Lecture_Outline-Chapter_Two

Lecture_Outline-Chapter_Two - LECTURE OUTLINE MANAGEMENT...

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LECTURE OUTLINE 1 MANAGEMENT 100 CHAPTER 2 FINANCIAL ACCOUNTING The Accounting Process and Balance Sheet Concepts Review: 1. What is an asset? 2. What is a liability? 3. What is shown in the Retained Earnings account? 4. Which financial statement shows how much a company declared in dividends last year? 5. How are assets valued on the Balance Sheet? 6. What are the primary accounts are included in Shareholders’ Equity? 7. What are the three parts of the Cash Flow Statement? I. Preparing the Financial Statements A. The Accounting Process Transaction Occurs Identification Journal Entry in General Journal Journalizing T-Accounts Posting to General Ledger Posting Prepare Trial Balance Make Corrections and Adjusting Entries to Trial Balance Adjusted Trial Balance Prepare Financial Statements Monthly, quarterly, annually Closing Process Once a year 1. Transactions a. What are accounting transactions? b. How do accounting transactions differ from economic events? c. How do accounting transactions differ from legal actions?
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MANAGEMENT 100 DANNY S. LITT External Transaction Internal Transaction General Journal Cash Receipts Journal Cash Disbursement Journal Purchases Journal Sales Journal Prepare Adjusted Trial Balance Income Statement Balance Sheet Statement of Cash Flows Statement of Owners Equity Footnotes Close Nominal Accounts At year-end Post Closing Trial Balance At year-end Reversing Entries (optional) General Ledger A/R Subsidiary Ledger A/P Subsidiary Ledger Prepare Trial Balance Accruals Prepayments Estimated Items Adjusting Journal Entries Prepare Financial Statements Closing Journal Entries Transaction Identification This Period Journalization Posting THE ACCOUNTING CYCLE Trial Balance Adjusted Trial Balance To Next Period 2
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MANAGEMENT 100 DANNY S. LITT 2. Double-Entry Bookkeeping: Journal Entries Bookkeeping system can be stated as a series of identities: Assets = Liabilities + Owners’ Equity Sum of account balances on the left = Sum of account balances on the right Sum of the debits (left) = Sum of the credits (right) Left side of the equation (i.e., DEBITS) = Right side of the equation (i.e., CREDITS) Implications: For every transaction DEBITS = CREDITS (Otherwise, the left and right sides of the equation will not be equal.) Assets have debit balances. Liabilities have credit balances. THE DOUBLE-ENTRY ACCOUNTING SYSTEM Assets = Liabilities + Owners' Equity + - - + - + Debit Credit Debit Credit Debit Credit Normal Balance Normal Balance Normal Balance The general format of a journal entry is: Account Debited xxx Account Credited xxx 3
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MANAGEMENT 100 DANNY S. LITT 4 Therefore: Increases in assets are debits Decreases in assets are credits Decreases in liabilities are debits Increases in liabilities are credits Decreases in owners’ equity are debits Increases in owners’ equity are credits Examples : Transaction Journal Entry (1) Investment of $80,000 cash by company organizers (2) Borrowed $25,000 from the bank, signing a note payable due within one year.
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Lecture_Outline-Chapter_Two - LECTURE OUTLINE MANAGEMENT...

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