses this month $380.

Accounting I

N Likitwongkajon


Assets

=

Liabilities

+


Cash


+ Supplies + Equip. Notes Payable

+ Accounts Payable

Capital- Robin

+ Profit and Loss

Rev. - Exp. - Withdrawal

+ + + = + + + - -

+ + + = + + + - -

+ + + = + + + - -

+ + + = + + + - -

+ + + = + + + - -

+ + + = + + + - -

+ + + = + + + - -

+ + + = + + + - -

+ + + = + + + - -

+ + + =

+ + + - -

+

+

+

=

+ +

+

-

-

Accounting I

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General Journal

General Journal Page 1

Date Account Titles Ref. Debit Credit

Jan 1 Cash 15,000 -

Share Capital—Ordinary 15,000 -

Issued shares for cash

5 Delivery Equipment 14,000 -

Cash 8,000 -

Account Payable 6,000 -

purchases a delivery truck

Step 1: Transactions Analysis (4) – corporation with solution

On July 1, 20x1, Cindy Belton opened Cindy Belton, Attorney at Law. On July

31, the account showed Cash $4,000, Accounts Receivable $1,500, Supplies

$500, Office Equipment $5,000, Accounts Payable $4,200, Capital Shares

$6,000, Retained Earnings $800. The following transactions occurred.

Aug. 1 Collected $1,400 of accounts receivable due from clients

5 Paid $2,700 cash for accounts payable due

10 Earned revenue of $9,000 of which $3,000 is collected in cash and

the balance is due in September

15 Purchased additional office equipment for $1,000 paying $400 in

cash and the balance, $600 on account.

20 Paid salaries$3,000 rent for August $900, and advertising

expenses $350.

25 Declared and paid a$750 cash dividend

28 Received $2,000 from Standard Federal Bank; the money was

borrowed on a 4-month note payable.

30 Incurred utility expenses for month on account $250.

Accounting I

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(4) An analysis of the transactions is shown below.

Date Cash +

Accounts

Receivable + Supplies +

Office

Equipme

nt =

Notes

Payable +

Accounts

Payable +

Capital

Shares +

Retained

Earnings +

Revenu

es -

Expens

es -

Divide

nds

Explanation

s

Balance 4,000 + 1,500 + 500 + 5,000 = + 4,200 + 6,000 + 800 + - -

Aug. 1 1,400 + -1,400 + + = + + + + - -

Subtotal: 5,400 + 100 + 500 + 5,000 = + 4,200 + 6,000 + 800 + - -

5 -2,700 + + + = + -2,700 + + + - -

Subtotal: 2,700 + 100 + 500 + 5,000 = + 1,500 + 6,000 + 800 + - -

10 3,000 + 6,000 + + = + + + + 9,000 - - service

revenue

Subtotal: 5,700 + 6,100 + 500 + 5,000 = + 1,500 + 6,000 + 800 + 9,000 - -

15 -400 + + + 1,000 = + 600 + + + - -

Subtotal: 5,300 + 6,100 + 500 + 6,000 = + 2,100 + 6,000 + 800 + 9,000 - -

20 -4,250 + + + = + + + + - 3,000 - salaries

+ + - 900 -

rent

expense

+ + - 350 -

advertisin

g expense

Subtotal: 1,050 + 6,100 + 500 + 6,000 = + 2,100 + 6,000 + 800 + 9,000 - 4,250 -

25 -750 + + + = + + + + - 0 - 750 dividend

Subtotal: 300 + 6,100 + 500 + 6,000 = + 2,100 + 6,000 + 800 + 9,000 - 4,250 - 750

28 2,000 + + + = 2,000 + + + + - -

Subtotal: 2,300 + 6,100 + 500 + 6,000 = 2,000 + 2,100 + 6,000 + 800 + 9,000 - 4,250 - 750

30 + + + = + 250 + + + - 250 - utilities

expense

Balance 2,300 + 6,100 + 500 + 6,000 = 2,000 + 2,350 + 6,000 + 800 + 9,000 - 4,500 - 750

Accounting I

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Step 2: Journalizing

General Journal Page…..


Accounting I

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Chart of Account

Account Number Account Titles

101 Cash

102 Account Receivables

: :

100—199 Assets, 200—299 Liabilities,

300—399 Equity, 400—499 Revenues, 500—599 Expenses

Cindy Belton, Attorney at Law

Chart of Account

Account Number Account Titles

Cash

Accounts Receivable

Supplies

Office Equipment

Notes Payable

Accounts Payable

Capital Share

Service Revenue

Salaries

Rent expense

Advertising expense

Dividend

Accounting I

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General Ledger

Cash No. 101

Date Explanation Ref. Debit

Date Explanation Ref. Credit

Sep. 1 Balance

4,000 - Sep. 5 Rent Expense J1 1,000 -

25 Service Revenue J1 3,000 - 30 Account Payable J2 2,000 -

Step 3: Posting

The transactions are recorded in the general journal below. Post the journal

entries to T-accounts.



Aug. 1 Accounts Receivable 2,800 - Service Revenue 2,800 -

10 Cash 4,000 -

Service Revenue 4,000 -

20 Rent Expense 1,000 -

Cash 1,000 -

30 Cash 1,400 - Accounts Receivable 1,400 -

General Ledger – T accounts

Cash 101 Accounts Receivable 102

Service Revenue 401 Rent Expense 502

4,000

Accounting I

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General Ledger

Cash No. 101 Date Explanation Ref. Debit


Accounts Receivable No. 102 Date Explanation Ref. Debit


Service Revenue No. 401



Rent Expense No. 501



Trial Balance August 30, 20x2

Debit Credit

Cash

Accounts Receivable

Service Revenue

Rent Expense

Accounting I

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Step 4: Trial Balance

The ledger accounts of the R&P Gym at June 30, 20x1 are shown below:

Accounts Payable $ 9,100

Accounts Receivable 1,050

Building 51,400

Share Capital-Ordinary 63,100

Cash 15,000

Exercise Equipment 18,900

Weight Equipment 22,000

Notes Payable 49,000

Office Supplies 350

Office Equipment 2,000

Dividends 10,500

Prepare a trial balance with the ledger accounts arranged in the proper

financial statement order. Include the appropriate heading.

R&P Gym

Trial Balance

June 30, 20x1

Account

Number

Account Titles Debit Credit

$121,200 $121,200

Accounting I

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Step 7: Prepare Financial Statement

The trial balance of Smile Service is below:

Smile Service Trial Balance

December 31, 20x4

Account Number


101 Cash $198,000 102 Accounts Receivable 370,000 103 Supplies 6,000 111 Furniture 100,000 112 Accumulated depreciation-

furniture $40,000

113 Building 250,000 114 Accumulated depreciation-

building 130,000

201 Accounts Payable 380,000 202 Unearned revenue 45,000 301 Capital-Smile 293,000 303 Withdrawals 65,000 401 Service revenues 286,000 501 Salary expense 172,000 502 Utility expense 13,000

Total $1,174,000 $1,174,000

Instructions:

(1) Write the trial balance on a six-column worksheet and complete the worksheet of Smile Service for the year ended December 31, 20x4.

(2) Prepare the income statement, and the balance sheet in report format.

(3) Journalize the closing entries.

Corporation: 301 Share Capital-Ordinary 293,000 302 Retained Earnings 65,000 303 Dividend 0

Accounting I

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Smile Service Worksheet

December 31, 20x4

Account

Account Titles Trial Balance Income Statement Balance Sheet

No. Dr. Cr. Dr. Cr. Dr. Cr.

101 Cash 198,000

102 Account Receivable 370,000

103 Supplies 6,000

111 Furniture 100,000

112 Accumulated depreciation

40,000

- furniture

113 Building 250,000

114 Accumulated depreciation

130,000

- building

201 Accounts Payable 380,000

202 Unearned revenue 45,000

301 Capital-Smile 293,000

302 Withdrawals 65,000

401 Service revenues 286,000

501 Salary expense 172,000

502 Utility expense 13,000

1,174,000 1,174,000

Smile Service

Income Statement

For the year ended December 31, 20x4

Revenues :

Expenses :

Accounting I

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Smile Service

Balance Sheet

December 31, 20x4

Assets Current Assets :

Property, Plants and Equipment :

Total Assets

Liabilities and Owner’s Equity

Liabilities :

Owner’s Equity:

Capital-Smile

Add

Less Withdrawals Total Liabilities and Owner’s Equity

Corporation: Owner’s Equity:

Share Capital-Ordinary

Retained Earnings

Total Liabilities and Owner’s Equity

Retained Earnings =

Accounting I

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Step 8: Closing Entries – Smile Service

General Ledger

Capital 301 Withdrawals 303

Income Summary 302 Salaries Expense 501

Service Revenue 401 Utility Expense 502

Corporation: General Ledger

Share Capital-Ordinary 301 Dividends 303

Retained Earnings 302 Salaries Expense 501

Service Revenue 401 Utility Expense 502

Accounting I

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Step 8: Closing Entries – Smile Service



Dec. 31 Closing entries

(1)

To close revenue accounts

(2)

To close expense accounts

(3)

To close net income

(4)

To close withdrawals

Corporation: Share Capital-Ordinary Cr.293,000 Dividend Dr.65,000




(3)

To close net income

(4)

To close dividend

Accounting I

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Step 9: A Post-Closing Trial Balance – Smile Service

Smile Service Post-Closing Trial Balance

December 31, 20x4

Account Number


101 Cash

102 Accounts Receivable 103 Supplies

111 Furniture 112 Accumulated depreciation-

furniture

113 Building

114 Accumulated depreciation-building

201 Accounts Payable

202 Unearned service revenue 301 Capital-Smile

302 Income Summary 303 Withdrawals

401 Service revenues 501 Salary expense

502 Utility expense

Total

Corporation: 301 Share Capital-Ordinary

302 Retained Earnings 303 Dividend

401 Service revenues

501 Salary expense 502 Utility expense

Total

Accounting I

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Step 5: Adjusting Entries

Adjusting Entries for Deferrals Adjusting Entries for Accruals

(1) Prepaid Expense

Dr. Expense

Cr. Prepaid Expense

(3) Accrued Revenues

Dr. Accrued Revenues

Cr. Revenues

(1.1) Prepaid Expense

Dr. …..Expense

Cr. Prepaid Expense

(4) Accrued Expenses

Dr. Expense

Cr. Accrued Expense

(1.2) Supplies

Dr. Supplies Expense

Cr. Supplies

(1.3) Plants, Equipments and Vehicles

Dr. Depreciation Expense-…

Cr. Accumulated Depreciation-…

(2) Unearned Revenues

Dr. Unearned Revenues

Cr. Revenues

Each adjusting entries example based on this trial balance.

Trial Balance October 31, 20x1

Account Number Account Titles Debit Credit 101 Cash $15,200 102 Supplies 2,500 103 Prepaid insurance 600 111 Equipment 5,000 201 Note Payable 5,000 202 Accounts Payable 2,500 203 Unearned revenue 1,200 301 Capital-Smile 10,000 302 Retained Earnings 0 303 Dividends 500 401 Service revenues $10,000 501 Salary expense 4,000 502 Rent expense $900

Total $28,700 $28,700

Accounting I

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(1) Prepaid Expense

(1.1) Prepaid Expense

On October 4, Company paid $600 for a one-year fire insurance policy.

Coverage began on October 1. Company recorded the payment by increasing

(debiting) Prepaid Insurance.

General Ledger

Prepaid insurance 103 Insurance Expense 503



Oct. 31

To record insurance expired

(1.2) Supplies

Company purchased supplies costing $2,500 on October 5. Company recorded

the payment by increasing (debiting) the asset Supplies. An inventory count on

October 31 reveals that $1,000 of supplies are still on hand.

General Ledger

Supplies 102 Supplies Expense 504



Oct. 31

To record supplies used

Accounting I

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(1.3) Plants, Equipments and Vehicles

Company estimates depreciation on the office equipment to be $480 a year, or

$40 per month. (Useful life= 10 years, scrape cost= $200)

General Ledger

Equipment 111

Accumulated Depreciation- Depreciation expense-

Equipment 112 Equipment 505



Oct. 31

To record monthly depreciation

Balance Sheet (Partial)

October 31, 20x1

Assets


Equipment

Less Accumulated Depreciation- Equipment


November 30, 20x1


Equipment

Less Accumulated Depreciation- Equipment

Accounting I

N Likitwongkajon


Company received $1,200 on October 2 from R. Knox (customer) for

advertising services expected to be completed by December 31. Company

recorded the received by increasing (crediting) the Unearned Revenue.

General Ledger

Unearned Revenue 203 Service Revenue 401



Oct. 31

To record revenue for services provided

Alternative treatment of prepaid expense and unearned revenue

(1) Prepaid Expense (1.1 and 1.2)


Accounting I

N Likitwongkajon

(3) Accrued Revenues

In October Company earned $200 for advertising services that had not been

recorded.

General Ledger

Account Receivable 104 Service Revenue 401



Oct. 31

To record revenue for services provided

(4) Accrued Expenses

Company signed a three-month note payable in the amount of $5,000 on

October 1. (Interest rate = 12%per year)

General Ledger

Note Payable 201

Interest Payable 204 Interest Expense 506



Oct. 31

To record interest expense

Reversing entries for (3) and (4)

Accounting I

N Likitwongkajon

(5) Account Receivable > Bad Debts Expenses

5.1 direct write-off method

1. To write off uncollectible accounts:

Dr. Bad Debts Expense xxx

Cr. Accounts Receivable xxx

Example: On December 12, Warden Co. writes off as uncollectible M. E.

Doran’s $200 balance.

General Ledger

Account Receivable 1xx

10,000

Allowance for Doubtful Accounts 1xx Bad Debts Expense 5xx



Oct. 31

To record uncollectible

Accounting I

N Likitwongkajon

5.2 Allowance Method for Uncollectible Accounts

1. Companies estimate uncollectible accounts receivable.

2. To record estimated uncollectible:

Dr. Bad Debts Expense xxx

Cr. Allowance for Doubtful Accounts xxx

3. To write off uncollectible accounts:

Dr. Allowance for Doubtful Accounts xxx

Cr. Accounts Receivable xxx

4. To recovery of uncollectible accounts:

Dr. Accounts Receivable xxx

Cr. Allowance for Doubtful Accounts xxx

Example: Hampson Furniture has credit sales of $1,200,000 in 2011. Of this

amount, $200,000 remains uncollected at December 31. The credit manager

estimates that 12,000 of these sales will be uncollectible.

General Ledger

Account Receivable 1xx

200,000

Allowance for Doubtful Accounts 1xx Bad Debts Expense 5xx

400

Accounting I

N Likitwongkajon



Dec. 31

To record estimated uncollectible


October 31, 20x1

Assets

Current Assets :

Account Receivable

Less Allowance for Doubtful Accounts

On March 1, the financial vice-president of Hampson Furniture authorizes a

write-off of the $500 balance owed by R.A.Ware.



March 1

To write off uncollectible

On July 1, R. A. Ware pays the $500 amount that Hampson had written off on

March 1.



July 1

To recovery uncollectible account

To collect account receivable

Accounting I

N Likitwongkajon

Example: Accounting Cycle –(Step 5-9)

Pioneer Inc. Trial Balance

October 31, 20x1

Account Number Account Titles Debit Credit 101 Cash $15,200 102 Supplies 2,500 103 Prepaid insurance 600 111 Equipment 5,000 201 Note Payable 5,000 202 Accounts Payable 2,500 203 Unearned revenue 1,200 301 Capital-Smile 10,000 302 Retained Earnings 0 303 Dividends 500 401 Service revenues $10,000 501 Salary expense 4,000 502 Rent expense $900

Total $28,700 $28,700

Additional information:

a) On October 4, Company paid $600 for a one-year fire insurance policy.

b) An inventory count on October 31 reveals that $1,000 of supplies on hand.

c) Company estimates depreciation on the equipment to be $40 per month.

d) Unearned Revenue $1,200 on October 2 to be completed by December 31.

e) Company earned $200 for advertising services that had not been recorded.

f) A note payable Interest rate = 12%per year.

g) Last paid salaries on October 26; the next payment of salaries will not occur

until November 9. The employees receive $400 per day. (Oct.27 is Saturday

and Oct.28 is Sunday) Thus, accrued salaries at October 31 are $1,200 ($400 x

3 days).

Accounting I

N Likitwongkajon

Step 5: Adjusting Entries – Pioneer



Oct. 31 Adjusting entries

a)

To record insurance expired

b)

To record supplies used

c)

To record depreciation expense

d)

To record revenue for service

provided

e)

To record revenue for service

provided

f)

To record interest on note

payable

g)

To record accrued salaries

Step 6: Adjusted trial balance – Pioneer

Accounting I

N Likitwongkajon

Pioneer Inc. Worksheet

October 30, 20x1

Acc. No.

Account Titles Trial Balance Adjustments Adjusted Trial Balance

Income Statement Balance Sheet

Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.

101 Cash 15,200

102 Advertising Supplies 2,500

103 Prepaid Insurance 600

111 Office Equipment 5,000

201 Notes Payable 5,000

202 Accounts Payable 2,500

203 Unearned Revenue 1,200

301 Share Capital 10,000

302 Retained Earning 0

303 Dividends 500

401 Service Revenue 10,000

501 Salaries Expense 4,000

502 Rent 900

Totals 28,700 28,700

Accounting I

N Likitwongkajon

Step 7: Prepare financial Statement – Pioneer

Pioneer Income Statement

For the year ended October 31, 20x1 Revenues :

Expenses :

Pioneer Balance Sheet

October 31, 20x1 Assets

Current Assets :


Total Assets

Liabilities and Owner’s Equity

Liabilities :

Owner’s Equity:

Total Liabilities and Owner’s Equity

Accounting I

N Likitwongkajon

Step 8: Closing Entries – Pioneer




(1)

To close revenue accounts

(2)

To close expense accounts

(3)

To close net income

(4)

To close dividend

Accounting I

N Likitwongkajon

Step 9: A Post-Closing Trial Balance – Pioneer

Pioneer Inc. Post-Closing Trial Balance

October 31, 20x1

Account Number


101 Cash

102 Supplies

Accounts Receivable

103 Prepaid insurance

111 Equipment

Accumulated Depreciation

201 Note Payable

202 Accounts Payable

203 Unearned revenue

Interest Payable

Salaries Payable

301 Share Capital-Ordinary

302 Retained Earnings

303 Dividend

401 Service revenues

501 Salary expense

502 Rent expense

Advertising Supplies Expense

Insurance Expense

Depreciation Expense

Interest Expense

Total

Accounting I

N Likitwongkajon

Additional Example

N&J prepared the following trial balance at December 30, 20x5:

N&J Trial Balance Dec 30, 20x5

Account Number


101 Cash $2,200 102 Accounts Receivable 7,500 103 Prepaid insurance 1,800 104 Supplies 1,350 110 Land 50,000 111 Building 137,500 112 Accumulated depreciation-

building $51,700

113 Equipment 90,100 114 Accumulated depreciation-

equipment 35,300

201 Accounts Payable 3,500 202 Unearned Rent 3,000 301 Capital 212,500 302 Withdrawals 10,000 401 Fees revenues 188,400 501 Salary and Wage expense 101,200 502 Advertising expense 58,200 503 Utilities expense 19,000 504 Repair expense 11,500 505 Miscellaneous expense 4,050

Total $494,400 $494,400

The data needed to determine year-end adjustments are as follows:

a. Accrued fees revenue at December 30 is $1,750. b. Insurance expired during the year is $800. c. Supplies on hand at December 30 are $650. d. Depreciation of building for the year is $1,620. e. Depreciation of equipment for the year is $3,500. f. Accrued salary and wage at December 30 are $1,050. g. Unearned rent at December 30 is $1,000.

accounting i (part i) -accounting cycle · 15 purchased additional office equipment for $4,000, ......

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