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1、1,Recording Business Transactions,Learning Objectives :Understand the dual-entry recording framework and Discuss the accrual basis of accounting,Discussion Section # 2 Financial Reporting EWMBA-202 Lopo Martinez,2,ACCOUNTING PROCESS,EVENTS,TRANSACTIONS,FINANCIAL STATEMENTS,JOURNAL,LEDGER,DOCUMENTATI
2、ON,Journalizing,Posting,FINANCIAL STATEMENTS,The Accuracy Summary,TRIAL BALANCE,1. Journalizing 2. Posting 3. Preparing a trial balance 4. Recording adjusting entries 5. Preparing financial statements,3,Debits and Credits,Account Title,Debit,Credit,(Dr.),(Cr.),Left Side,Right Side,Debit (dr.) - an e
3、ntry or balance on the left side of an account Credit (cr.) - an entry or balance on the right side of an account,One debit,One credit,Each transaction is recorded with at least:,Total debits must equal total credits.,and,DR,CR,4,Debits and Credits in the Accounts,=,Net Income,5,Mechanics of Double
4、Entry Accounting,Can you identify the type of transaction below ?,+,-,+,+,+,-,+,-,1,2,3,4,Notice that in each of the transactions, the equation balances (+ and -) Notice also that the debits and credits are equal in each transaction,=,+,Assets,Liabilities,Owners Equity,Debit for Increases,Credit for
5、 Decreases,Debit for decreases,Debit for decreases,Credit for Increases,Credit for Increases,5,+,-,6,Journal Entries,Accountants record a transaction by making a journal entry. A journal entry shows both sides of the transaction with the name of the ACCOUNTS and their respective debit or credit.,On
6、Jan 2, the firm issues 10,000 shares of common stock for $100,000 cash On Jan 5, it pays $60,000 cash to purchase equipment,7,Toy Example,Toys transactions for January 2002 are as follows: 1) Jan 2 - The firm issues 10,000 shares of common stocks for $100,000 cash. 2) Jan 5 - Pays $60,000 cash to pu
7、rchase equipment. 3) Jan 15 - Purchases merchandise inventory costing $15,000 from supplier on account. 4) Jan 21 - Pays supplier in (3) $8,000 of the amount due. 5) Jan 28 - The firm borrows $30,000 from a bank. 6) Jan 31 - The firms receives $3,000 from a customer for a good to be delivered in Mar
8、ch.,8,100,000 (1),(1) 100,000,Transaction 1 Assets = Liabs. + OE +100,000 (cash) = +100,000 (common stock),Ledger Posting Procedure - Using T-Accounts,Journal Entries,T-Accounts,9,(2) 60,000,(1) 100,000 60,000 (2),Transaction 2 Assets = Liabs. + OE - 60,000 (cash) + 60,000 (equipment) =,Ledger Posti
9、ng Procedure - Using T-Accounts,Journal Entries,T-Accounts,10,15,000 (3),(3) 15,000,Transaction 3 Assets = Liabs. + OE +15,000 (inventory) = +15,000 (acc.payable),Ledger Posting Procedure - Using T-Accounts,Journal Entries,T-Accounts,11,(4) 8,000 15,000 (3),(1) 100,000 60,000 (2) 8,000 (4),Transacti
10、on 4 Assets = Liabs. + OE - 8,000 (cash) = -8,000 (acc.payable),Ledger Posting Procedure - Using T-Accounts,Journal Entries,T-Accounts,12,30,000 (5),(1) 100,000 60,000 (2) (5) 30,000 8,000 (4),Transaction 5 Assets = Liabs. + OE +30,000 (cash) = +30,000 (loan payable),Ledger Posting Procedure - Using
11、 T-Accounts,Journal Entries,T-Accounts,13,3,000 (6),(1) 100,000 60,000 (2) (5) 30,000 8,000 (4) (6) 3,000,Transaction 6 Assets = Liabs. + OE +3,000 (cash) = +3,000 (adv. customers),Ledger Posting Procedure - Using T-Accounts,Journal Entries,T-Accounts,14,T-Accounts and Balance Sheet as at Jan 31, 20
12、02,(1) 100,000 60,000 (2) (5) 30,000 8,000 (4) (6) 3,000 Bal. 65,000,3,000 (6) 3,000 Bal.,30,000 (5) 30,000 Bal.,(3) 15,000 Bal. 15,000,(2) 60,000 Bal. 60,000,100,000 (1) 100,000 Bal.,(4) 8,000 15,000 (3) 7,000 Bal.,Balance Sheet ASSETS Currents Assets Cash 65,000 Inventory 15,000 PPE Equipment 60,0
13、00 Total Assets 140,000 LIABILITIES AND OE Current Liabilities Accounts Payable 7,000 Adv from Customers 3,000 Long-term Liabilities Loan Payable 30,000 Total Liabilities 40,000 OWNERS EQUITY Common Stock 100,000 Total Liabilities and OE 140,000,15,THE TRIAL BALANCE,A listing of all accounts with th
14、eir related balances. It tests whether debits and credits are equal.,CASH (A) 65,000 INVENTORY (A) 15,000 EQUIPMENT (A) 60,000 ACCOUNTS PAYABLE (L) 7,000 ADVANCES FROM CUSTOMERS (L) 3,000 LOAN PAYABLE (L) 30,000 COMMON STOCK (OE) 100,000 TOTAL 140,000 140,000,BALANCE ACCOUNT TITLES DEBIT CREDIT,TRIA
15、L BALANCE TOY CORPORATION AS AT JAN 31, 2002,16,Accrual Basis Vs. Cash Basis,Accrual Basis Revenues are recognized when earned and expenses are recognized when incurred.,Cash Basis Revenues are recognized when cash is received and expenses recorded when cash is paid.,Intuitive and easy. Provides information on the liquidity Subject to manipulation, for example, the firm can delay having to recognize an exp
