Lecture_Notes_-_Assign_2

Trial balance proof that the debits and credits equal

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Trial Balance - Proof that the debits and credits equal. Also, it is a list of the totals in all the accounts. T-account: Account name ─────────┬──────── Post all of the Credits go on this side Debits on the left Once all of the amounts have been recorded in the T-accounts, one total is found. The total usually goes on the normal balance side of the T-account.The total will go on whichever side is the largest. For assets, drawing, and expenses, the total will be on the debit, left side. For liabilities, revenue, and capital, the total will be on the credit, right side. There are rare exceptions to this. For instance, if cash is overdrawn, it will have a credit balance.
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Activity : Try some on your own. Use the notes below and the rules for debits/credits as a guide. Journal paper can be found under Forms on Angel. 1. Purchased supplies for cash, $300. 2. Paid gas bill for month, $300. 3. Billed customers for fees earned on account, $2,000. 4. Purchased equipment on account, $1,500. 5. Received cash from customers on account, $2,000. 6. Purchased equipment for cash $700. 7. Received cash for fees earned, $2,500. 8. Partial payment of equipment purchased on account #4, $900. 9. Purchased supplies on account, $500. 10.Paid rent for month, $1,000. 11.Paid wages for month, $3,000. Notes: 1. How the journal is set up: a. Date column: The rectangle is for the month, square for the date. The year is sometimes written in the top half of the first rectangle in small letters. If no date is given, the letter or number of the transaction is written. b. Description: Account name. List all of the debits first, then the credits. The credits are indented. c. Post Reference: Leave blank. We will discuss this next week. d. Debit/Credit: Enter the amount. e. Below each entry, an explanation is written to describe the transaction. (I don’t require this on handed in assignments as you will only be rewriting the description in the book.) 2. “On account” means either accounts receivable or accounts payable. Accounts receivable means the business is waiting to receive the cash. Accounts payable is cash owed to someone else. 3. “Earned”, “Completed” and “billed customer” mean revenue. 4. “This is the complete opposite of what I know about debits and credits.” The monthly bank statement you receive is actually the bank’s records. For the bank, your account is a liability (They owe you the money.) So the bank statement you receive is a printout of the bank’s liability account, not your cash account. 5. The industry standard abbreviation for debit is Dr and Credit is Cr. (Yes, I know debit doesn’t have an r in it.) 6. The distinction between prepaid and expenses. Monthly items are recorded as an expense. Items to be around longer than a month are recorded as prepaid. Example: Room and board is paid at the beginning
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of the semester – prepaid rent. An apartment rent is normally paid monthly – straight to expense.
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