Presentation on theme: "Introduction to Accounting 120"— Presentation transcript:
1Introduction to Accounting 120 Chapter 4Mark U4A2, Balancing T-AccountsTuesday, April 13, 2o10
2In Today’s Class REMINDER: U4A1 OVERDUE Mark U4A2 in class Move on with Balancing T-Account Lecture and Presentation
3U4A2 You have 15 minutes to complete U4A2 (on the Wiki and O: drive). Once you have finished please print and hand in promptly.
4Marking U4A2 We will now mark U4A2 together. Mark Question III out of 20 Points (0.5 for each right portion).Mark Question IV out of 22 Points (1 point for each correct line).Mark fairly and accurately, then hand back in, tally score out of 48 points.
5 Moving On..Balancing T-Accounts There are three steps to calculate the balance of a T-Account.Separately add the two sides of the account.Subtract the smaller number from the larger number.Record the difference on the side with the largest balance. This indicates if the account has a debit or credit balance.
8 Balancing T-AccountsThe T-Account Ledger There are ten accounts in the Atlantic Fleet ledger. Each account contains:The name of the accountThe opening balance of the accountEntries indicating individual changes resulting from specific transactionsThe next step is to calculate the new balance of each account.
9 Balancing T-AccountsThere are three steps to calculate the balance of a T-Account.Separately add the two sides of the account. Record the results beneath the last entry.Subtract the smaller number from the larger number.Record the result beneath the larger number. This indicates if the account has a debit or credit balance.
10 Balancing T-Accounts (Continued) Examine the balancing of the other Atlantic Fleet accounts.
11 Balancing T-Accounts (Continued) Examine the balancing of the other Atlantic Fleet accounts.
12Interpreting T-Account Information It is important that accounting learners understand the information stored in each account.You know that:Assets have debit balances.Liabilities have credit balances.Owner's equity has credit balances.Assets increase with a debit and decrease with a credit.Liabilities increase with a credit and decrease with a debit.Owner's equity increases with a credit and decreases with a debit.Occasionally, however, an account will have an exceptional balance. An exceptional balance occurs when an account balance is not on the normal side. If Bank ended with a $100 credit balance, it would be exceptional.
13Interpreting T-Account Information Occasionally, however, an account will have an exceptional balance. An exceptional balance occurs when an account balance is not on the normal side. If Bank ended with a $100 credit balance, it would be exceptional.
14Exceptional Account Balances An exceptional balance does not necessarily mean that an accounting error was made. Examine the following situations and try to determine the end result.Situation:The company overpays an account payableThe regular A/R customer, with no account balance, returns merchandise for credit.The company returns goods, for credit, to a supplier with whom they have no balance.The bank account has a balance of $3000. Cheques issued total $3500.
15Exceptional Account Balances The company overpays an account payableA/P has a debit balance.The regular A/R customer, with no account balance, returns merchandise for credit.A/R has a credit balance.The company returns goods, for credit, to a supplier with whom they have no balance.A/P Has a debit balance.The bank account has a balance of $3000. Cheques issued total $3500.Bank has a credit balance.
16Review of TermsThere are a few terms or phrases, which you have come across in this and the previous unit, that require a little more explanation.Bank You are aware of the term bank indicating the balance of a company's bank account. In this and the previous unit, transactions occurred that affected this account. The receipt of cash increased the account and the issuing of cheques decreased the account. As far as accounting is concerned, cheques are equivalent to cash and cash is termed bank.
17Review of TermsOn Account If an item is bought on account or on credit, it means it is not paid for at the time of purchase. This transaction increases accounts payable. If a service is sold on account or on credit, it means payment is not received at the time of sale. This transaction increases accounts receivable. If a payment is made to a creditor, it is a payment on account and reduces the debt owed to the account payable. If a payment is received from a debtor, it is a receipt on account and reduces the amount collectable from the account receivable.
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