Original Entries
How does the following statement affect your accounting equation?
Sell shares of common stock for $10K.Increase in assets of $10K
Increase in stock equity of $10K
Fill in the blanks.
Accrued expenses record _____ and recognize _______.
Accrued revenue record _____ and recognize _______.
1. Liabilities
2. Expenses
3. Assets
4. Revenues
Do credits go on the left or right? Debits?
Debits = Left
Credits = Right
What accounts are temporary? Permanent?
Temporary: Revenue, expenses, dividends (IS)
Permanent: Assets, liabilities, equity, retained earnings (BS)
Assets
Liabilities
Revenues
Expenses
How does the following statement affect your accounting equation?
Pay one year of rent in advance for PPE, $300K.
Decrease in assets (cash) $300K
Increase in assets (prepaid rent) $300k
NET ZERO IMPACT
Adjust the following transaction
OG Transaction: Purchase supplies on account $20K
* Debit supplies increase of $20K
* Credit accounts payable increase of $20K
New info: Only $5K of supplies remains, how much was used in the supplies account during the year?
$20K - $5K = $15K
*Debit supplies expense increase $15K
(increase in equity, decrease in SE)
*Credit supplies decrease $15K
What accounts are increased by a debit? Credit?
(D)ebits: Credits:
(E)xpenses Liabilities
(A)ssets Stock Equity
(D)ividends Revenues
Retained Earnings
Net Income
Contra Assets
What permanent account do all temporary accounts close to?
Retained Earnings!
What questions should you ask yourself when you are determining cash or accrual basis accounting?
Accrual: Have we earned it?
Cash: Was there cash involved in the transaction?
How does the following statement affect your accounting equation?
Receive cash in advance from customers for services to be provided in the future for $500K
Increase in assets (cash) $500K
Increase in liabilities (deferred revenue) $500K
Adjust the following transaction:
Purchase equipment for $500K
*Debit equipment increase of $500K
*Credit cash decrease of $500K
New info: The equipment will be used for 5 years (60 months), at the end of the year one month of the equipment's value has expired.
(FYI: CONTRA ACCOUNT NEEDED)
$500K/60 months = $8,333.33
*Debit depreciation expense increase $8,333.33
*Credit accumulated depreciation (contra-asset) increase $8,333.33
Do debits and credits HAVE to equal?
YES
How would you close the following revenue account?
*Sales revenue $400K
*Service revenue $50K
Debit all revenues, credit retained earnings for $450K
Determine if this transaction is accrual or cash basis accounting. Also provide the expense recorded.
Sell 5 laptops with inventory cost of $500K
Was the resource used? YES
Is there cash? NO
Expense recorded: $500K
How does the following statement affect your accounting equation?
Pay employee salaries for the month, $30K.
Decrease in assets (cash)
Decrease in equity (salary expense)
Adjust the following transaction:
$100K of cash received on account from customer.
New info: Additional $10K of services provided on account but have not been billed or collected.
*Debit accounts receivable increase of 10K
*Credit service revenue increase of $10K
What type of accounts are listed first in journal entries?
Debits!
(more specifically assets)
How would you close the following expense account?
* COGS $100K
* Salaries expense $50K
* Rent expense $10K
* Depreciation expense $5K
* interest expense $10K
Credit all expenses, debit retained earnings by $175K.
Determine if this transaction is accrual or cash basis accounting. Also provide the expense recorded.
Pay one year of rent in advance, $200K ($16.6K per month).
Was the resource used? (have we earned it?) NO
Was there cash? YES
Expense recorded: $200K
How does the following statement affect your accounting equation?
Sell 5 textbooks for cash $50K (50,000 per unit), and on account $100K
Increase in assets (cash) $50K
Increase in assets (AR) $100K
Increase in equity (sales revenue)
Decrease in equity (COGS) $250K
How would the following transaction be recorded?
Dec. 31 one month of interest has been charged for borrowing $600K at 15% interest.
$600K x .15 x 1/12 = 7,500
*Debit interest expense increase $7,500
*Credit interest payable increase $7,500
Fill in the blank.
Dividends and expenses ______ retained earnings. Retained earnings is a _____ account, so we _____ expenses and dividends with a _____.
1. decrease
2. credit
3. increase
4. debit
How would you close the following dividends accounts?
* Dividends $15K
Credit dividends $15K, debit retained earnings $15K.
Determine if this transaction is accrual or cash basis accounting. Also provide the expense recorded.
Pay employee salaries of $50K for the month.
Was the resource used? YES
Is there cash? YES
Expense recorded: $50K