Lecture03 - Lecture 3 Balance Sheet Recording the Effects...

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1 Lecture 3 Balance Sheet Recording the Effects of Transactions and Events
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2 Goals of Today’s Class 1. Develop a better understanding of Balance Sheet Concepts 2. Understand the Accounting Process and Transactional Analysis 3. Understand Debits, Credits, and the use of T-accounts
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3 Exercise II – Fill in the Gaps 25,535 20,468 Total L and E 7,922 6,719 Retained Earnings 1,399 1,149 Contributed Capital 9,207 5,999 Non-current Liabilities 8,287 7,642 6,733 Current Liabilities 24,025 Total Assets 14,960 Non-current Assets 9,988 9,975 8,435 Current Assets 2001 2000 1999 1998 d. Current Assets – Current Liabilities = $1,724 j. Net loss = $656 and Dividends = $1,117 n. Current Assets – Current Liabilities = $1,948 o. Net income = $2,524 and Dividends = $1,240 20,468 a b 12,033 1,017 c d 9,366 14,659 e f 24,025 7,312 g h 24,935 24,935 i j 6,149 1,292 k l 25,535 15,547 m n 8,040 o 7,433 p 8,663
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4 How do we get the numbers in the balance sheet? • Record financial effects of transactions in accounts • Calculate the ending balance • Report the ending balance on the balance sheet • Balance sheet accounts are cumulative
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5 Accounting Process • Transaction analysis • Recording transactions • Deriving account balances • Prepare financial statements
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6 Dual Effects of Transactions on the Accounting Equation + Increase Cash (an asset) + Increase Bank Loan (a liability) Assets = Liabilities + Equity 100 = 100 + 0 Assets = Liabilities + Equity Example #1: Receive $100 from bank loan
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7 Dual Effects of Transactions on the Accounting Equation + Decrease Cash (an asset) + Decrease Bank Loan (a liability) Assets = Liabilities + Equity 100 = 100 + 0 (20) = (20) + 0 Assets = Liabilities + Equity Example #2: Repay $20 of bank loan
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8 Dual Effects of Transactions on the Accounting Equation + Decrease Cash (an asset) + Increase Inventory (an asset) Assets = Liabilities + Equity 100 = 100 + 0 (20) = (20) + 0 +10 - 10 = 0 + 0 Assets = Liabilities + Equity Example #3: Purchase $10 of inventory with cash
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9 Dual Effects of Transactions on the Accounting Equation + Increase Common Stock (equity) + Decrase Bank Loan (a liability) Assets = Liabilities + Equity 100 = 100 + 0 (20) = (20) + 0 +10 - 10 = 0 + 0 0 = (50) + 50 80 = 30 + 50 Assets = Liabilities + Equity Example #4: Issue $50 of common stock to repay portion of bank loan
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10 All transactions will fit into one or a combination of two or more of the below +A -L -E +E +E +E -A +L +E -L -L -L -A +L +E +A +A +A will be accompanied by This change This change Or vice versa!
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Lecture03 - Lecture 3 Balance Sheet Recording the Effects...

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