exam1 - ACCOUNTING CYCLE STEPS 1) Make a journal entry for...

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7/14/10 ACCOUNTING CYCLE STEPS 1) Make a journal entry for each transaction and post to T accounts. 2) At end of accounting period look for possible adjusting entries. Make journal entries and post. 3) Prepare a Pre-closing trial balance 4) Prepare an Income Statement
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7/14/10 The Four Basic Financial Statements 1. On a company’s BALANCE SHEET, all resources owned and amounts owed are listed. The difference between the resources owned and the amounts owed, represents the stockholders’ equity in the business. v Contains three Elements (or sub-groups)… Assets, Liabilities, & Stockholders’ Equity.
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7/14/10 The Four Basic Financial Statements 2. On a company’s INCOME STATEMENT, all the revenues earned from sales to customers are listed along with the expenses incurred to produce those revenues. v Contains two Elements (or sub-groups)… Revenues and Expenses.
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7/14/10 The Balance Sheet Assets Cash Short-Term Investment Accounts Receivable Notes Receivable Inventory (to be sold) Supplies Prepaid Expenses Long-Term Investments Equipment Buildings Land Intangibles Liabilities Accounts Payable Accrued Expenses Notes Payable Taxes Payable Unearned Revenue Bonds Payable Stockholders’ Equity Contributed Capital Retained Earnings Typical Account Titles
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7/14/10 On a company’s INCOME STATEMENT, all the revenues earned from sales to customers are listed along with the expenses incurred to produce those revenues. ² Contains two Elements (or sub-groups)… Revenues and Expenses. ² Represents a period of time. For example: 1 year or 1 month… ² Revenues – Expenses = Net Income ² Revenues and expenses are TEMPORARY
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7/14/10 The Income Statement Revenues Sales Revenue Fee Revenue Interest Revenue Rent Revenue Expenses Cost of Goods Sold Wages Expense Rent Expense Interest Expense Depreciation Expense Advertising Expense Insurance Expense Repair Expense Income Tax Expense Typical Account Titles
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7/14/10 A = L + SE Transaction Analysis Model + ASSETS - Debit for Increase Credit for Decrease - EQUITIES + Debit for Decrease Credit for Increase - LIABILITIES + Debit for Decrease Credit for Increase Debits and credits affect the Balance Sheet Model as follows:
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7/14/10 Transaction Analysis Model - Revenues + + Expenses - Debit for Decrease Credit for Increase Debit for Increase Credit for Decrease
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7/14/10 Closing the Books Revenue and Expenses are called temporary accounts and are closed at the end of the period. They are closed into the Retained Earnings account.
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7/14/10 Closing the Books Two steps are used in the closing process . . . 1. Close revenues to Retained Earnings. 2. Close expenses to Retained Earnings.
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7/14/10 Closing the Books Equity Accounts Learned So Far: 1. When the owners’ claim to the assets results from the owners putting money into the business, the claim is put in the Common Stock account.
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exam1 - ACCOUNTING CYCLE STEPS 1) Make a journal entry for...

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