BMGT 220 Chapter 02

BMGT 220 Chapter 02 - Financial Accounting, Seventh Edition...

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Slide 2-1 The Recording Process Financial Accounting, Seventh Edition Chapter 2
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Slide 2-2 An account is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense item. The general ledger is a record containing all accounts used by the company. The Account
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Slide 2-3 Liabilities Equity Assets = + Owner’s Capital Dividend s Revenues Expenses + + The Accounting Equation
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Slide 2-4 Knowledge Check # 1: An individual person starting a business made an investment  of a building, which is valued at $300,000 with an  $180,000 outstanding mortgage payable. The effect of this  transaction on the accounting equation of the business  would be  to: A. Increase assets by $120,000. B. Increase assets by $180,000. C. Increase stockholders’ equity by $120,000. D. Increase stockholders’ equity by $300,000.
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Slide 2-5 The ledger is a collection of all accounts for an information system. A company’s size and diversity of operations affect the number of accounts needed. The chart of accounts is a list of all accounts and includes an identifying number for each account. The Chart of Accounts Account Number Account Name Accounting Number Accounting Name 101 Cash 319 Dividends 106 Accounts receivable 403 Revenues 126 Supplies 406 Rental revenue 128 Prepaid insurance 622 Salaries expense 167 Equipment 637 Insurance expense 201 Accounting payable 640 Rent expense 236 Unearned revenue 652 Supplies expense 307 Common stock 690 Utilities expense
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Slide 2-6 Debits are simply entries on the left. Credits are simply entries on the right. Remember: Debits and Credits
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Slide 2-7 DR CR DR CR (+) (-) (-) (+) Assets Liabilities Expenses Revenues Dividends Owners’ Equity Debit is an increase. Credit is a decrease. Debit is a decrease. Credit is an increase. Rule of Debits and Credits
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Slide 2-8 Liabilities Equity Assets = + Debit Credit Debit Credit Debit Credit ASSETS + - LIABILITIES - + EQUITIES - + Basic Accounting Equation
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Slide 2-9 Revenues Expenses Capital Stock Dividends _ + _ Debit Credit Capital Stock - + Debit Credit Dividends + - Debit Credit Expenses + - Debit Credit Revenues - + Equity Double-Entry bookkeeping
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2-10 Double-entry accounting system Each transaction must affect two or more accounts to keep the basic accounting equation in balance. Recording done by debiting at least one account and crediting another. DEBITS
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BMGT 220 Chapter 02 - Financial Accounting, Seventh Edition...

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