Lecture+Note+chapter+3+with+answers

Lecture+Note+chapter+3+with+answers - Chapter 3 Accounting...

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Unformatted text preview: Chapter 3 Accounting Information System In-class exercises: EX3-4, EX3-13, EX3-17, EX3-18 Practice exercises: EX3-19, P3-9, P3-16, P3-17 This chapter should be a review of material covered in introductory accounting. Since we assume that you are already familiar with journal entries and the accounting cycle, in class, we will focus mostly on learning objectives 5, 6 & 7. You may omit the appendix (reversing entries). I. NOMINAL VS. REAL ACCOUNTS II. TRIAL BALANCE III. ADJUSTING JOURNAL ENTRIES IV. CLOSING JOURNAL ENTRIES 1 I. NOMINAL VS. REAL ACCOUNTS EXPLAIN THE DIFFERENCE BETWEEN A NOMINAL ACCOUNT AND A REAL ACCOUNT. Temporary (nominal) accounts revenue, expense & withdrawal (dividend/drawings) accts begin each period with zero balance transfer balance to capital (R/E) at end of period Permanent (real) accounts all B/S accts balance at end of period carries over to begin of next period appear on post-closing trial balance 2 WHAT IS THE DIFFERENCE BETWEEN AN UNEXPIRED & AN EXPIRED COST? EXPENDITURE = COST UNEXPIRED COST = AN ASSET EXPIRED COST = AN EXPENSE o ASSET ON B/S "USED UP" AS IT GENERATES REVENUE o MOVES TO I/S AS AN EXPENSE Eg. Prepaid rent rent exp Inventory COGS PPE amortization exp 3 II. TRIAL BALANCE WHAT IS A TRIAL BALANCE? List of account balances at a specific time Total list all debits should = total list of credits AT WHAT THREE POINTS IN THE ACCOUNTING CYCLE SHOULD YOU TAKE A TRIAL BALANCE? Unadjusted TB Adjusted TB Post-closing TB 4 WHAT TYPES OF ERRORS WILL CAUSE A TRIAL BALANCE NOT TO BALANCE? Error in preparing TB: Incorrectly add column of TB Acct balance incorrectly recorded on TB Omit acct from TB Record dr. acct balance as cr. or vice-versa Error in acct: Added incorrectly Dr entered as cr or vice-versa Wrong amt posted to an acct Omit posting part of a JE TAKING A TRIAL BALANCE WILL NOT HIGHLIGHT ALL ERRORS. EXPLAIN WHAT TYPES WILL NOT BE REVEALED. Types of errors not revealed: Failure to record a transaction Recording same transaction more than once Recording all dr & cr in a JE backwards Posting transaction to wrong acct 5 Ex 3 - 4 Chris Cross Inc. Trial Balance June 30, 2009 Debit Credit Cash ($2,870 + 570+750 65 $65) $ 4,060 Accounts Receivable ($3,231 570 $750) 1,911 Supplies ($800 $500) 300 Equipment ($3,800 + $500) 4,300 Accounts Payable ($2,666 $206 $260) $ 2,200 Unearned Service Revenue ($1,200 $325) 875 Common Shares 6,000 Retained Earnings 3,000 Dividends 575 Service Revenue ($2,380 + $801 + $325) 3,506 Wages Expense ($3,400 + $670 $575) 3,495 Office Expense 940 _______ $15,581 $15,581 6 III. ADJUSTING JOURNAL ENTRIES WHY ARE THESE NEEDED?...
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This note was uploaded on 10/13/2010 for the course ACTG 2P31 taught by Professor Pacharn,p during the Fall '10 term at Brock University, Canada.

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Lecture+Note+chapter+3+with+answers - Chapter 3 Accounting...

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