What is the accounting equation?
Assets= Liabilities+ Owner's Equity
Cash
Asset
Manufacturing Business
A business that creates tangible items
Harry bought $320 worth of office equipment with cash.
Debit office equipment for $320
Credit cash for $320
Wilson Group purchased $400 dollars worth of office equipment on account.
Debt office equipment for $400
Credit accounts payable for $400
What does the account equation have to be on both sides?
Equal
Fees earned
Owner's Equity
Generally Accepted Accounting Principles. (GAAP)
A set of rules and guidelines used by financial accountants when preparing reports
Joe bought $110 worth of supplies on account.
Debit supplies for $110
Credit accounts payable for $110 dollars
Great Clips provided a customer with a $20 dollar haircut on account.
Debit accounts receivable for $20
Credit fees earned for $20
What does it mean when something is bought on account?
The customer did not pay for the item right away, but he/she will eventually make a payment for the item/service.
Capital
Owner's Equity
Corporation
A company that is ran by a board of directors and sells stocks
A customer paid 150 dollars for supplies that they previously bought on account.
Debit fees earned for 150
Credit accounts receivable for 150
Ben invests $20,000 back into his business.
Credit capital for $20,000
What does it mean when a business does not hold personal liability?
Accounts Payable
Liability
Fiscal year
The calendar year chosen by a company
What is the journal entry a company records when paying $6,000 for this months rent?
Debit rent expense for 6,000
Credit cash 6,000
Mary paid David $600 for supplies that she recently bought on account.
Debit accounts payable for $600
Credit cash for $600
Liability- Credit
Capital- Credit
Drawing- Debit
Revenue- Credit
Expenses- Debit
Accounts Receivable
Asset
Double Entry Accounting System
At least 2 accounts are effected in every journal entry
The owner of a company withdraws $700 to go on vacation.
Debit drawing for $700
Credit cash for $700
Penelope paid $2,540 worth of wages.
Debit wages expenses $2,540
Credit cash for $2,540