Class 2 Lecture Notes SM10

Class 2 Lecture Notes SM10 - Lewis University MBA 550...

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1 Lewis University MBA 550 Financial Accounting 1-1 2-1 Class 2 Class 2 - Analyzing Transactions Analyzing Transactions 1 After studying this chapter, you should be able to: Describe the characteristics of an account and a chart of accounts. 1 Analyzing Transactions Describe and illustrate journalizing 1-2 2-2 2 2-2 2 Describe and illustrate journalizing transactions using the double-entry accounting system. 3 Describe and illustrate the journalizing and posting of transactions to accounts. 4 Prepare an unadjusted trial balance and explain how it can be used to discover errors. Describe the characteristics of an 1 1-3 2-3 3 account and a chart of accounts. 2-3
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2 The T Account Title 1 1-4 2-4 4 The T account has a title. The T Account Title Debit 1 1-5 2-5 5 The left side of the account is called the debit side. The T Account Title Debit The right side of Credit 1 1-6 2-6 6 The right side of the account is called the credit side.
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3 Cash (a) 25,000 (b) 20,000 (d) 7,500 (e) 3,650 (f) 950 1 1-7 2-7 7 (h) 2,000 Balance 5,900 Balance of the account A group of accounts for a business entity 1 Chart of Accounts 1-8 2-8 8 for a business entity is called a ledger . A list of the accounts in a ledger is called a 1 Chart of Accounts 1-9 2-9 9 chart of accounts .
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4 Assets are resources owned by the business entity. Cash 1 Chart of Accounts 1-10 2-10 10 Supplies Accounts receivable Prepaid expenses Buildings Liabilities are debts owed to outsiders (creditors). 1 Chart of Accounts 1-11 2-11 11 Accounts payable Notes payable Wages payable Owner’s equity is the owner’s right to the assets of the bi A di t 1 Chart of Accounts 1-12 2-12 12 business. A drawing account represents the amount of withdrawals by the owner.
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5 Revenues are increases in owner’s equity as a result of selling services or products to customers 1 Chart of Accounts 1-13 2-13 13 products to customers. Fees earned Commission revenue Rent revenue The using up of assets or consuming services in the process of generating 1 Chart of Accounts 1-14 2-14 14 revenues results in expenses . Wages expense Rent expense Miscellaneous expense Describe and illustrate journalizing transactions 2 1-15 2-15 15 using the double-entry accounting system.
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6 Credit for Debit for Asset Accounts Credit for Debit for Liability Accounts Rules of Debit and Credit Normal Balances of Accounts 2 1-16 2-16 16 Credit for increases (+) Debit for decreases (–) Owner’s Equity Accounts decreases (–) increases (+) increases (+) decreases (–) Balance Balance Balance Credit for increases (+) Debit for decreases (–) Revenue Accounts Income Statement Accounts 2 1-17 2-17 17 Credit for decreases (–) Debit for increases (+) Expense Accounts Credit for Debit for Drawing Account Owner’s Withdrawals 2 1-18 2-18 18 decreases (–) increases (+)
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7 Increase (Normal Bal.) Decreases Balance sheet accounts: Asset Debit Credit Liability Credit Debit Normal Balances 2 1-19 2-19 19 Owner’s Equity: Capital Credit Debit Drawing Debit Credit Income statement accounts: Revenue Credit Debit Expense Debit Credit
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This note was uploaded on 10/12/2010 for the course MBA 11111 taught by Professor Spike during the Fall '10 term at Lewis University .

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Class 2 Lecture Notes SM10 - Lewis University MBA 550...

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