Escolar Documentos
Profissional Documentos
Cultura Documentos
person
credit
operation of law
2.
Nature of Business
Service Concern- rendering of services to the
customer
Trading or Merchandising- buying and selling of
goods
Manufacturing Concern- turns raw materials to
finished products
Assumptions
service
2
Measurement and Unit of Measure-
Non-Current Assets
Equipment
Investment
Principles
Constraints
Estimates/ Judgments- not everything can be
accounts)
assets
Liability- claim in the assets
Proprietorship- owners interest in the business
T-Account- simple form of account; simpler form of
ledger
your payables
Assets
Current Assets- regular operation of the
business; can be converted to cash within
a short period of time
- Cash
- Receivables- collectible from customer
- Inventories- items of tangible personal
property
and proprietorship
Debit To:
Credit To:
1. Increase in Asset
1. Decrease in Asset
2. Decrease in Liabilty
2. Decrease in Liability
3. Decrease in
Proprietorship due to:
Increase in
Proprietorship due to:
a. withdrawal of assets
by owner
a. investment by owner
c. increase in income
3
Real Accounts- Permanent accounts; accounts
paid
Proprietorship Titles
of owner
Owners Drawing- amount withdrawn by owner
from asset
the business
Income Titles
Asset Titles
professional
Rent Income- amount of rental earned
Service Income- amount of income from
services
Interest Income- amount earned from lending
money
Expense Titles
Cost of Sales/ Cost of Goods Sold- cost of
goods when purchased; real value
Advertising Expense- expense incurred to
promote the product
Supplies Expense- Amount of supplies used
Taxes- duties incurred
Utilities Expense- amount of light and water
consumed
Repairs and Maintenance- expenses from
repair
Bad Debts- estimated amount of losses from
uncollectible
Depreciation Expense- allocated cost of fixed
asset in current period
expense
Land
Building
Liability Titles
promissory note
Accounts Payable- amount due to creditors
Interest Payable- interest incurred but not yet
4
Steps:
1. Journalizing
2. Posting
accounting period
4. Adjusting Entries
5. Preparation of Worksheet
7. Closing Entries
8. Reversing Entries
Original Entry
Adjusting Entry
A/R xxx
Incomexxx
Incomexxx
A/Rxxx
journal
Accounts Receivable
first time
2 kinds:
1. Special journals
cash receipts journal
sales journal
purchase journal
2 types:
1. % of Sales
200,000 X .5 = 10,000
12/31 Bad Debt Expense 10,000
Allowance for Bad Debts 10,000
based on 5% of sales
2. % of Accounts Receivables
credit
2 Types:
1. Trial Balance of Balances- accounts with
open balances
either:
Debit balance- debit total > credit total
Credit balance- credit total > debit total
Zero balance/ Closed account- credit total = debit
total
5
Recognition of Prepaid Expenses
3. Aging of Receivables
1- 30
days
31-60
days
1%
500k
5,000
61-90
days
2%
200k
91-180
days
5%
100k
4,000
5,000
10%
20%
50,000 150k
5,000
2 Methods
181
and up
30,000 total:
49,000
advertisement fee
Oct. 1, 2014 Dec. 31, 2014
10/1 Prepaid Advertising 10,000
Cash10,000
To record 10 mos. advr. payment
Cost of Asset
Prepaid Account
Oct. 1- 10,000
Dec.
1. Straight-line Method
Cash10,000
Oct. 1- 10,000
2014
year 1
year 2
year 3
Same
Same
Eqpt (100,000)
Less: Acc. Dep
(20,000)
100,000
40,000
100,000
60,000
NBV= 80,000
NBV= 60,000
NBV= 40,000
6
12/31 Deferred/Unearned Rent 2,333.33
Rent Income 2,333.33
To record used prepaid rent
Deferred Rent Income
Oct. 1- 7,000
Dec.31- 4,666.67
Accrued Expenses
Oct.1 Issued 120-day promissory note amounting
to 200,000 with 10% interest
12/31 Accrued Interest Expense 5,000
Accrued Interest Payable 5,000
To record accrued interest
[Acc. Int. Expense- Income Statement and Acc. Int.
Payable- Balance Sheet]
Accrued Income
Oct.1 Received a 120-day promissory note
amounting to 200,000 with 10% interest
Oct.1 Jan. 31 (200,000 and interest)
Interest = Prt
= (200,000)(.1)(90/360)
= 5,000
12/31 Interest Receivable 5,000
Accrued Interest Income 5,000
To record accrued interest for a 120-day
promissory note
[Interest Receivable- Balance Sheet and Acc. Int.
Income- Income Statement]