ACCT 203 Lecture Notes - Lecture 15: Accrual, Trial Balance, Geico
8 May 2018
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ACCT 203 Final Review
Chapter 1
Assets – economic resources of the company.
Natural debit balance
Cash
Short-Term investments
Accounts receivable
Liabilities – obligation to the company, money you owe
Accounts payable
Accrued liability
Unearned revenue - occurs when a customer pays you cash in advance, you have to debit cash.
Credit unearned revenue
Notes Payable – Owe money when you sign a note.
Equity:
Common Stock – company gets cash and hand out common stock, debit cash, credit common
stock
Retained Earnings – all revenues and expenses of the company
Revenue –
Revenue = Sales
Expenses – resources that are consumed
A=L+E
A-L=E Balance Sheet
Revenues – Expenses = Net Income / Loss
- Natural credit balance
Which of the following have a natural debit balance?
Assets
Expenses
Contra-Revenue account (returns, discounts, and allowances)
Natural debit and permanent accounts?
Assets
Natural and temporary?
Expenses, returns, discounts, and allowances
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Which are permanent accounts?
Assets, Liabilities, Equity
Revenue and Expenses are temporary accounts.
Chapter 2
Current vs. Long term
Current Assets: turns into cash, otherwise used up in one year or less. Cash, Accounts
receivable, prepaid (does not turn into cash, paid expense in advance)
Long term: does not turn into cash or used up in a year.
Current Ratio – Current Assets/Current Liabilities
Working Capital – Current Assets – Current Liabilities = Working Capital
Debt to Assets Ratio – total liabilities / total assets
EPS – Net income / Average Common Shares Outstanding
Beginning + ending = answer / 2
Historical Cost Principle – cash equivalent amount and stay as a cash equivalent amount.
Comp purchases land for 200k and today it is worth 1m
What is it on the books? – the number that is what you paid for 20 years ago.
Revenue Recognition –
Unearned Revenue – Liability until you deliver.
Expense Recognition Principle - Expenses are recognized when they are incurred.
GAAP – Generally Accepted Accounting Principles Record assets at historical cost, revenue rec.
and expense rec. Also known as Accrual Accounting. Accruing revenues and expenses
(recognizing when you are supposed to.)
*Accounts Receivable –
+Accounts Payable – incurring expenses before they are paid.
*Prepaid – Pay Geico $1200, you have prepaid your insurance. Expensed over time.
+Unearned Revenue –
General Leger – every single account in the general leger and every transaction.
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Trial balance – ending balance for the period, for every single account. Debits have to equal the
credits for every account. It is a report and shows every ending balance for the general ledger.
*prints out ending balance for all of the permanent and temporary accounts* (exam answer)
Common Journal Entries:
Own 100% of company:
Dr. Cash 10,000
Cr. Common Stock 10,000
Assets up, Liabilities up, no impact on equity.
I own the company and want to buy a computer
Dr. Computer
Cr. Cash
No impact on total assets, liability and equity
Call vendor, order $2000 worth of t-shirts. 1000 for $2. Have not paid yet. Just called and
ordered the shirts. *
No impact on any account
Once, shirts have been delivered to customer, to pay in 30 days:
Dr. Inventory 2,000
Cr. Accounts Payable 2,000
^ ^, no impact on equity
1000 shirts at $2 dollars each. Sell shirts at 5 dollars each. Transaction and Delivery
Dr. Accounts Receivable 2500
Cr. Revenue 2500
No impact questions on revenue and expense
Reduce Inventory – 500 shirts at $2 dollars each
Dr. COGS 1,000
Cr. Inventory 1,000
Vendor says 30 days is up, asks for money. You owe $2000. Debit Liability to make it go down.
Dr. A/P
Cr. Cash
Liability and Assets down, no impact on equity.
$2500 in cash
Dr. Cash 2500
Cr. Account Receivable 2500
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Liabilities obligation to the company, money you owe. Unearned revenue - occurs when a customer pays you cash in advance, you have to debit cash. Notes payable owe money when you sign a note. Common stock company gets cash and hand out common stock, debit cash, credit common stock. Retained earnings all revenues and expenses of the company. Revenues expenses = net income / loss. Current assets: turns into cash, otherwise used up in one year or less. Cash, accounts receivable, prepaid (does not turn into cash, paid expense in advance) Long term: does not turn into cash or used up in a year. Working capital current assets current liabilities = working capital. Debt to assets ratio total liabilities / total assets. Eps net income / average common shares outstanding. Historical cost principle cash equivalent amount and stay as a cash equivalent amount. Comp purchases land for 200k and today it is worth 1m.
