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Comprehensive Bookkeeping Mechanics Guide

Learn the steps in the bookkeeping process, record transactions, post to ledgers, prepare trial balances, make adjusting entries, and more with practical examples and explanations in this detailed guide.

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Comprehensive Bookkeeping Mechanics Guide

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  1. Chapter Three Bookkeeping Mechanics

  2. Steps in the Bookkeeping Process • Record Transactions in Journals • Post Journal Transactions to Ledgers • Prepare a Trial Balance using the General Ledger • Adjust the trial balance to reflect actuality

  3. Adjusting Entries--LapoversAsset-Expense • Pay two year rent on 7/1/1 with a check for $18,000 • Record as asset Prepaid Rent $18,000 Cash $18,000 • What is the adjusting entry at 12/31/1? Rent Expense $4,500 Prepaid Rent $4,500

  4. Adjusting Entries-LapoversAsset -Expense • Pay 2 years rent on 7/1/1 with a check for $18,000 • This time record initially as expense Rent Expense $18,000 Cash $18,000 • What is your adjusting entry on 12/31/1? Prepaid Rent $13,500 Rent Expense $13,500

  5. Adjusting Entries-LapoversLiability Revenue • As a landlord you on 7/1/1 received a check for $18,000 for two years rent. • Record initially as liability Cash $18,000 Unearned Rental Income $18,000 • What is your adjusting entry on 12/31/1? Unearned Rental Income $4,500 Rental Income $4,500

  6. Adjusting EntriesLiability-Revenue • As a landlord you again received a check for $18,000 on 7/1/1. • Record as a revenue Cash $18,000 Rental Revenue or Income $18,000 • What is your 12/31/1 adjusting entry? Rental Revenue $13,500 Unearned Rental Revenue $13,500

  7. Adjusting Entries Unrecorded Expenses • Pay your employees $2,000 per day and year ends on a Wednesday. Assuming you pay every Friday for current week, what is your entry on Dec. 31? Salaries Expense (3X$2,000) $6,000 Salaries Payable $6,000

  8. Adjusting EntriesUnrecorded Revenues • As a Tax specialist you agreed to do a tax return with planning for $1,000 for a wealthy customer. At December 31 you have earned $600 and will earn the rest next year. You will be paid when the return is complete some time in March. • What entry do you need at December 31 Accounts Receivable $600 Fees Earned $600

  9. Estimates • Depreciation and Bad Debts • $200,000 building, 20 year life, $40,000 salvage value, DDB • Entry • Debit: Depn Expense 20,000 • Credit: Accumulated Depn 20,000

  10. Steps in the Bookkeeping Process Continued • Prepare an Adjusted Trial Balance • Using the Adjusted Trial Balance, prepare the financial statements • Closing entries • Post closing entries • Consider and make necessary reversing entries

  11. Worksheet on Sample Company • Using the sheets attached to your notes—let’s try to do a worksheet with income taxes for Sample Company

  12. Tips on Everett--Slide One • Marketable securities are shown at market: If Market higher DEBIT Adj to Mkt and CREDIT Unrealized gain. If Market lower DEBIT Unrealized loss CREDIT Adj. To Mkt. • Review the balance sheet and income statement approaches to bad debts.

  13. Tips on Everett--Slide Two • Error in inventory is taken to retained earnings. • The gain on the warehouse is extraordinary. The cumulative effect is $3,750. In Chapter Five we will show how these are presented. • Entry for the note payable involves a Debit to Interest Expense and a credit to the Discount on Notes Payable account.

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