Lecture_2_FA2_spring_2011_black - ACCT 615 Learning Points...

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NJIT_ACCT615_WX_LECTURE 2 1 1 NJIT_ACCT615_WX Lectures 2 Fundamentals of Financial Accounting (2) ACCT 615 NJIT_ACCT615_WX 2 (1) Analyze & Journalize (journal entries) (2) Post journal entries to Ledger accounts (3) Prepare “ trial balance ”– 1 st (4) Journalize & post adjusting entries (5) Prepare “ adjusted trial balance” – 2 nd (6) Prepare financial statements (4 statements) (7) Journalize & post closing entries (close the book) (8) Prepare “ post-closing trial balance” – 3 rd 1. Recording Tools (Double-Entry Accounting) 2. The Accounting Cycle (8 Steps) Learning Points 3 NJIT_ACCT615_WX Point (1) Recording Tools (Double-Entry Accounting) NJIT_ACCT615_WX 4 Transactions are economic events that would change a business’ financial position (i.e. A, L, E) NOT all activities represent transactions to be recorded. May be external or internal. Each transaction has a Dual Effect on the accounting equation. Transaction Analysis NJIT_ACCT615_WX 5 Assets = Liab. Equity + Transaction Analysis Borrowed bank loan Paid off debt Owner made new investment Earned revenues (How to earn Rev. ?) Paid for expenses (salaries, utilities. .) Hired new manager Paid cash dividends Try it … NJIT_ACCT615_WX 6 Double-Entry Accounting Assets = Liab. Equity + Double-entry Accounting – a system to record transactions in a way that maintains the equality of the accounting equation
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NJIT_ACCT615_WX_LECTURE 2 2 NJIT_ACCT615_WX 7 •A n account is an individual accounting record of increases & decreases in each specific Asset, Liability, or Equity item; e.g. Cash; A/R; Office Equipment; Notes Payable; Unearned Revenue; Common Stock; Retained Earnings; Sales Revenue; Rent Expense; Utilities Expense … … • Accounts provide an efficient way to classify, record & summarize transactions Each transaction will affect at least TWO accounts due to the “equality” of the accounting equation Account NJIT_ACCT615_WX 8 T-account is a simplified depiction of an account • A T-account is composed of 3 parts: Account Name, Debit Side, & Credit Side Name of Account Debit Side ( DR ) Credit Side ( CR ) T-Account NJIT_ACCT615_WX 9 Debits simply mean amounts on the left Credits simply mean amounts on the right Remember: Name of Account T-Account NJIT_ACCT615_WX 10 In double-entry accounting system , Each transaction will have “ dual effects on the accounting equation; one MUST enter EQUAL debit & credit amounts into relevant accounts by following “DR-CR rules” Double-Entry Accounting NJIT_ACCT615_WX 11 DR CR DR CR (-) (+) (-) (+) DR CR (+) (-) Assets = Liab. Equity + e.g. Cash, A/R, Land… e.g. A/P, Unearned Rev. ( ? _____________) Retained Earnings … e.g. Cash e.g. Acct Payable e.g. Common Stock Liabilities and Equity accounts: Increases ( Ç ) are recorded on credit side Assets accounts: Increases ( Ç ) are recorded on debit side Debit-Credit – Basis NJIT_ACCT615_WX 12 = Assets Dr. Cr.
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This note was uploaded on 03/18/2011 for the course ACCT 601 taught by Professor O'connel during the Spring '10 term at New York Institute of Technology-Westbury.

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Lecture_2_FA2_spring_2011_black - ACCT 615 Learning Points...

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