Acc200Day04 - Accy 200 Accy 200 Day 4 Peter A. Silhan...

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Unformatted text preview: Accy 200 Accy 200 Day 4 Peter A. Silhan Agenda Agenda Cash Account/ Cash Flows Horizontal Model Journal Entries Accrual Accounting: cash­timing effects Cash Account (Current Asset) Cash Account (Current Asset) Inflows (Debits) Cash Outflows (Credits) Cash Account (Current Asset) Cash Account (Current Asset) Inflows (increase cash; Cash Revenues Collections of AR Paid in Capital Obtain Loans Sale of PPE “debit” to an asset account) Outflows (decrease cash; “credit” to an asset account) Cash Expenses Payments of AP Dividends Repay Loans Capital Expenditures Cash Account Structure Account Structure C h a rt o f A c c o u n ts A ccount A sset C u rre n t A s s e t N o n c u rre n t A s s e t L ia b ilit y C u r r e n t L ia b ility N o n c u r r e n t L ia b ility O w n e r s ' E q u ity P a id in C a p it a l R e t a in e d E a rn in g s Note: Claims = Liabilities + Owners’ Equity Working Capital = Current Assets – Current Liabilities Basic Horizontal Model Basic Horizontal Model A= L+ OE memorandum Beginning Balance Ending Balance A= L+ OE Expanded Horizontal Model Expanded Horizontal Model Cash + AR + INV + PPE = CL+ LTL+ PIC+ RE memorandum Beginning Balance Ending Balance Cash + AR + INV + PPE = CL+ LTL+ PIC+ RE E2.3 Using Horizontal Model E2.3 Using Horizontal Model Firm A Beg changes Ending Firm B Beg changes Ending Firm C Beg changes Ending A= L+ PIC + ???--> 420,000 A= 215,000 L+ 75,000 PIC + ???--> RE 78,000 102,000 net income (increase) (50,000) dividends (decrease) 130,000 RE 246,000 83,000 net income (increase) (19,000) dividends (decrease) 310,000 RE 42,000 113,000 net income (increase) (65,000) dividends (decrease) 90,000 <--??? 540,000 A= 145,000 L+ 85,000 PIC + 325,000 195,000 40,000 E2.5 Using Horizontal Model E2.5 Using Horizontal Model A= Beg Changes L+ PIC + RE 311,800 (4,700) net loss (decrease) (18,500) dividends (decrease) Ending 288,600 <--??? E2.7 Using Horizontal Model E2.7 Using Horizontal Model Problem/Solution Firm A Beg Changes Ending A= 12,400 1,800 (2,400) 11,800 L+ 7,000 (1,200) nc 5,800 OE 5,400 3,000 net income (increase) (2,400) <--dividends (decrease) 6,000 P2.15 (Basic Transactions) P2.15 (Basic Transactions) A= increase decrease increase increase decrease increase/decrease = zero increase/decrease = net increase decrease decrease L+ increase decrease OE memorandum Beginning Balance (a) Borrowed cash on a bank loan (b) Paid an account payable (c) Sold common stock (d) Purchased merchandise inventory on account (e) Declared and paid dividends (f) Collected an account receivable (g) Sold merchandise inventory on account at a profit (h) Paid operating expenses in cash (I) Repaid principal and interest on a bank loan Ending Balance increase increase decrease increase decrease decrease decrease A= L+ OE Note: on exams you will have to enter $ amounts, also P2.15 Expanded P2.15 Expanded Note: on exams you will have to enter $ amounts, also E4.1 Using Horizontal Model E4.1 Using Horizontal Model Cash + AR + 0 8000 5000 -1750 -1400 -9000 6500 -1200 3900 3160 -4720 $8,490 0 INV + PPE = CL+ 0 0 0 5000 1750 15000 -4000 4200 -9000 6000 100 3000 1850 LTL+ 0 PIC+ 0 8000 RE memorandum 0 Beginning Balance (a) Organized firm and owners invested cash $8000 (b) Borrowed $5000 from bank; signed short term loan (c) Purchased display cases for $1750 cash -1400 (d) Paid $1400 for one month's rent (e) Purchased INV for $15000; paid $9000 cash, owe remainder 2500 (f) Sold merchandise $6500 in cash; it cost $4000 -100 (g) Purchased newspaper ad for $100 to be paid next month (h) Purchased INV for $4200; paid $1200 cash; balance due next month 9600 -3160 4500 (i) Sold $13500 of sales revenue; $9600 sold on account; cost was $9000 -1850 (j) Used labor worth $1850 in wages to be paid next month (k) Collected $3160 from customer AR (I) Paid $4720 owed to suppliers from transaction (e) -4720 $6,440 $6,200 $1,750 $11,230 $0 $8,000 $3,650 Ending Balance Cash + AR + INV + PPE = CL+ LTL+ PIC+ RE T­Account T­Account A T­account is a tool used to represent an account. Account Name Left Right T­Account T­Account The left side of the T­account is always the debit side. The right side of the T­account is always the credit side. Account Name Left Debit Right Credit Debits and Credits Debits and Credits Debits and credits affect the accounting equation as follows: A = L + OE OE ASSETS Debit Credit for for Increase Decrease LIABILITIES Debit Credit for for Decrease Increase EQUITIES Debit Credit for for Decrease Increase T­Account Flows T­Account Flows Asset Accounts Dr. Side (normal side) Beg Bal Change (inflows, increase) End Bal Cr Side Change (outflows, decrease) Claims = Liabilities&OE Accounts Dr. Side Change (outflows, decrease) Cr. Side (normal side) Beg Bal Change (inflows, increase) End Bal Note: X beginning + inflow – outflow = X ending INV Account (inventory) INV Account (inventory) inflow (increase) purchases Cash Cr Supplier Invoice INV Dr Cr outflow (decrease) cost of goods sold OE:RE (expense) Dr Journal Entry Format Journal Entry Format Provide a reference date for each transaction. Debits are written first. Date 6/30 Description Cash Debit 2,000 Credit Paid-in Capital 2,000 To record an investment Total debits must equal by the owners. Credits are indented and written after debits. total credits. memo E4.3(a) Journal Entry E4.3(a) Journal Entry Dr. Cash (increase A) $8000 Cr. PIC (increase OE) $8000 Memo: (a) Organized firm and owners invested cash $8000 PIC = paid in capital E4.3(b) Journal Entry E4.3(b) Journal Entry Dr. Cash (increase A) $5000 Cr. Notes Payable (increase L) $5000 Memo: (b) Borrowed $5000 from bank; signed short term loan (current liability) E4.3(c) Journal Entry E4.3(c) Journal Entry Dr. PPE (increase A) $1750 Cr. Cash (decrease A) $1750 Memo: (c) Purchased display cases (equipment) for $1750 cash Note that “list price” ($1900) is not the cost of this long term asset (PPE) purchased; therefore it is not recorded PPE = Plant, Property, and Equipment E4.3(d) Journal Entry E4.3(d) Journal Entry Dr. Rent Expense (decrease OE) $1400 Cr. Cash (decrease A) $1400 Memo: (d) Paid $1400 for one month's rent Note that this is only for one month E4.3(e) Journal Entry E4.3(e) Journal Entry Dr. INV (increase OE) $15000 Cr. Cash (decrease A) $9000 Cr. AP (increase L) $6000 Memo: (e) Purchased merchandise INV for $15000; paid $9000 cash, owe remainder to supplier INV = inventory E4.3(f) Journal Entry E4.3(f) Journal Entry Dr. cgs (decrease OE) $4000 Cr. INV (decrease A) $4000 Dr. Cash (increase A) $6500 Cr. sales (increase OE) $6500 Memo: (f) Sold merchandise for $6500 in cash; it cost $4000 cgs = cost of goods sold and sales are “net income “accounts which are “temporary” accounts closed into Retained Earnings E4.3(g) Journal Entry E4.3(g) Journal Entry Dr. selling expense (decrease OE) $100 Cr. AP (increase L) $100 Memo: (g) Purchased newspaper ad for $100 to be paid next month Selling expense is “net income “account which is “temporary” account closed into Retained Earnings E4.3(h) Journal Entry E4.3(h) Journal Entry Dr. INV (increase A) $4200 Cr. Cash (decrease A) $1200 Cr. AP (increase L) $3000 Memo: (h) Purchased INV for $4200; paid $1200 cash; balance due next month E4.3(i) Journal Entry E4.3(i) Journal Entry Dr. cgs (decrease OE) $9,000 Dr. Cash (increase A) $3,900 Dr. AR (increase A) $9,600 Cr. INV (decrease A) $9,000 Cr. sales (increase OE) $13,500 Memo: (i) (i) Sold $13500 of sales revenue; $9600 sold on account; cost was $9000 E4.3(j) Journal Entry E4.3(j) Journal Entry Dr. wage expense (decrease OE) $1850 Cr. AP (increase L) $1850 Memo: ((j) Used labor worth $1850 in wages to be paid next month E4.3(k) Journal Entry E4.3(k) Journal Entry Dr. Cash (increase A) $3160 Cr. AR (decrease A) $3160 Memo: (k) Collected $3160 from customer AR E4.3(l) Journal Entry E4.3(l) Journal Entry Dr. AP (decrease L) $4720 Cr. Cash (decrease A) $4720 Memo: (I) Paid $4720 owed to suppliers from transaction (e) Note that this was paid with a “delay”, i.e., a timing difference between when we took possession of asset and when we paid for it. E4.9 Using Horizontal Model E4.9 Using Horizontal Model A= Beg Change L+ PIC + RE 630,000 123,000 revenues (increase) (131,000) expenses (decrease) (12,000) dividends (decrease) Ending 610,000 Note that “cash” received/spent (cash flow) is not the determinant of net income; instead it is revenues earned ($123k) and expenses incurred ($131k). This is “accrual” accounting. Accrual Accounting: Accrual Accounting: Cash­Timing Differences (accruals, deferrals, etc) A: AR, Interest Receivable, … “recognition” line Revenues L: Unearned Revenue, … Cash Early A: Prepaid Expense, Supplies, … L: AP, other payables, … Cash Late Expenses Q&A Q&A ...
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This note was uploaded on 10/16/2010 for the course ACCY Accy 200 taught by Professor Xxx during the Spring '10 term at University of Illinois at Urbana–Champaign.

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