Lecture_Notes_-_Assign_3

Dec 31 st dr interest receivable 172 cr interest

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Dec 31 st Dr Interest receivable 172 Cr Interest payable 172 (To record accrued interest.) 5. Depreciation Fixed assets – property, plant and equipment, vehicles, buildings land, furniture, computers. These items all wear out over time, this wearing out is called depreciation. Depreciation is an expense. Supplies became supplies expense, prepaid rent became rent expense. These differ from depreciation in that they are known, definite amounts, depreciation is an estimate. Because it is an estimate, the amount of depreciation is kept in a separate account called Accumulated Depreciation, a contra asset account. A contra account is one that does the opposite of what a normal account would. Thus, Accumulated Depreciation has a credit balance. If you remember back to the cost concept in Chapter 1, an item is recorded at its cost and stays at its cost until it is discarded. A building bought for $200,000 would always be in the building account at $200,000 until it is sold. The estimated wearing out of the building would be in kept in the accumulated depreciation account. On the balance sheet these two accounts would be shown netted against (subtracted from) each other at the book value. book value = cost of asset – accumulated depreciation. Land is the only fixed asset not depreciated. Land is assumed not to wear out. Land can be improved with a parking lot – this is Land Improvements, a fixed asset that is depreciation. The journal entry to record the wearing out of a fixed asset is: Dr Depreciation Expense Cr Accumulated Depreciation (To record depreciation)
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Chapter 4 – Accounting Cycle This chapter finishes explaining the accounting cycle. Students have told me that they never understood accounting until they did this chapter, then it all finally made sense. This chapter takes the financial statements from chapter 1, T- accounts and trial balance from chapter 2, and adjusting entries from chapter 3 and pulls them all together. The assignment due with this chapter takes you through the entire accounting cycle. The accounting cycle: Transactions Journal entries Post T-accounts or ledger Trial balance Adjusting Entries Adjusted Trial balance Financial Statements Closing Entries Post Closing Trial Balance
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Worksheet The worksheet is an excellent tool for understanding the relationship between the different parts of the accounting cycle. The textbook gives an example of a worksheet. Activity: Try completing a worksheet of the following problem. A worksheet form can be found under Forms and Angel. The unadjusted trial balance of Quick Repairs at October 31 St , the end of the current year, is shown below. Debit Credit 11 Cash 2,950 13 Supplies 12,295 14 Prepaid Insurance 2,735 16 Equipment 95,650 17 Accumulated Depreciation – Equipment 21,209 18 Trucks 36,300 19 Accumulated Depreciation – Trucks 7,400 21 Accounts Payable 4,015 31 Rhonda Salter, Capital 67,426 32 Rhonda Salter, Drawing 6,000 41 Service Revenue 99,950 51 Wages Expense 26,925 53 Rent Expense 9,600 55 Truck Expense 5,350 59 Miscellaneous Expense 2,195 Totals 200,000 200,000 The date needed to determine year-end adjustments are as follows: a. Supplies on hand at October 31 are $7,120.
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