Chapter 4
Problem I
1: Gain on Realization Fully Allocated to Partners Capital Balances.
QRS Partnership
Statement of Realization and Liquidation
November 1 30, 20x4
Cash
NonCash
Assets
Liabilities
12,000
Q, Loan
9,600
R, Capital
(50%)
48,000
S,
Capital
(
Transactions
and the Accounting Equation
The accounting equation must remain in
balance after each transaction.
Assets
Assets
=
Liabilities
Liabilities
+
Equity
Equity
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Transaction Analysis
The owner of Scott Inc. invests $20
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Classifying Liabilities
Current
Current
Liabilities
Liabilities
Long-Term
Long-Term
Liabilities
Liabilities
Due
Due within
within one
one
year
year or
or the
the
companys
companys
operating
operating cycle,
cycle,
whichever
whichever
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Basics of Bonds
Bond Issuance Price
Company
Bond Issue
Date
Bond Certificate
at Par Value
Investors
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Basics of Bonds
Bond Interest Payments
Company
Investors
Bond Interest Payments
Bond Issue
Date
Interest Payment
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Financial Statement Analysis
Analytical
techniques
used to
examine
relationships
among financial
statement items
Covered here
Horizontal analysis
(Dollar and percentage
changes on statements)
Trend analysis
Common-size statements
(Ver
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Ratio Analysis
Liquidity and
Efficiency
Solvency
Profitability
Market
Expectations
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Liquidity and Efficiency
Liquidity
The availability of
resources to meet
short-term cash
requirements.
Efficiency
A companys
productivity in
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Choosing A Business Form
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Basics of Capital Stock
Total
Totalamount
amount of
of stock
stockthat
that aacorporations
corporations
charter
charter authorizes
authorizesititto
tosell.
sell.
Total
Totalamount
amount of
of stock
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Classifying Cash Flows
Operating Activities can be reported
in one of two ways:
1. Indirect Method
Reports necessary adjustments to
reconcile net income to net cash provided
(used) by operating activities.
Covered here.
Used by most companies.
Determining
Bond Discount or Premium
Contract
Contract rate
rate is:
is:
Above
Above market
market rate
rate
Equal
Equal to
to market
market rate
rate
Below
Below market
market rate
rate
Bond
Bond sells:
sells:
At
At aa premium
premium
At
At par
par value
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Cash Dividends
Three important dates
Date of Declaration
Date of Record
Date of Payment
Record liability
for dividend.
No entry
required.
Record payment of
cash to stockholders.
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Entries for Cash Dividends
On Janua
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Purpose of Statement of Cash Flows
Helps
Helps the
the user
user of
of the
the
financial
financial statements
statements assess
assess . . .
1.
1.AAfirms
firms ability
ability to:
to:
Generate
Generate cash.
cash.
Meet
Meet its
its
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Notes Receivable
A note is a
written
promise to
pay a specific
amount at a
specific future
date.
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Notes Receivable
Payee
after date I promise to pay to
the order
of
Balstar Company, Los Angeles, CA
Dollars
Value re
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Plant Assets Transactions
Decline
in Book
Value
Over Se
rvice Lif
e
1. Compute
acquisition
cost.
2. Allocate cost to
periods benefited.
3. Account for
subsequent
expenditures.
4. Record
disposal.
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Depreciation
Depr
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Characteristics of a Liability
Because of a
past event.
Past
the
company
has
a present
obligation.
Present
.for future
sacrifices.
Future
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Contingent Liabilities
Amount . . .
Probability of future sacrifice . . .
Reasonably
P
Accounting for
Merchandise Sales
Sales Discounts and
Sales Returns and Allowances
are Contra Revenue accounts.
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Sales Transactions
On March 18, TCom Corp. sold
merchandise costing $18,000 for $25,000.
GENERAL JOURN
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Financial Statements
Balance Sheet
Income Statement
Statement of
Retained Earnings
Statement of
Cash Flows
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Balance Sheet
Cash
Cashassets
assets
Noncash
Noncashassets
assets
Total
TotalAssets
Assets
ABC
ABCCOMPANY
Chapter 3
Problem I
1.
Ben, capital
Pet, capital (50% x P700,000)
2.
350,000
350,000
The total capital of BIG Entertainment Galley remains at P1,480,000. The total amount
paid by Pet to Ben does not affect the partnership and Pet does not become a partner
ADAMSON UNIVERSITY
Accounting Information System
Prelim Exam
DO NOT WRITE ANYTHING ON THE QUESTIONNAIRE
Analyze the following statements. Decide whether they are True or False.
1. Documentation includes everything except narrative descriptions.
2. An exam
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System of Internal Control
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All policies and procedures
that managers use to:
Protect assets.
Ensure reliable accounting.
Promote efficient operations.
Urge adherence to company
policies.
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Principles of Internal Control
1. Est
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Closing Process
Resets revenue and
expense account
balances to zero at
the end of the period.
Helps summarize a
periods revenues
and expenses in the
Income Summary
account.
Identify accounts for
closing.
Record and post the
closing
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Adjusting Accounts
An adjusting entry is recorded to bring an asset or
liability account balance to its proper amount.
F r a m e w o r k f o r A d ju s tm e n ts
A d ju s tm e n ts
P r e p a id
E xpenses
D e p re c ia tio n
U n e a rn
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Accounting for
Merchandise Purchases
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On April 20, Barbee, Inc. purchased
$14,000 of Merchandise Inventory paying cash.
GENERAL JOURNAL
Date
Description
April 20 Merchandise Inventory
Cash
Purcha sed mer cha ndi se for ca sh.
Page 34
P
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Assigning Costs to Inventory
Inventory affects . . .
Balance
Sheet
Income
Statement
The matching principle
requires
the matching
of the cost of the
merchandise sold
with the sales revenue.
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Inventory Information
fo
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Accounts Receivable
Accounts
Accounts receivable
receivable are
are amounts
amounts
due
due from
from customers
customers for
for credit
credit sales.
sales.
Credit
Credit sales
sales require:
require:
Maintaining
Maintaining aa separate
separ
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Influence of Accounting
Accounting
is a
system that
Identifies
Records
Relevant
information
that is
Communicates
Reliable
Comparable
to help users make
better decisions.
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Focus of Accounting
Identifying
Business
Transactions
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Classified Balance Sheet
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Lets look
at a
classified
balance
sheet by
first
examining
the asset
section.
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Classified Balance Sheet
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Sections of a Classified Balance Sheet
Assets
Liabilities and Owner's Equity
Current
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Transactions and Documents
Transaction
Source
documents
Analyze
Reporting
Trial balance
Recording and
posting
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Transactions and Events
External Transactions
are exchanges
of economic consideration
between an organization and
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Bank Reconciliation
A bank reconciliation is prepared
to explain the difference between
the cash reported on the bank statement and
the Cash account balance in the general ledger.
First National Bank
Nashville, TN 37459
May 31, 20A
Clothes Mart
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The Account
AA detailed
detailed record
record
of
of increases
increases and
and
decreases
decreases in
in
specific
specific assets,
assets,
liabilities,
liabilities, equities,
equities,
revenues,
revenues, or
or
expenses.
expenses.
Separate
Sep
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Plant Assets
Tangible
Actively Used in Operations
Expected to Benefit Future Periods
Property, Plant and Equipment
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Cost of Plant Assets
General Rule
Purchase
price
Acquisition
cost
Acquisition cost excludes
financing charge
