ACCT72 - Intro Accounting April 13, 2017 Stuff to Help Connect Study Material D2L Practice Quizzes Read your textbook Solutions to selected homework questions in D2L

ACCT72 - Intro Accounting April 13, 2017 Analyzing and Recording Transactions More of C H A P T E R 2

ACCT72 - Intro Accounting April 13, 2017 Learning Objectives Explain the accounting cycle. (LO1) Describe an account, its use, and its relationship to the ledger. (LO2) Define debits and credits and explain their role in double-entry accounting. (LO3) Describe a chart of accounts and its relationship to the ledger. (LO4)

ACCT72 - Intro Accounting April 13, 2017 Learning Objectives Analyze the impact of transactions on accounts. (LO5) Record transactions in a journal and post entries to a ledger. (LO6) Prepare and explain the use of a trial balance. (LO7)

ACCT72 - Intro Accounting April 13, 2017 The normal balance of an account refers to the debit or credit side where increases are recorded. Ans: True Difficulty: Moderate LO: 3 A) True B) False

Analyzing Transactions ACCT72 - Intro Accounting April 13, 2017 Analyzing Transactions Example #1: The owner, V. Klimb, invests $10,000 in the business. Accounts affected Increase/ Decrease Debit/ Credit Cash Increase Debit V.Klimb, capital 1 2 3 Review from last session… LO 5

Analyzing Transactions ACCT72 - Intro Accounting April 13, 2017 Analyzing Transactions Example #1: The owner invests $10,000 in the business. Debit Cash for $10,000 Credit V.Klimb, Capital for $10,000 We see the result in T-account format LO 5

ACCT72 - Intro Accounting April 13, 2017 The General Journal Entries are originally recorded in the General Journal. This process is called “journalizing”. While we have been recording using T-accounts we normally use a Journal. This (see slide) is the MOST GENERAL FORM of a Journal Book of Original Entry. Where we FIRST record the financial impact of an event. Think of it as a DIARY where we record each thing as it happens (following a prescribed format) LO 6

Elements of a Journal Entry ACCT72 - Intro Accounting April 13, 2017 Elements of a Journal Entry 3 2 1 4 For now, just point out there are a couple of other things on the journal page including the page number and a thing called “PR” Both will be explained further a little later in the presentation… Date of transaction/event Name of accounts affected Amount of each change A brief description Note “debits” are listed first

Analyzing Transactions ACCT72 - Intro Accounting April 13, 2017 Analyzing Transactions Example #2: The company purchases supplies by paying $2,500 cash. Accounts affected Increase/ Decrease Debit/ Credit 1 2 3 Taking a look at another example and compare formats: increase/decrease T-account Journal Entry LO 5

Analyzing Transactions ACCT72 - Intro Accounting April 13, 2017 Analyzing Transactions Example #2: The company purchases supplies by paying $2,500 cash. Accounts affected Increase/ Decrease Debit/ Credit Supplies Increase Debit Cash Decrease 1 2 3 increase/decrease LO 5

Analyzing Transactions ACCT72 - Intro Accounting April 13, 2017 Analyzing Transactions Example #2: The company purchases supplies by paying $2,500 cash. T-account Journal Entry Note the 4 elements (date, accounts, amounts and description) are all repeated LO 5

The General Journal provides a place for recording: ACCT72 - Intro Accounting April 13, 2017 The General Journal provides a place for recording: A) The transaction date. B) The names of the accounts involved. C) The amount of each debit and credit. D) An explanation of the transaction. E) All of these answers are correct. Ans: E Difficulty: Moderate LO: 5

ACCT72 - Intro Accounting April 13, 2017 Focussed Workout QS 2-9 Ex 2-6 (pt 1) For practice translating economic events into journal entries. Do the trick over and over 

ACCT72 - Intro Accounting April 13, 2017 The Ledger A record (or list) containing all accounts used by a business. May be computerized or maintained manually. Each company has its own unique set of accounts. Typically numbered LO 2

ACCT72 - Intro Accounting April 13, 2017

ACCT72 - Intro Accounting April 13, 2017

ACCT72 - Intro Accounting April 13, 2017

ACCT72 - Intro Accounting April 13, 2017 Ledger Account GENERAL LEDGER ACCOUNT NAME ACCOUNT NO. 101 DATE EXPLANATION PR DEBIT CREDIT BALANCE The Ledger is like a big file folder where each account gets its own page. Each account is where we record the effect of transactions that we recorded in the journal (kind of like re-sorting) The “T” has not really gone away

ACCT72 - Intro Accounting April 13, 2017 Posting Journal Entries General Journal information is transferred to the General Ledger. Account balances are updated. This process is called “posting”. LO 6

ACCT72 - Intro Accounting April 13, 2017 Posting 5 General journal information is transferred (posted) to the general ledger 3 2 1 5 Perform the steps and repeat for next line of Journal Entry. Student note have blank GL 4 Steps: Identify the accounts. Enter date Enter amount Calculate new account balance Enter posting references (where to/from) LO 6

The process of copying journal information to the ledger is called: ACCT72 - Intro Accounting April 13, 2017 The process of copying journal information to the ledger is called: A) Double-entering. B) Posting. C) An internal business transaction. D) Journalizing. E) An external business transaction. Ans: B Difficulty: Easy LO: 6

ACCT72 - Intro Accounting April 13, 2017 Test Run QS 2-10, 2-11 Ex 2-6 (pt 2)

ACCT72 - Intro Accounting April 13, 2017 The Accounting Cycle Prepare post-closing trial balance Analyze transactions 1 Ch 4 9 Ch 1-2 Journalize 2 Ch 2 Close 8 Ch 4 Post 3 Ch 2 Prepare statements 7 Ch 1-4 Prepare unadjusted trial balance 4 Ch 2 Prepare adjusted trial balance 6 Adjust 5 Ch 3 Ch 3 LO 1

ACCT72 - Intro Accounting April 13, 2017 Trial Balance A list of accounts and their balances at a point in time. Used to determine if total debits equals total credits. May also be used to prepare financial statements. Next step it to prepare the Trial Balance, but what IS that? NOT to be confused with the BALANCE SHEET LO 7

Just One Account from the General Ledger (GL) ACCT72 - Intro Accounting April 13, 2017 Just One Account from the General Ledger (GL)

ACCT72 - Intro Accounting April 13, 2017 Ledger for Vertically Inclined - March 31, 2014 Quite a Hodge-Podge Not very readable. Note the Revenue and Expense accounts are listed under ‘Equity’ Equity is not JUST Owner’s Capital

ACCT72 - Intro Accounting April 13, 2017 Nicely organized Lends itself well to verification Accounts grouped in ALCREW

ACCT72 - Intro Accounting April 13, 2017 Practice! EX 2-12,13 QS 2-12

What if it Doesn’t Balance? ACCT72 - Intro Accounting April 13, 2017 What if it Doesn’t Balance? Add debit column and credit column, again Check for the difference Divisible by 9? Amounts copied correctly Amounts in the right columns Recheck posting Recheck original journal entries More and more work as we go down the list. See page 84

ACCT72 - Intro Accounting April 13, 2017 Income Statement 2,400

Statement of Changes in Equity ACCT72 - Intro Accounting April 13, 2017 Statement of Changes in Equity 2,400 11,800

ACCT72 - Intro Accounting April 13, 2017 Balance Sheet 11,800

Comprehensive Practice ACCT72 - Intro Accounting April 13, 2017 Comprehensive Practice Problem 2-6A Solution available on D2L

Which of the following statements is true? ACCT72 - Intro Accounting April 13, 2017 Which of the following statements is true? A) The trial balance is an internal report used to prepare financial statements. B) The trial balance is a list of all the accounts in the journal. C) Another name for the trial balance is the "chart of accounts." D) The trial balance is a list of the accounts in the general ledger. E) A trial balance is only prepared at year end. Ans: A Difficulty: Moderate LO: 7 Some may argue that D is also true and while a fine point, a list of all the accounts in the GL is actually the Chart of Accounts. A TB must be a complete list of accounts AND their balances. (BTW – the test bank has an error on this question)

ACCT72 - Intro Accounting April 13, 2017 Review What is journalizing? What is posting? What is the purpose of a trial balance? What goes on each statement?

Chapter 2 – Major Hurdle How are you doing? ACCT72 - Intro Accounting April 13, 2017 Chapter 2 – Major Hurdle How are you doing? How are you facing the hurdles of Chapter 2? Style and elegance, scrambling, hurdle jumping over you, attempting to stare it down or a chalk outline?