dtt - lecture 2
TRANSCRIPT
-
7/30/2019 DTT - Lecture 2
1/40
31
Lecture2Analyzing Transactions
and Double Entry
-
7/30/2019 DTT - Lecture 2
2/40
32
Analyzing Business TransactionsUsing T Accounts
Section 1: Transactions That AffectAssets, Liabilities, and Owners Equity
Section Objectives
1. Set up T accounts for assets, liabilities,and owners equity.
2. Analyze business transactions and enter
them in the accounts.
3. Determine the balance of an account.
-
7/30/2019 DTT - Lecture 2
3/40
33
Analyze each transaction and
event from source documents
Analyzing and Recording Process
Record relevant transactionsand events in ajournal
Post journal
information
to ledger
accountsPrepare and analyze
the trial balance
-
7/30/2019 DTT - Lecture 2
4/40
34
Sales
Tickets
Bank
Statements
Purchase
Orders
Checks
Source Documents
Bills fromSuppliers
Employee
EarningsRecords
-
7/30/2019 DTT - Lecture 2
5/40
35
The Accounting Equation
ASSETSThe property a
business owns
LIABILITIESThe debts of
the business
OWNERS
EQUITYThe owners financial
interest in the business
=
+
-
7/30/2019 DTT - Lecture 2
6/40
36
Account
Type
Assets
Liabilities
Capital
Revenue
Expenses
Withdrawals
Step 1
Write down the account types
using ALCREW.
Remembering Debits and Credits
ALCREW
-
7/30/2019 DTT - Lecture 2
7/4037
Account
Type
Normal
Balance
Assets
Liabilities
Capital
Revenue
Expenses
Withdrawals
Step 2
Write down the normalbalance (debit) of A,E,W. The
others are credits.
Remembering Debits and Credits
ALCREW
Account
Type
Assets
Liabilities
Capital
Revenue
Expenses
Withdrawals
-
7/30/2019 DTT - Lecture 2
8/4038
Account
Type
Normal
Balance
Assets Dr
Liabilities
Capital
Revenue
Expenses Dr
Withdrawals Dr
Step 2
Write down the normalbalance, debit, of A,E,W. The
others are credits.
Remembering Debits and Credits
ALCREW
Account
Type
Assets
Liabilities
Capital
Revenue
Expenses
Withdrawals
-
7/30/2019 DTT - Lecture 2
9/4039
Account
Type
Normal
Balance
Assets Dr
Liabilities Cr
Capital Cr
Revenue Cr
Expenses Dr
Withdrawals Dr
Step 2
Write down the normalbalance, debit, of A,E,W. The
others are credits.
Remembering Debits and Credits
ALCREW
Account
Type
Assets
Liabilities
Capital
Revenue
Expenses
Withdrawals
-
7/30/2019 DTT - Lecture 2
10/40310
Account
Type
Normal
BalanceTo
Balance
To
Balance
Assets Dr Dr
Liabilities Cr Cr
Capital Cr Cr
Revenue Cr Cr
Expenses Dr
Withdrawals Dr
Step 3
Remember, increases are the
same as the normal balances,
decreases are the opposite.
Remembering Debits and Credits
ALCREW
-
7/30/2019 DTT - Lecture 2
11/40311
Account
Type
Normal
BalanceTo
Balance
To
Balance
Assets Dr Dr Cr
Liabilities Cr Cr Dr
Capital Cr Cr Dr
Revenue Cr Cr Dr
Expenses Dr
Withdrawals Dr
Step 3
Remember, increases are the
same as the normal balances,
decreases are the opposite.
Remembering Debits and Credits
ALCREW
-
7/30/2019 DTT - Lecture 2
12/40312
Account
Type
Normal
BalanceTo
Balance
To
Balance
Assets Dr Dr Cr
Liabilities Cr Cr Dr
Capital Cr Cr Dr
Revenue Cr Cr Dr
Expenses Dr Dr Cr
Withdrawals Dr Dr Cr
Remembering Debits and Credits
ALCREW
-
7/30/2019 DTT - Lecture 2
13/40313
T Accounts
= +ASSETS
+
RecordIncreases
LEFT SIDE
-
RecordDecreases
RIGHT SIDE
LIABILITIES
-
RecordDecreases
LEFT SIDE
+
RecordIncreases
RIGHT SIDE
OWNERS EQUITY
-
RecordDecreases
LEFT SIDE
+
RecordIncreases
RIGHT SIDE
Set up T accounts for assets, liabilities and
owners equityObjective 1
-
7/30/2019 DTT - Lecture 2
14/40314
Effects of Business Transactions
1. Analyze the financial event.
Steps to analyze the effects of the business
transactions:
1. Apply the left-side-right side rules for each account affected.
2. Make the entry in T-account form.
Identify the accounts affected.
Classify the accounts affected.
Determine the amount of increase or decrease for each
account.
Objective 2 Analyze business transactions and enterthem in the accounts
f
-
7/30/2019 DTT - Lecture 2
15/40315
Determine the balance of an
accountObjective 3
An account balance is the difference between the
amounts recorded on the two sides of an account.
-
7/30/2019 DTT - Lecture 2
16/40316
the total of those entries is the account
balance.
an account contains entries on only one
side,
that amount is the balance.an account shows only one amount,
the balance is recorded on the left side.the total on the left side is larger,
the balance is recorded on the right side.the total on the right side is larger than
the total on the left side,
Recording Account Balances
IF THEN
-
7/30/2019 DTT - Lecture 2
17/40317
Account balances for Carter Consulting Services
ASSETS = LIABILITIES + OWNERS EQUITY
Cash Accounts Payable Carolyn Wells, Capital
(a) 100,000 (b) 5,000 ( e) 2,500 (c) 6,000 (b) 100,000
(d) 1,500 Bal. 3,500
(e) 2,500
(f) 8,000
Bal. 83,000 17,000
Supplies
SUMMARY OF ACCOUNT BALANCES
(d) 1,500
ASSETS = LIABILITIES + OWNERS EQUITY
Prepaid Rent 83,000 3,500 100,000
1,500
(f) 8,000 8,000
11,000
Equipment
103,500 = 3,500 + 100,000
(b) 5,000
(c) 6,000
Bal. 11,000
Summary of Account Balances
-
7/30/2019 DTT - Lecture 2
18/40318
Analyzing Business TransactionsUsing T Accounts
Section 2: Transactions That Affect Revenue,Expenses, and Withdrawals
Section Objectives
1. Set up T accounts for revenue and expenses.
2. Prepare a trial balance from T accounts.
3. Prepare an income statement, a statement of ownersequity, and a balance sheet.
4. Develop a chart of accounts.
-
7/30/2019 DTT - Lecture 2
19/40319
The Rules of Debit and Credit
A debit is an entry on the left side of an account.
A credit is an entry on the right side of an account.
A double-entry system is an accounting system that
involves recording the effects of each transaction asdebits and credits in separate accounts.
Every transaction in a Double entry accounting system
has at least one debit and one credit.
Every transaction must have at least one debit and onecredit. The total of the debits and credits recorded in the
separate accounts must be EQUAL.
-
7/30/2019 DTT - Lecture 2
20/40320
Any Account
Left Side Right Side
Accountants refer to the left side of an account as the debit side
instead of saying the left side.
The right side of the account is called the credit side.
-
7/30/2019 DTT - Lecture 2
21/40321
Rules for Debits and Credits
-
7/30/2019 DTT - Lecture 2
22/40322
Objective 5 Prepare a trial balance from T accounts
1. Use the proper heading to include who, what, and
when information.
2. List the accounts in chart of account order or in the
same order as they appear in the financial
statement.
3. Enter the ending balance of each account in the
appropriate Debit or Credit column.
4. Total the Debit column.
5. Total the Credit column.
6. Compare the column totals. They should be equal.
-
7/30/2019 DTT - Lecture 2
23/40323
Post.
Ref.
JOURNAL
Date Description Debit Credit
Page 1
1
2
3
4
Nov. 12005 Cash 25 000 00Chris Clark, Capital 25 000 00
Invested cash in NetSolutions.
(A) On November 1, Chris Clark
deposits $25,000 in a bank account
in the name of NetSolutions.
-
7/30/2019 DTT - Lecture 2
24/40324
(A) On November 1, Chris Clark
deposits $25,000 in a bank account
in the name of NetSolutions.
Effects of this entry in the Ledger
CashNov. 1 25,000 Nov. 1 25,000
Chris Clark, Capital
-
7/30/2019 DTT - Lecture 2
25/40325
4
5
6
7
8
9
10
5 Land 20 000 00
Cash 20 000 00
Purchased land for building
site.
(B) On November 5,
NetSolutions bought land
for $20,000, paying cash.
-
7/30/2019 DTT - Lecture 2
26/40
326
Effects of this entry in the Ledger
CashNov. 1 25,000 Nov. 5 20,000
LandNov. 5 20,000
(B) On November 5,
NetSolutions bought land
for $20,000, paying cash.
-
7/30/2019 DTT - Lecture 2
27/40
327
10
11
12
13
14
15
16
10 Supplies 1 350 00
Accounts Payable 1 350 00
Purchased supplies on account.
(C) On November 10,
NetSolutions purchased
supplies on account for
$1,350.
-
7/30/2019 DTT - Lecture 2
28/40
328
(C) On November 10,
NetSolutions purchased
supplies on account for
$1,350.
Effects of this entry in the Ledger
Supplies
Nov. 10 1,350
Accounts Payable
Nov. 10 1,350
-
7/30/2019 DTT - Lecture 2
29/40
329
(D) On November 18, NetSolutions
received fees of $7,500 from
customers for services provided .
18 Cash 7 500 00
Fees Earned 7 500 00
Received fees from customers.
14
15
16
17
18
19
20
-
7/30/2019 DTT - Lecture 2
30/40
330
Effects of this entry in the Ledger
CashNov. 1 25,000 Nov. 5 20,000
Fees EarnedNov. 18 7,500
18 7,500
(D) On November 18, NetSolutions
received fees of $7,500 from
customers for services provided .
-
7/30/2019 DTT - Lecture 2
31/40
331
(E) Throughout the month, NetSolutions
incurred the following expenses:
wages, $2,125; rent, $800; utilities,$450; and miscellaneous, $275 .
30 Wages Expense 2 125 00
Rent Expense 800 00
Utilities Expense 450 00
Miscellaneous Expense 275 00
Cash 3 650 00
Paid expenses.
18
19
20
21
22
23
24
-
7/30/2019 DTT - Lecture 2
32/40
332
Effects of this entry in the Ledger
CashNov. 1 25,000 Nov. 5 20,000
Wages
ExpenseNov. 30 2,125
18 7,500
Rent ExpenseNov. 30 800
Utilities ExpenseNov. 30 450
Miscellaneous ExpenseNov. 30 275
30 3,650
(E) Throughout the month, NetSolutions
incurred the following expenses:
wages, $2,125; rent, $800; utilities,$450; and miscellaneous, $275 .
-
7/30/2019 DTT - Lecture 2
33/40
333
30 Accounts Payable 950 00
Cash 950 00
Paid creditors on account.
30
31
32
33
34
35
36
(F) On November 30, NetSolutions
paid creditors on account, $950.
-
7/30/2019 DTT - Lecture 2
34/40
334
CashNov. 1 25,000 Nov. 5 20,000
18 7,500 30 3,650
Effects of this entry in the Ledger
Accounts PayableNov. 10 1,350Nov. 30 950
30 950
(F) On November 30, NetSolutions
paid creditors on account, $950.
-
7/30/2019 DTT - Lecture 2
35/40
335
(G) On November 30, a count
revealed that $800 of the supplies
inventory had been used.
30 Supplies Expense 800 00
Supplies 800 00
Supplies used during
November.
25
26
27
28
29
30
31
-
7/30/2019 DTT - Lecture 2
36/40
336
Effects of this entry in the Ledger
SuppliesNov. 10 1,350
Supplies ExpenseNov. 30 800Nov. 30 800
(G) On November 30, a count
revealed that $800 of the supplies
inventory had been used.
-
7/30/2019 DTT - Lecture 2
37/40
337
Post.
Ref.
JOURNAL
Date Description Debit Credit
Page 2
1
2
3
4
Nov. 302005 Chris Clark, Drawing 2 000 00Cash 2 000 00
Chris Clark withdrew cash for
personal use.
(H) On November 30, Chris Clark
withdrew $2,000 in cash fromNetSolutions for personal use.
-
7/30/2019 DTT - Lecture 2
38/40
338
30 950
30 2,000
CashNov. 1 25,000 Nov. 5 20,000
18 7,500 30 3,650
Effects of this entry in the LedgerChris Clark,
Drawing
Nov. 10 1,350Nov. 30 2,000
(H) On November 30, Chris Clark
withdrew $2,000 in cash fromNetSolutions for personal use.
-
7/30/2019 DTT - Lecture 2
39/40
339
Flow of Business Transactions
1Transaction
authorized 2Transaction
takes place 3Document
prepared
4
Entry
recorded injournal 5
Entry posted
to ledger
-
7/30/2019 DTT - Lecture 2
40/40
The End