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Chapter 5 – The Expanded Ledger l Accounting 1, 7th Edition1
Chapter 5The Expanded Ledger
5
Chapter 5 – The Expanded Ledger l Accounting 1, 7th Edition2
The Expanded Ledger
This tutorial guides you through the expanded ledger system.
Up to Chapter 4, only the capital account is used for owner’s equity. In Chapter 5, you learn that there are several other equity accounts.
For more detailed instructions, refer to Section 5.1 of the Accounting 1 textbook.
Chapter 5 – The Expanded Ledger l Accounting 1, 7th Edition3
The Expanded Ledger
In the old Chapter 4 system, there is only a single equity account.
Chapter 5 – The Expanded Ledger l Accounting 1, 7th Edition4
The Expanded Ledger
The Chapter 5 ledger expands upon the old version.
Chapter 5 – The Expanded Ledger l Accounting 1, 7th Edition5
The Expanded Ledger
The Chapter 5 ledger expands upon the old version.
Chapter 5 – The Expanded Ledger l Accounting 1, 7th Edition6
The Expanded Ledger
To begin expanding the ledger, extract the beginning capital amount.
Chapter 5 – The Expanded Ledger l Accounting 1, 7th Edition7
The Expanded Ledger
To begin expanding the ledger, extract the beginning capital amount.
Chapter 5 – The Expanded Ledger l Accounting 1, 7th Edition8
The Expanded Ledger
Next, extract drawings (withdrawals of money from the company for personal use).
Chapter 5 – The Expanded Ledger | Accounting 1, 7th Edition9
The Expanded Ledger
Next, extract drawings (withdrawals of money from the company for personal use).
Chapter 5 – The Expanded Ledger | Accounting 1, 7th Edition10
The Expanded Ledger
Extract the revenue amounts (known as “fees earned” if the company sells a service, or “sales” if the company sells a product).
Chapter 5 – The Expanded Ledger | Accounting 1, 7th Edition11
The Expanded Ledger
Extract the revenue amounts (known as “fees earned” if the company sells a service, or “sales” if the company sells a product).
Chapter 5 – The Expanded Ledger | Accounting 1, 7th Edition12
The Expanded Ledger
Finally, extract the individual expense amounts into their own separate accounts.
Chapter 5 – The Expanded Ledger | Accounting 1, 7th Edition13
The Expanded Ledger
With the expanded ledger accounts, you can create a more informative trial balance and balance sheet.
You are now also able to generate an income statement.
Chapter 5 – The Expanded Ledger | Accounting 1, 7th Edition14
The Expanded Ledger
The new trial balance shows the expanded equity accounts. It is possible to determine net income and the balance of capital using the balances of these accounts.
Chapter 5 – The Expanded Ledger l Accounting 1, 7th Edition15
The Expanded Ledger
Another view of the trial balance.
Chapter 5 – The Expanded Ledger | Accounting 1, 7th Edition16
The Expanded Ledger
Another view of the trial balance. The expanded ledger accounts can be used to generate the income statement.
Chapter 5 – The Expanded Ledger | Accounting 1, 7th Edition17
The Expanded Ledger
Another view of the trial balance. The expanded ledger accounts can be used to generate the income statement.
Chapter 5 – The Expanded Ledger | Accounting 1, 7th Edition18
The Expanded Ledger
Another view of the trial balance. The expanded ledger accounts can be used to generate the income statement.
Chapter 5 – The Expanded Ledger | Accounting 1, 7th Edition19
The Expanded Ledger
The income statement consists of all revenue and expense accounts, which are part of the expanded ledger.
Chapter 5 – The Expanded Ledger | Accounting 1, 7th Edition20
The Expanded Ledger
The expanded ledger also makes the balance sheet more informative.
Chapter 5 – The Expanded Ledger l Accounting 1, 7th Edition21
The Expanded Ledger
Asset and liability accounts remain unchanged.
Chapter 5 – The Expanded Ledger | Accounting 1, 7th Edition22
The Expanded Ledger
Owner’s equity accounts are expanded.
Chapter 5 – The Expanded Ledger | Accounting 1, 7th Edition23
The Expanded Ledger
The new calculation looks at beginning capital, plus net income, less drawings, plus increase in capital.
Chapter 5 – The Expanded Ledger | Accounting 1, 7th Edition24
The Expanded Ledger
Once you have calculated the total owner’s equity you can rule and total and complete the balance sheet.