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  • Securities and Exchange Commission

    Group that has been given power by Congress to enforce the proper application of financial reporting rules for companies whose securities are publicly traded.

    Financial Accounting Standards Board

    Independent, private-sector group that is primarily responsible for setting financial reporting standards in the United States.

    Auditors

    Independent intermediaries that help to ensure that management appropriately applies financial reporting rules in preparing the company's financial statements.

    International Accounting Standards Board

    Body that is attempting to develop a single set of high-quality, understandable global accounting standards.

    Measurement Process, Step 1

    Use source documents to identify accounts affected by external transactions.

    Measurement Process Step 2

    Analyze the impact of the transaction on the accounting equation.

    Measurement Process Step 3

    Assess whether the impact of the transaction results in a debit or credit to the account balance.

    Measurement Process Step 4

    Record transactions using debits and credits.

    Measurement Process Step 5

    Post the transaction to the T-accounts in the general ledger.

    Measurement Process Step 6

    Prepare a trial balance.

    Account payable

    a liability account showing how much is owed for goods and services purchased on credit

    Account recievable

    Record of cash that will be received from a customer to whom a business has sold products on credit

    Note payable

    a note promising to pay a certain amount of money at a certain time

    What happens to assets, liability, and equity when you buy land by singing a note to the bank?

    Assets increase, Liabilities increase, Equity has no effect

    What happens to assets, liability, and equity when you purchase equipment for cash?

    No effect on all 3

    What happens to assets, liability, and equity when you issue stock for cash?

    Assets increase, Equity increases, no effect on Liabilities

    What happens to assets, liability, and equity when you pay a account payable?

    Assets (cash) decrease, Liabilities (accounts payable)Decrease, no change in equity.

    What happens to assets, liability, and equity when you recieve cash in advance from customers?

    Assets increase, Liabilities increase, No effect on equity.

    What happens to assets, liability, and equity when you pay rent in advance with cash?

    no effect on all 3

    Whats the impact of assets, liabilities and equity equation if you purchase equipment by signing a note with the bank for 20000$?

    Assets(20000)=Liabilities(20000)+Equity(0)

    Whats the impact of assets, liabilities and equity equation if you provide services to customers for 26,000$?

    Assets(26000)=Liabilities(0)+Equity(26000)

    Whats the impact of assets, liabilities and equity equation if you pay utilities of $2000 for the current month?

    Assets(-2000)=Liabilities(0)+Equity(-2000)

    Whats the impact of assets, liabilities and equity equation if you paid back bank note of 20,000$ from the first transaction?

    Assets(-20000)=Liabilities(-20000)+Equity(0)

    Whats the impact of assets, liabilities and equity equation if you purchase supplies for 700$ cash?

    Assets(0)=Liabilities(0)+Equity(0)

    Issue 10,000 shares of common stock in exchange for $32,000 in cash

    assets increase, and stockholders' equity increases.

    Purchase land for $19,000. A note payable is signed for the full amount.

    Assets increase and liabilities increase

    Purchase storage container equipment for $8,000

    One asset increases and another asset decreases.

    Hire three employees for $2,000 per month.

    No effect on the accounting equation.

    Receive cash for $12,000 in rental fees for the current month

    Assets increase and stockholders' equity increases.

    Purchase office supplies for $2,000 on account.

    Assets increase and liabilities increase.

    Pay employees $6,000 for the first month's salaries.

    Assets decrease and stockholders' equity decreases.

    Cash is..?

    Debit

    Service Revenue is..?

    Credit

    Salaries Expense is..?

    Debit

    Accounts Payable is..?

    Credit

    Equipment is..?

    Debit

    Retained Earnings is..?

    Credit

    Utilities Expense is..?

    Debit

    Accounts receivable is..?

    Debit

    Dividends is..?

    Debit

    Common Stock is..?

    Credit

    When you Pay a cash dividend it is...?

    Debit dividends; credit cash

    When you Pay rent in advance for the next three months it is...?

    Debit prepaid rent; credit cash

    When you Provide services to customers on account it is...?

    Debit accounts receivable; credit service revenue

    When you Purchase office supplies on account it is...?

    debit supplies; credit accounts payable.

    When you Pay salaries for the current month it is...?

    Debit salaries expense; credit cash

    When you Issue common stock in exchange for cash it is...?

    debit cash; credit common stock

    When you Collect cash from customers for services (on account) it is...?

    debit cash; credit accounts receivable.

    When you Borrow cash from the bank and sign a note it is...?

    debit cash; credit notes payable

    When you Pay for the current month's utilities it is...?

    debit utilities expense; credit cash.

    When you Pay for office supplies that were purchased on account it is...?

    debit accounts payable; credit cash.

    What is the Financial Accounting Equation if you Provide services to customers on account, $1,600.

    +$1,600 = $0 + +$1,600

    What is the Financial Accounting Equation if you Pay $400 for current month's rent.

    -$400 = $0 + -$400

    (3) What is the Financial Accounting Equation if you Hire a new employee, who will be paid $500 at the end of each month.

    $0 = $0 + $0

    What is the Financial Accounting Equation if you Pay $100 for advertising aired in the current period.

    -$100 = $0 + -$100

    What is the Financial Accounting Equation if you Purchase office supplies for $400 cash.

    +$400 and -$400 = $0 + $0

    What is the Financial Accounting Equation if you Receive cash of $1,000 from customers in (1) above.

    +$1,000 and -$1,000 = $0 + $0

    What is the Financial Accounting Equation if you Obtain a loan from the bank for $7,000.

    +$7,000 = +$7,000 + $0

    What is the Financial Accounting Equation if you Receive a bill of $200 for utility costs in the current period.

    $0 = +$200 + -$200

    What is the Financial Accounting Equation if you Issue common stock for $10,000 cash.

    +$10,000 = $0 + +$10,000

    What is the Financial Accounting Equation if you Pay $500 to employee in (3) above.

    -$500 = $0 + -$500

    Account

    A summary of the effects of all transactions related to a particular item over a period of time

    General ledger

    All accounts used to record the company's transactions (shown in chart of accounts)

    Chart of accounts

    A list of all account names used to record transactions of a company

    (pic) Chart of accounts

    External transactions

    Transactions the firm conducts with a separate economic entity

    Internal transactions

    Events that affect the financial position of the company but do not include an exchange with a separate economic entity

    Journal

    A chronological record of all transactions affecting a firm

    (pic) Journal Format 1 transaction

    transaction (1) causes total assets to increase (+A) and total stockholders' equity to increase (+SE). For each transaction, total debits must equal total credits.

    Posting

    The process of transferring the debit and credit information from the journal to individual accounts in the general ledger

    T-account

    A simplified form of a general ledger account with space at the top for the accounts title and two sides for recording debits and credits

    (pic) Cash T-Account

    For assets (such as cash), an amount in the debit or left column always means an increase in the balance. An amount in the credit or right column always means a decrease in the balance.

    • Just the opposite is true for liabilities and stockholders' equity: A debit to a liability or stockholders' equity T-account always means a decrease, and a credit always means an increase.
    5-purchase supplies on account 2300
    7-provide golf training to customers on account 2500
    notice that transactions (5) and (7) are not posted to Eagle's Cash T-account. These transactions did not include the receipt or payment of cash, and therefore they do not affect the balance of cash

    (pic )Trial balance

    A list of all the accounts and their balances at a particular date, showing that total debits equal total credits

    Indicate how to increase and decrease each account listed below by selecting debit or credit. Accounts Receivable

    Increase in Debit, Decrease in Credit

    Indicate how to increase and decrease each account listed below by selecting debit or credit. Equipment

    Increase in Debit, Decrease in Credit

    Indicate how to increase and decrease each account listed below by selecting debit or credit. Salaries Payable

    Increase in Credit, Decrease in Debit

    Indicate how to increase and decrease each account listed below by selecting debit or credit. Unearned Revenue

    Increase in Credit, Decrease in Debit

    Indicate how to increase and decrease each account listed below by selecting debit or credit. Common Stock

    Increase in Credit, Decrease in Debit

    indicate whether a debit or credit is used to increase (+) or decrease (-) the balance of the account. Retained Earnings

    Increase in Credit, Decrease in Debit

    indicate whether a debit or credit is used to increase (+) or decrease (-) the balance of the account. Dividend

    Decrease in Credit , increase in Debit

    Which of the following is used to increase the balance of an asset account? Debit or Credit?

    Debit

    Which of the following is used to increase the balance of a liability account? Debit or Credit?

    Credit

    Which of the following is used to increase the balance of a revenue account? Debit or Credit?

    Credit

    Which of the following is used to increase the balance of an expense account? Debit or Credit?

    Debit

    The balance of a stockholders' equity account increases with a ... and decreases with a .....

    Credit,Debit

    Determine which account to debit and which account to credit. Purchase equipment by signing a note with the bank for $20,000.

    Debit-Equipment, Credit-Notes Payable

    Determine which account to debit and which account to credit. Provide services to customers for $26,000 cash.

    Debit-cash, Credit-Service Revenue

    Determine which account to debit and which account to credit. Pay utilities of $2,000 for the current month.

    Debit-Utilities expense, Credit-Cash

    Determine which account to debit and which account to credit. Paid back bank note of $20,000 from the first transaction above.

    Debit-Notes Payable, Credit-Cash

    Determine which account to debit and which account to credit. Purchase supplies for $700 cash.

    Debit-Supplies, Credit-cash

    (#1) Determine the amount to post to the Cash T-account. Purchase equipment by signing a note with the bank for $20,000.

    No Entry

    Determine the amount to post to the Cash T-account. Provide services to customers for $26,000 cash.

    26,000 Debit

    Determine the amount to post to the Cash T-account. Pay utilities of $2,000 for the current month.

    2000 Credit

    Determine the amount to post to the Cash T-account. Pay back bank note of $20,000 in #1 above.

    20,000 Credit

    Determine the amount to post to the Cash T-account. Assuming the beginning balance in the Cash T-account is $0, what is the ending balance in the Cash T-account after the five transactions above?

    3300 Debit

    Determine the amount to post to the Cash T-account. Instead of a beginning balance of $0, what if the beginning balance in the Cash T-account was $3,000. Now, what is the ending balance in the Cash T-account after the five transactions above?

    6300 Debit

    Determine the amount to post to the Cash T-account. Purchase supplies for $700 cash.

    700 Credit

    Prepare a trial balance by indicating whether each account balance is listed in the debit column or credit column. Cash = $4,000.

    Debit 4000

    Prepare a trial balance by indicating whether each account balance is listed in the debit column or credit column. Buildings = $15,000.

    Debit 15000

    Prepare a trial balance by indicating whether each account balance is listed in the debit column or credit column. Accounts Payable = $3,000.

    Credit 3000

    Prepare a trial balance by indicating whether each account balance is listed in the debit column or credit column. Common Stock = $9,000.

    Credit 9000

    Prepare a trial balance by indicating whether each account balance is listed in the debit column or credit column. Retained Earnings = $5,000.

    Credit 5000

    Prepare a trial balance by indicating whether each account balance is listed in the debit column or credit column. Service Revenue = $13,000.

    Credit 13000

    Prepare a trial balance by indicating whether each account balance is listed in the debit column or credit column. Salaries Expense = $11,000.

    Debit 11000

    Which of the following is not an asset account?
    Supplies.
    Accounts Payable.
    Equipment.
    Accounts Receivable.

    Accounts Payable.

    Pumpkin Inc. sold $500 in pumpkins to a customer on account on January 1. On January 11 Pumpkin collected the cash from that customer. What is the impact on Pumpkin's accounting equation from the collection of cash?
    a.No net effect to the accounting equation.
    b.Decrease assets and increase liabilities.
    c.Increase assets and increase liabilities.
    d.Decrease assets and decrease liabilities.

    a.No net effect to the accounting equation.

    If the liabilities of a company increased by $55,000 during a month and the stockholders' equity decreased by $21,000 during that same month, did assets increase or decrease and by how much?

    $34,000 increase

    Which of the accounts are decreased on the debit side and increased on the credit side?

    Liabilities, stockholders' equity, and revenues.

    Expenses normally carry a _______ balance and are shown in the _________.

    Debit; Income statement

    Which of the following accounts would normally have a credit balance?

    Accounts Payable, Service Revenue, Common Stock.

    Childers Service Company provides services to customers totaling $2,100, for which it billed the customers. How would the transaction be recorded?

    Debit accounts receivable $2,100, credit service revenue $2,100.

    A company received a bill for newspaper advertising services received, $390. The bill will be paid in 10 days. How would the transaction be recorded today?

    Debit advertising expense $390, credit accounts payable $390

    When a company pays utilities of $1,710 in cash, the transaction is recorded as:

    Debit Utilities Expense $1,710, credit Cash $1,710

    When a company pays $2,700 dividends to its stockholders, the transaction should be recorded as:

    Debit Dividends; credit Cash.

    5 steps of measurement process

    General ledger postings

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