Normal Balances
What is a normal balance?
The side the account increases on.
What side of the account does each debit/credit get recorded on?
Debits on the left, credits on the right.
What is the formula to calculate Net Loss?
Expenses - Revenues
A company purchases a supplies on account.
Assets - Supplies - Increase; Liabilities - Accounts Payable - Increase
The process of transferring the journal entries to each individual account is known as what?
Posting.
What is the normal balance of Accounts Payable?
Credit
If you bought equipment on account, what would you debit and credit?
Debit Equipment, Credit Accounts Payable
What is the purpose of preparing a trial balance?
Ensure the debits = credits.
The company purchases equipment with cash.
Assets - Equipment - Increase; Assets - Cash - Decrease
The asset created by a business when it makes a sale on account is termed what?
Accounts receivable.
If you didn't understand normal balances, what could you refer to for help?
DEAD COIL
How would you debit and credit the following transaction? Jones invests $600 into her new business.
Debit Cash 600, Credit Jones, capital 600.
Why do the Income Statement and Owner's Equity Statements say "for the month ending" but not the Balance Sheet?
Because they cover an entire month where Balance sheet and trial balance should always be equal on any date.
The owner withdraws cash from the business for personal use.
Owner's Equity - Drawing - Increase; Assets - Cash - Decrease
There are four transactions that affect owner's equity. Which are the two transactions that decrease owner's equity?
Owner Withdrawal, Expense
Name 5 specific account names that have normal credit balances.
Answers vary: Owner, capital, Accounts payable, Wages payable, Unearned Revenue, Fees Earned.
The Cash T-Account has the following data. What is the balance (and what side is it on)- debit 1500, credit 500, debit 2000, credit 1000
$2,000
What is the account that resembles the accounting equation?
The Balance Sheet
The company purchases land by paying half in cash and signing a note payable for the other half.
Assets - Land - Increase; Assets - Cash - Decrease; Liabilities - AP - Increase
How do you calculate the balance in an account using a T Chart?
Add all the debits, add all the credits, and then subtract the smaller sum from the larger sum
What does a negative in a balance signify?
There are no negative balances. You need to express it an opposite balance. For example, a 'negative' cash balance would be expressed as a credit.
***What are 3 possible mistakes that could have happened if your debits do not equal credits on a trial balance?
Answers Vary. Typed incorrect number, completely missed an entry, Transposed or used slides, made changes on ONE side only such as (Rec Cash on Act)
How many financial statements have we learned in class? What order to do they need to be created in?
4 - Income Statement, Statement of Owner's Equity, Balance Sheet, Statement of Cash Flows
Company X has calculated that they have used $500 in supplies over the last month.
Asset - Supplies - Decrease (credit); Owner's Equity - Supplies Expense - Increase (debit)
What is the formula to calculate ending capital? _____ +/- ______ + ________ - ________= ending capital
Beginning capital +/-Net income/loss + investments - drawing = ending capital