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Accounting Records and Systems

Accounting Records and Systems. 4. Part One: Financial Accounting. The McGraw-Hill Companies, Inc., 1999. The Account. Slide 4-1. Cash. (decrease) 750 7,200 4,800 3,000 15,750. (increase) Beginning balance -0- 5,000 4,000 200 12,000

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Accounting Records and Systems

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  1. Accounting Records and Systems 4 Part One: Financial Accounting • The McGraw-Hill Companies, Inc., 1999

  2. The Account Slide 4-1 Cash (decrease) 750 7,200 4,800 3,000 15,750 (increase) Beginning balance -0- 5,000 4,000 200 12,000 21,200 New balance 5,450

  3. Debits and Credits Slide 4-2 Assets Liabilities Owners’ Equity Debit Credit Debit Credit Debit Credit + - + - + -

  4. 2. Journalize original entries 3. Post journal entries to ledger 4. Identify, journalize, and post adjusting entries 5. Journalize and post closing entries 6. Prepare financial statements The Accounting Process Slide 4-3 1. Analyze transactions

  5. Cash Paid-in Capital Transaction Analysis Slide 4-4 On August 1, Snelson invested $5,000 in the business as owner. 5,000 5,000

  6. Cash Prepaid Expenses 5,000 Transaction Analysis Slide 4-5 On August 1, the firm paid $750 rent for the month of August. 750 750

  7. Cash Notes Payable 5,000 750 Transaction Analysis Slide 4-6 The firm borrowed $4,000 from a bank on a 9 percent note payable, with interest payable quarterly and the principal due in full at the end of two years. 4,000 4,000

  8. Cash Equipment, at Cost 5,000 750 4,000 Transaction Analysis Slide 4-7 Equipment costing $7,200 was purchased for cash. The expected life of the equipment was 10 years. 7,200 7,200 Refer to pages 94 through 96 for the remaining entries for the month of August.

  9. Cash Balance -0- 750 5,000 7,200 4,000 4,800 200 3,000 12,000To Balance5,450 21,200 21,200 Balancing an Account Slide 4-8 Balance 5,450

  10. The Trial Balance Slide 4-9 CAMPUS PIZZERIA, INC. Trial Balance As of August 31 Balance Debit Credit Cash……………………………………………………. $ 5,450 Accounts receivable……………………………………. -0- Inventory……………………………………………….. 550 Prepaid expenses……………………………………….. 750 Equipment, at cost……………………………………… 7,200 Accounts payable………………………………………. $ 2,200 Notes payable………………………………………….. 4,000 Paid-in capital………………………………………….. 5,000 Sales revenue…………………………………………... 12,200 Cost of sales……………………………………………. 6,000 Wage expense………………………………………….. 3,000 Utilities expense……………………………………….. 450 Totals……………………………………………….. $23,400 $23,400

  11. Fuel Oil Inventory Accounts Payable Adjusting Entries Slide 4-10 Fuel oil was purchased for $1,000. 1,000 1,000

  12. Fuel Oil Inventory Fuel Expense 1,000 Adjusting Entries Slide 4-11 By the end of the accounting period, $600 of the fuel had been consumed. 600 600

  13. Prepaid Insurance Cash Adjusting Entries Slide 4-12 Paid an insurance premium on company car, $1,200. 1,200 1,200

  14. Prepaid Insurance Insurance Expense 1,200 Adjusting Entries Slide 4-13 At year-end, $800 of this is an expense. 800 800

  15. Wages Expense Accrued Wages Adjusting Entries Slide 4-14 Employees earned $150 of wages during the period. These wages have not been paid. 150 150

  16. Depreciation Accumulated Expense Depreciation Adjusting Entries Slide 4-15 Annual depreciation on equipment totaled $2,000. 2,000 2,000 Additional adjusting entries are explained on pages 99 through 101 of the textbook.

  17. Closing Entries Slide 4-16 Closing the Sales Revenues account Sales Income Revenues Summary 12,200 200 12,400 12,400

  18. Closing Entries Slide 4-17 Closing the Cost of Sales account Cost of Income Sales Summary 6,000 12,400 6,000 6,000

  19. Income Summary (B) 6,000 (C) 3,000 (D) 450 (E) 750 (F) 60 (G) 30 10,290 (A) 12,400 Credit Income Tax Liability Closing Entries Slide 4-18 Closing the Income Summary account (17) 382 (H) 1,528

  20. Financial Statements Slide 4-19 CAMPUS PIZZERIA, INC. Balance Sheet As of August 31 Assets Liabilities and Owners’ Equity Cash $ 5,450 Accounts payable $ 2,200 Accounts receivable 200 Notes payable 4,000 Inventory 550 Accrued expenses 30 Prepaid expenses 0 Income tax liability 382 Total current assets 6,200 Total liabilities 6,612 Equipment, at cost 7,200 Paid-in capital 5,000 Less: Accum. Depr. 60 Retained earnings 1,728 Equipment, net 7,140 Total owners’ equity 6,728 Total assets $13,340 Total liab. and own. eq. $13,340

  21. Financial Statements Slide 4-20 CAMPUS PIZZERIA, INC. Income Statement For the Month of August Sales revenues $12,400 Cost of sales 6,000 Gross margin 6,400 Operating expenses: Wages $3,000 Rent 750 Utilities 450 Depreciation 60 Interest 30 4,290 Income before income taxes 2,110 Income tax expense 382 Net income $ 1,728

  22. Chapter 4 TheEnd

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