ACC 221 Final Study Guide Cumulative

ACC 221 Final Study Guide Cumulative - Assets = Liabilities...

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Assets = Liabilities + Owner’s Equity 1. Analyze Transactions 2. Record Transactions in General Journal 3. Post to General Ledger 4. Adjusting Entries 5. Trial Balance 6. Financial Statements Income Statement Calculate Retained Earnings Balance Sheet 7. Closing Entries 8. Post Closing Trial Balance Trial Balance - all accounts in general ledger to make sure system is balanced All Revenue and Expense Accounts have a balance in them Balance Sheet - all Asset, Liability, Common Stock and Retained Earnings accounts to make sure system is in balance No Revenue or Expense Accounts on BS, already closed into Retained Earnings Issue Common Stock Cash 1000 Common Stock 1000 Borrow on note from the bank Cash 8000 Note Payable 8000 Period of Time Assumption - The life of the firm is sliced into accounting periods, in each period we cycle through the entire accounting process Entity Assumption - Only record your firm’s transactions in the accounting system Monetary Unit Assumption - Only record transactions that are stated in terms of dollars Going Concern Assumption - You are assuming the firm will be in business for a long time into the future Cost Principle - When we record a transaction, we record that transaction the cost, not the value. Never write things up, can depreciate though. Common Stock - the owner’s putting money into the business by buying stocks
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Retained Earnings - Owner’s claim to assets as a result of business operations Never close, always has a beginning balance, Not on Income Statement Revenue and Expense accounts go home to Retained Earnings Revenue – Expenses = Net Income Income Statement Balance Sheet: Retained Earnings = Net Income – Dividends Interest Payable - Adjusting Entry for the interest due from the previous month Interest Expense 100 Interest Payable 100 Cost of Goods Sold - an Expense Account, costs of inventory Sell merchandise to customers Cash 1000 Sales Revenue 1000 Costs of Goods Sold 500 Inventory 500 Income Statement – Calculates Net Income that goes home to Retained Earning on BS Income Statement Revenue 5000 Costs of Goods Sold -1000 Gross Profit 4000 Operating Expenses Supplies 100 Wages 200 Interest 150 Total Operating Expenses 450 Net Income 3550 Retained Earnings = Net Income – Dividends Balance Sheet Post-Closing Trial Balance - shows all account balances in General Ledger All Revenue and Expense Accounts have a zero balance Permanent Balances - ALL Asset, ALL Liability, and Common Stock and Retained Earnings accounts
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Adjusting Entries What is the balance? What should be the balance? How do we get there? Depreciation Expense 1000 Accumulated Depreciation 1000 If you forget to due adjusting Depreciation entry Assets Overstated Accumulated Depreciation Understated Equipment Overstated Liabilities Balances Equity Overstated Expenses Understated Net Income Overstated Retained Earnings Overstated Supplies = $11,000 Should be $10,125 Supplies Expense 875 Supplies 875
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ACC 221 Final Study Guide Cumulative - Assets = Liabilities...

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