The interest is due on march 1 of the following year

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The interest is due on March 1 of the following year. Principal is due in 2 years. + 20 = 20 LONG TERM DEBT LOANS, 6% interest on next season and we will come back here to understand = Inventory 300 Accounts Payable 300 3. Purchased $300 of bicycle inventory on credit. +300 INVENTORIE S = 300 ACCOUNT S PAYABLE = Cash 507 Sales 507 COGS – 180 Inventory Reduction 180 4. Sold bicycles for cash of $507. The cost of the bikes sold was $180. 507 -180 INVENTORY REDUCTIONS = RETAINED EARING 327 507 SALES 180 COGS = 327 GROSS PROFIT COGS – 48 Inventory Reduction 48 AR 95 Sales 95 5. Sold and invoiced bicycles to a client for $95. The cost of the bikes sold was $48. -48 INVENTORY REDUCTIONS +95 ACCOUNT RECEIVABLE = +47 RETAINED EARING +95 SALES 48 COGS = +47 GROSS PROFIT Pre-paid Asset 84 6. On February 1, paid -84 +84 PRE-PAID ASSET/RESOU = = 3
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Riffe – ACCT 6201 – Session 4 –Fall 2018 Cash 84 $84 for 12 months’ rent. RCE Journal Entry Balance Sheet Income Statement Transaction Cash Asset + Noncash Assets = Liabil- ities + Contrib. Capital + Earned Capital Rev- enues Expenses = Net Income Supplies inventory 24 Cash 24 7. Paid $24 in cash for supplies to have on hand for bike repairs. - 24 +24 SUPPLIES INVENTORY = = Cash 60 AR 60 8. Collected $60 from accounts receivable. +60 -60 ACCOUNT RECEIEVABL E = = ACCOUNTS PAYABLE 200 CASH 200 9. Paid $200 for bikes purchased on credit in 3. - 200 = -200 Accounts payable = DIVIDENDS 3 CASH 3 10. Paid cash dividends of $3. -3 = -3 dividends are not expensed = CASH 6 UN-EARNED REVENUE 6 11. Received $6 cash from a customer for maintenance services to be delivered in future. +6 = +6 un-earned revenue or advances from customer = WAGE EXPESES 15 CASH 15 12. Wages paid during the year were $15. -15 = -15 RE 15 WAGES = -15 OPERATIN G PROFIT SHORT TERM INVEST. 12 13. Purchased Govt. Debt Securities for $12. -12 +12 short term investments = = 4
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Riffe – ACCT 6201 – Session 4 –Fall 2018 CASH 12 5
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Riffe – ACCT 6201 – Session 4 –Fall 2018 Translation Rules - Debits and Credits Accountants record the impact on the two or more accounts affected by a transaction using debits and credits. Think of debits and credits as a translation or grammar rule for the language of business. Pacioli,* the creator of double-entry accounting, decided that: Debit means to record on the LEFT side. Credit means to record on the RIGHT side. Don’t think of debits as good or bad or credits as good or bad; they simply mean left or right. Remember: Assets = Liabilities + Shareholders’ Equity. Because assets are on the left side of the accounting equation, increases in assets are recorded on the left with debits. Accordingly, decreases must be shown on the right with credits. Because liabilities and equity are on the right side of the equation, increases in liabilities and equity are recorded on the right side with credits. Accordingly, decreases must be shown on the left with debits.
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