What is the accounting equation? Part III: Show the impact of business transactions on the accounting equation For each item, indicate the impact of that transaction on assets, liabilities, and equity. Assume that all transactions, unless stated otherwise, are in cash. Part IV: Analyze the impact of business transactions on accounts Part V: Record journalize and post transactions in the books What is the chronological record of transactions that accountants use called?
Post the following transactions to the ledger accounts. What formula could you use to analyze the cash account and compute cash payments for the period if you were unsure of the amount of cash payments? What three strategies could help you detect and correct accounting errors made during the period?
Indicate the normal balance for each of the following types of accounts: a. Assets b. Liabilities c. Common stock ii. Retained earnings iii. Dividends iv. Revenues v. On what statement do companies report their results of operations?
On what statement do companies report their financial position? Part I: Explain what a transaction is LO1 1. Transaction 2. Account 5. Economic resources that provide a future benefit for a business 6. Liabilities are debt.
Amounts owed to other parties payables. Accounts payable, Notes payable, and Accrued liabilities 9. Common stock, Retained earnings, Dividends, Revenues, and Expenses Dividends decrease retained earnings The dual effects of each transaction are always recorded. Every transaction affects at least two accounts. Debit; credit Debits increase dividends and expenses but decrease revenues. Credits decrease dividends and expenses but increase revenues.
Specify each account affected by the transaction and classify each account by type. Determine whether each account is increased or decreased by the transaction. Use the rules of debit and credit to increase or decrease each account. Record the transaction in the journal, including a brief explanation. The debit side in entered on the left margin, and the credit side is indented to the right.
Part VI: Construct and use a trial balance A trial balance lists all of the accounts with their balances. The trial balance summarizes all the account balances and shows whether total debits equal total credits. The trial balance facilitates in the preparation of the financial statements. Search the records for a missing account. Chart of accounts Normal balance is the side of the account where increases are recorded. In order to increase an asset, you debit it, therefore assets have a normal debit balance.
Normal balances: a. Assets — debit b. Liabilities — credit c. Common stock — credit ii. Retained earnings — credit iii. Dividends — debit iv. Revenues — credit v. Expenses — debit It keeps a running balance in the two right columns. A Business Transaction A.
Any event that has a financial impact on the business and can be measured reliably B. Giving something C. Receiving something in return Account A. Categories 1. Impact on the accounting equation the equation always stays in balance B. Double-entry accounting system B. Journal — A chronological record of transactions B. Journalizing example: 1. Ledger — Grouping of all the T-accounts, with their balances Posting — Data must be copied from the journal to the ledger Posting example:.
Construct and Use a Trial Balance A. Analyzing accounts B. Correcting accounting errors C. Chart of accounts D. Normal account balances: Normal Balance Debit Credit. Account formats F. How to analyze transactions from T-accounts. Chapter Activities 1.
Chapter Opener Chapter 2 spotlight continues with the Walt Disney Company discussion from Chapter 1 and discusses the sources of some of the millions of transactions that Disney records each year, resulting in billions of dollars of revenues. Throughout the chapter, references are made to the accounts and transactions that Disney reports in their financial statements.
Additionally, discuss the items that could be included in the expense figures for Disney. This could lead to a discussion about how a company determines its net income or net loss. Transactions Activity Use the game Monopoly as an example of a business that would engage in transactions for a particular period.
Have the students put each of the transactions in journal entry form. Answer Key to Chapter 2 Quiz Quiz on following pages 1. Which of the following accounts is decreased with a credit? Accounts Receivable B. Accounts Payable C. Rent Revenue D. Service Revenue. The ledger is: A. Always expected to have a debit balance. An event that has an economic impact on the business.
A grouping of all T-accounts, with their balances. None of the above. The journal is: A. A listing of all open accounts and their balances. A listing of all accounts used to record the business transactions. A chronological record of transactions. Not necessary to record transactions. Which of the following accounts is decreased with a debit? Equipment B. Cash D. Payroll Expense. The entry to record this transaction is: A. Accounts Receivable 3, Cash 3, B.
Cash Accounts Payable. Accounts Payable B. Revenue C. Accounts Receivable D. Cash disbursements during March must have been: A. Cannot be determined from the information given. A trial balance: A. Connect with us to learn more. On-line Supplement. We're sorry! We don't recognize your username or password. Please try again. The work is protected by local and international copyright laws and is provided solely for the use of instructors in teaching their courses and assessing student learning.
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