Web Review Notes - Accounting in Business Chapter 1 Balance...

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Accounting in Business Accounting in Business Chapter 1 Chapter 1
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Balance Sheet Balance Sheet
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Income Statement Income Statement
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Scott Company Statement of Owner's Equity For Month Ended December 31, 2007 Capital, December 1, 2007 - $ Plus: Investments by Owner 20,000 $ Net Income 2,200 22,200 22,200 Less: Withdrawals by owner 500 Capital, December 31, 2007 21,700 $ Statement of Owner’s Equity Statement of Owner’s Equity
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Statement of Cash Flows Statement of Cash Flows
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Financial Statement Relationships Financial Statement Relationships Scott Company Statement of Owner's Equity For Month Ended December 31, 2007 Capital, December 1, 2007 - $ Plus: Investments by Owner 20,000 $ Net Income 2,200 22,200 22,200 Less: Withdrawals by owner 500 Capital, December 31, 2007 21,700 $
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Analyzing and Recording  Analyzing and Recording  Transactions Transactions Chapter 2 Chapter 2
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Analyzing and Recording Process Analyzing and Recording Process 1. Analyze each transaction and event from  source documents Apply double-entry accounting 2. Record relevant transactions and events in a  journal 3. Post journal information to ledger accounts T-account versus formal ledger account 4. Prepare and analyze the trial balance 5. Prepare financial statements
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Transaction Analysis Transaction Analysis 1. J. Scott invests $20,000 cash to start the business. 1. Purchased supplies paying $1,000 cash. 1. Purchased equipment for $15,000 cash 1. Purchased Supplies of $200 and Equipment of $1,000 on account. 1. Borrowed $4,000 from 1st American Bank. 1. Provided consulting services receiving $3,000 cash. 1. Paid salaries of $800 to employees. 1. A withdrawal of $500 is made by the owner.
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Source Documents Source Documents (and double-entry accounting) (and double-entry accounting) J. Scott #527 1 University Station Pay to the order of Scott Company $20,000 twenty thousand and no/100 ------------------------------------------ J. Scott Acct Name: Scott Company Item Supplies Mega-Mart Mega-Mart Acct Name: Scott Company Item Amount Supplies $1,000 Mega-Mart "Too Much is Not Enough" Assets Liabilities Equity =   +
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Journal Entries Journal Entries Date Description PR Debit Credit Cash 20,000 Owner Capital 20,000
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Ledger Accounts Ledger Accounts A T-account represents a ledger account and is a  tool used to understand the effects of one or more  transactions.   Cash Credit side Debit side
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ASSETS Debit for Increase Credit for Decrease EQUITY Debit for Decrease Credit for Increase LIABILITIES Debit for Decrease Credit for Increase = + Revenues Expenses Owner Investments Owner Withdrawals Debits and Credits
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Transaction Analysis Transaction Analysis 1. J. Scott invests $20,000 cash to start the business. 1. Purchased supplies paying $1,000 cash. 1. Purchased equipment for $15,000 cash 1. Purchased Supplies of $200 and Equipment of $1,000 on account. 1. Borrowed $4,000 from 1st American Bank.
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