Plain Background Power Point Slides Chapter 2 Transaction Analysis 4878

8/9/2019 Plain Background Power Point Slides Chapter 2 Transaction Analysis 4878

http://slidepdf.com/reader/full/plain-background-power-point-slides-chapter-2-transaction-analysis-4878 1/42

©2006 Prentice Hall Business Publishing Financial Accounting, 6/e Harrison/Horngren1

Processing AccountingInformation

Chapter 2




Learning Objective 1

Analyze business transactions.




The Account

Basic summary device

Accounts - grouped in three broad

categories Assets

Liabilities

Stockholders¶ Equity




The Account

Assets - economic resources thatbenefit the business now and in the

futureCash Accounts receivableInventory

Notes receivablePrepaid expenses

LandBuildingsEquipment, furniture,

and fixtures




The Account

Liabilities - debts of the company

o Notes payable

o Accounts payableo Accrued liabilities

o Long-term liabilities (bonds)




The Account

Stockholders¶ (owners¶) equity -owners¶ claims to the assets of a

corporationo Common Stock

o Retained Earnings

o Revenues

o Expenses




Accounting for Business

TransactionsTransaction - any event that both

affects the financial position of the

business entity and can be reliablyrecorded







Transactions2. Air & Sea purchases land for an

office location, paying $40,000 in

cashTrans Cash

Accounts

Receivable

Office

Supplies Land

Accounts

payable

Common

Stock

Retained

Earnings

(1) 50,000 50,000

(2) (40,000) 40,000

Bal 10,000 40,000 50,000





Transactions3. The business buys office supplies,

agreeing to pay $500 to the office-

supply store within 30 days.

Lia ilities

ra s as

cc ts

ecei a le

Office

lies La

cc ts

aya le t ck

etai e

ar i s

(1) 50,000 50,000

( ) ( 0,000) 0,000

al 10,000 0,000 50,000

s s e t s =

t ck l er's

q ity

(3) 500 500

al 10,000 500 0,000 500 50,000





Transactions4. Air & Sea Travel earns service

revenue of $5,500 and collects this

amount in cash.

Lia ilities

ra s as

cc ts

ecei a le

Office

lies La

cc ts

aya le t ck

etai e

ar i s

al 10,000 0,000 50,000

( ) 500 500

al 10,000 500 0,000 500 50,000

s s e t s =

t ck l er's

q ity

( ) 5,500 5,500

al 15,500 500 0,000 500 50,000 5,500





Transactions5. Air & Sea Travel performs services

for customers on account for $3,000.

Trans Cash

Accounts

Receivable

Office

Supplies Land

Accounts

payable

Common

Stock

Retained

Earnings

al 10,000 0,000 50,000

( ) 500 500

al 10,000 500 0,000 500 50,000

( ) 5,500 5,500 al 15,500 500 0,000 500 50,000 5,500

(5) ,000 ,000

al 15,500 ,000 500 0,000 500 50,000 8,500




Trans Cash

Accounts

Receivable

Office

Supplies Land

Accounts

payable

Common

Stock

Retained

Earnings

al 10,000 500 0,000 500 50,000

( ) 5,500 5,500

al 15,500 500 0,000 500 50,000 5,500 (5) ,000 ,000

al 15,500 ,000 500 0,000 500 50,000 ,500


Transactions6. Air & Sea Travel pays $2,700 for cash

expenses: office rent $1,100, employee

salary $1,200, and utilities $400.

(6) (2,700) (2,700)

al 12, 00 ,000 500 0,000 500 50,000 5, 00




Trans Cash

Accounts

Receivable

Office

Supplies and

Accounts

payable

Common

Stock

Retained

Earnings

Bal 15,500 500 40,000 500 50,000 5,500

(5) 3,000 3,000

Bal 15,500 3,000 500 40,000 500 50,000 8,500

(6) (2,700) (2,700)

Bal 12,800 3,000 500 40,000 500 50,000 5,800


Transactions7. Air & Sea Travel pays $400 to the

store from which it purchased office

supplies in Transaction 3.

(7) (400) (400)

Bal 12,400 3,000 500 40,000 100 50,000 5,800





Transactions8. The owners remodel their home at

a cost of $30,000, paying cash

from personal funds.Lia ilities

ra s as

cc ts

ecei a le

Office

lies La

cc ts

aya le t ck

etai e

ar i s

al 15,500 3,000 500 40,000 500 50,000 8,500

(6) (2,700) (2,700)

al 12,800 3,000 500 40,000 500 50,000 5,800

(7) (400) (400)

al 12,400 3,000 500 40,000 100 50,000 5,800

s s e t s =

t ck l er 's

q ity

This is a personal

transaction, not abusiness transaction!





Transactions9. The business collects $1,000 from

a customer on account.

Liabilities

Trans Cash

Accounts

Receivable

Office

Supplies Land

Accounts

payable

Common

Stock

Retained

Earnings

Bal 15,500 3,000 500 40,000 500 50,000 8,500

(6) (2,700) (2,700)

Bal 12,800 3,000 500 40,000 500 50,000 5,800

(7) (400) (400)

Bal 12,400 3,000 500 40,000 100 50,000 5,800

A s s e t s =Stockholder's

Equity

(9) 1,000 (1,000)

Bal 13,400 2,000 500 40,000 100 50,000 5,800








Income Statement

Ai & l

I m m

M Apr il 30, 20x3

:rvi revenue $8,500

xpenses:

l r y expense $1,200

ent expense 1,100Utilities expense 400

tal expenses 2,700

Net income $5,800




Statement of Retained Earnings

Air & ea ravel

tatement of etained arnings

Month nded Apr il 30, 20x3

etained earnings, Apr il 1, 20x5 $ 0

Add: Net income for the month 5,800

ubtotal $5,800

ess: Dividends (2,100)

etained earnings, Apr il 30, 20x5 $3,700




Balance Sheet

Assets

Cash $ 33,300Accounts receivable 2,000

ff ice supplies 500

and 18,000

otal assets $ 53,800

Liabili t i es

Accounts Payable $ 100Stockhold ers¶ Equ i ty

Common stock $50,000

etained earnings 3,700

Total stockholders¶equity $53,700

Total liabilities andstockholders¶ equity $53,800

Air & ea Travel

Balance heetApr il 30,20X3



©2006 Prentice Hall Business Publishing Financial Accounting, 6/e Harrison/Horngren 22

Air & ea Travel

tatement of Cash FlowsMonth nded Apr il 30, 20x3

C ash f l ows from oper at ing act ivi t i es:

Collections from customers ($5,500 + $1,000) $ 6,500

Cash payments to suppliers and employees

($2,700 + $400) (3,100)

Net cash inf low from operating activities $ 3,400C ash f l ows from inv est ing act ivi t i es:

Acquisition of land $(40,000)

ale of land 22,000

Net cash outf low from investing activities (18,000)C ash f l ows from f inanc ing act ivi t i es:

Issuance (sale) of stock $50,000Payment of dividends (2,100)

Net cash inf lows from f inancing activities $47,900Net increase (decrease) in cash $33,300Cash balance, Apr il 1, 20x5 0Cash balance, Apr il 30, 20x5 $33,300





Understand how accounting works.




Double-Entry Accounting

Record the dual effects of eachbusiness transaction.




The T-Account

Account Title

LEFT IDE

Debit

RIGHT IDE

Credit




Increases and Decreases

in the Accounts

Accounting

Equation: Assets = Liabilities +

Stockholders¶

EquityRules of

Debit and

Credit: Debit

+

Debit

±

Debit

±

Credit

±

Credit

+

Credit

+




Rules of Debit and Credit

Air & Sea received $50,000 andissued stock

Assets = Liabilities +tockholders¶Equity

Debitfor

Increase,50,000

Creditfor

Increase,50,000

Cash Common Stock




Rules of Debit and Credit

Air & Sea purchased land for $40,000cash.

Common Stock

Bal. 50,000

CashCredit

for Decrease,

40,000

Bal. 50,000

LandDebit

for Increase,40,000

Assets =L

iabilities +

tockholders¶E

quity





Record business transactions.




Journal

Chronological record of alltransactions listed by date.




Recording Transactions

in the Journal

Gener Jour nalDate Account and Explanat ons PR Debit r edit

Apr il 2 ash 50,000

ommon Stock 50,000

I ssued common stock

1. Identify the transaction; specify each accountaffected.

2. Determine whether each account is increased or decreased. Use the rules of debits and credits

3. Enter transaction in the journal, including a brief explanation.




Posting from Journal to Ledger

Ledger - grouping of all theaccounts; it shows their balances.

Posting ± process of transferringdebits and credits from journal toledger




Posting from Journal to Ledger

Journal EntryGener al Jour nal

Date Accounts and Explanations PR Debit r edit

Apr il 2 ash 50,000ommon Stock 50,000

I ssued common stock

50,000

Cash Common Stock

50,000




Flow of Accounting Data

TransactionOccurs

TransactionAnalyzed

Transaction

Entered inthe Journal

Amounts

Posted tothe Ledger

Theimagecannot bedisplayed. Your computer may nothaveenough memory toopen theimage,or the imagemay havebeencorrupted.Restartyour computer,and then open thefile again.If thered x stillappears, you may havetodeletethe imageandthen insertitagain.





Use a trial balance.

Trial Balance - lists all accounts withtheir debit or credit balances




Chart of Accounts

Listing of all accounts and accountnumbers used by a business




Normal Balances of the Accounts

Liabilities EquityAssets = +Assets

Debit for Credit for

+ -NormalBalance

LiabilitiesDebit for Credit for

- +NormalBalance

Stockholder¶sEquity


- +NormalBalance




Normal Balances of the Accounts

Stockholders¶ Equity


- +NormalBalance

Common Stock


- +NormalBalance

Retained Earnings

Debit for Credit for + -

NormalBalance

Expenses

Debit for Credit for - +

NormalBalance

Revenues

Decreases

Retained

Earnings Increases

Retained

Earnings





Analyze transactions for quickdecisions.




Quick Decision Making

The managers of PepsiCo mayconsider buying equipment that

costs $100,000. PepsiCo willborrow the money.




Quick Decision Making

Note PayableCash

(a) 100,000 (a) 100,000

Transaction a ± Borrow $100,000

Cash

(a) 100,000 (b) 100,000

Equipment

(b) 100,000

Note Payable

(a) 100,000

Transaction b ± Purchase equipment




End of Chapter 2

Date post:	30-May-2018
Category:	Documents
Upload:	openaccounting
View:	220 times
Download:	0 times

Plain Background Power Point Slides Chapter 2 Transaction Analysis 4878

Documents