CHAPTER 4

CHAPTER 4 - CHAPTER 4: I. Accounting Cycle (what are the 11...

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CHAPTER 4: I. Accounting Cycle (what are the 11 steps and what does each step accomplish) 1. Transaction Analysis a. Figure out which specific accounts were affected and how. Increased or decreased? b. Example 1: The owner invested $10,000 in the corporation. Break this down and figure out which accounts were affected and how. i. Cash account balance increased by $10,000 because the business has more cash than it originally had. ii. Capitol Stock increased by $10,000 because the owner added stock to the business. iii. Revenues and Expenses are Owners Equity accounts. c. Example 2: The company paid $1000 for a laptop i. Cash account balance decreased by $1000 ii. Equipment increased by $1000 d. Example 3: Company provided $500 of consulting services for a customer on account. i. Accounts receivable increased by $500 ii. “Service Revenue” increased by $500 e. Example 4: Company paid $200 wages to employee i. Cash decreased by $200 ii. Wages expense increased by $200 f. Example 5: Company Borrowed $100,000 From the Bank i. Cash Balance increased by $100,000 ii. Notes Payable increased by $100,000 g. Example 6: Company paid $5000 sales commission. i. Cash decreased by $5000 ii. Commissions expense increased by $5000 iii. An increase in expenses will decrease profits, so you use a negative
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This note was uploaded on 10/01/2010 for the course ACCT 2000 taught by Professor Holmes during the Spring '08 term at LSU.

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CHAPTER 4 - CHAPTER 4: I. Accounting Cycle (what are the 11...

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