ACCTG 211 Lecture Notes - Lecture 2: Accounting Equation, Retained Earnings, Asset

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19 Dec 2018

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What is an account: the accounting equation contains three parts: assets, liabilities, and equity. Each part contains accounts: an account is the detailed record of all increases and decreases that have occurred in an account during a speci ed period, assets = liability + equity. The t account: t account: shortened form of ledger which is used to analyze transactions, not part of the accounting records, debits and credits are location-oriented (left/right) term not increase/decrease. Debit and credit accounts: debit accounts: assets, expenses, and dividends, credit accounts: liabilities, retained earnings, common stock, and revenue. Determining the balance of a t-account: use the t-account to determine the ending balance in an account. The ending balance is shown on the side with the larger number. How do you record transactions: accountants use source documents to provide evidence and data for recording transactions, the documents help businesses determine how to record the transactions.

Related Questions

In this chapter we were provided a chart of accounts withsixteen accounts in exhibit 2 in the text.

From that chart of accounts select an account (try to pick onethat has not been discussed yet), in the subject box put theaccount title you selected, then do the following:

1. Assets, Liabilities, Owner's Equity, Revenues, and Expensesare the five categories (account types) that an account can beclassified as. Which category is the account you selected includedin?

2. The double-entry accounting system has specific rules forrecording debits and credits based on the type of account. Describehow these rules apply to the account you selected. How is theaccount increased and how is it decreased?

3. The normal balance of an account can be either a debit or acredit depending on whether increases in the account are recordedas debits or credits. What is the normal balance of the account youselected?

4. Think of a transaction that your account would be used in. Donot copy an entry from the book. Describe and illustratejournalizing the transaction, in the proper journal entryformat.

From that chart of accounts select an account (try to pick onethat has not been discussed yet), in the subject box put theaccount title you selected, then do the following:

1. Assets, Liabilities, Owner's Equity, Revenues, and Expenses arethe five categories (account types) that an account can beclassified as. Which category is the account you selected includedin?

2. The double-entry accounting system has specific rules forrecording debits and credits based on the type of account. Describehow these rules apply to the account you selected.

3. The normal balance of an account can be either a debit or acredit depending on whether increases in the account are recordedas debits or credits. What is the normal balance of the account youselected?

4. Think of a transaction that your account would be used in.Describe and illustrate journalizing the transaction.

The following selected transactions were completed by Fasteners Inc. Co., a supplier of buttons and zippers for clothing:

20Y3
Nov.	21	Received from McKenna Outer Wear Co., on account, a $54,000, 60-day, 7% note dated November 21 in settlement of a past due account.
Dec.	31	Recorded an adjusting entry for accrued interest on the note of November 21.
20Y4
Jan.	20	Received payment of note and interest from McKenna Outer Wear Co.

Journalize the entries to record the transactions. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year when calculating interest. Round answers to the nearest dollar amount.

CHART OF ACCOUNTS

Fasteners Inc. Co.

General Ledger

	ASSETS
110	Cash
111	Petty Cash
121	Accounts Receivable-McKenna Outer Wear Co.
129	Allowance for Doubtful Accounts
131	Interest Receivable
132	Notes Receivable
141	Merchandise Inventory
145	Office Supplies
146	Store Supplies
151	Prepaid Insurance
181	Land
191	Store Equipment
192	Accumulated Depreciation-Store Equipment
193	Office Equipment
194	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
211	Salaries Payable
213	Sales Tax Payable
214	Interest Payable
215	Notes Payable

	EQUITY
310	Owner, Capital
311	Owner, Drawing
312	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

EXPENSES

510

Cost of Merchandise Sold

520

Sales Salaries Expense

521

Advertising Expense

522

Depreciation Expense-Store Equipment

Office Salaries Expense

531

Rent Expense

532

Depreciation Expense-Office Equipment

533

Insurance Expense

534

Office Supplies Expense

535

Store Supplies Expense

Miscellaneous Expense

710

Interest Expense

Journalize the entries to record the transactions for the year 20Y3. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year when calculating interest. Round answers to the nearest dollar amount.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4

Journalize the entries to record the transactions for the year 20Y4. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year when calculating interest. Round answers to the nearest dollar amount.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4

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ACCTG 211 Lecture Notes - Lecture 2: Accounting Equation, Retained Earnings, Asset

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