1) identify and analyze events

2) record transaction in journal

3) post journal to the ledgers

4) prepare trial balance

5) prepare adjusting journal entries

record adjusting journal entries to worksheet

6) adjusted trial balance

7) prepare financial statements

8) close temporary account

-show impact of accounting events, adjusting events, closing events on the accounting equation

-show how to make and post journal entries, adjusting journal entries, and closing journal entries

-show how accounting events are reported on the financial statements

-the basis of the standard system used by businesses and other organizations to record financial transactions

-first codified by the italian mathematician Luca Pacioli

-maintains a history of changes in monetary values about a particular aspect of the business

-each entry is recorded in at least 2 accounts

-specific to the entity foe which the accounting records are kept (business entity concept)

-measureable in monetary terms (monetary unit concept)

-impact the entity's assets, liabilities, and/or owners' equity (business entity, going concern, periodicity concepts)

-the journal is the starting point of the accounting cycle and the first place a transaction is entered into the system

-the purpose of the general journal is to provide a complete record of a particular accounting event all in one place in chronological order

-a place where the results of events affecting a specific item can be recorded

-list of accounts used by business

-used like an index to help people find the account by classifying each account as an asset, liability, or owners' equity

-each business entity has its unique chart of accounts

-book containing all accounts

-each account has a separate page

-contains all asset, liability, and all equity related accounts (capital, revenue, and expenses)

-am informal representation of a general ledger account

-the normal balance of an account is always the side (debit or credit) on which it increases

left

right

asset = liability + equity   revenue - expense

debit         ↑           ↓           ↓          ↓             ↑

credit        ↓           ↑           ↑          ↑             ↓

1) identify and analyze events

2) record events in the general journal

3) post journal entries to general ledger and subsidiary ledgers

4) prepare an unadjusted trial balance

5) enter adjusting entries in the journal and post to the general ledger

6) prepare an unadjusted trial balance

7) prepare financial statements

8) prepare closing journal entries for the year

9) prepare post closing trial balance (optional)

make a general journal:

purchase office equipment on account, $7,000

office equipment ↑$7,000      A/P ↑$7,000

               A↑                            L↑

               Dr                            Cr

office equipment    $7,000

          A/P                      $7,000

make a general journal:

performed a service and immediately collected $2,000

service revenue ↑$2,000      cash ↑$2,000

         Rev ↑, OE ↑                      A↑

               Dr                            Cr

Cash                               $2,000

         Service Revenue              $2,000

make a general journal:

received, but did not pay, the monthly utility bill, $450

Utility exp ↑$450      Utility/P ↑$450

         OE↓                      L↑

          Dr                       Cr

Utility Expense           $450

           Utility Payable           $450

make a general journal:

paid $18,000 for a one-year lease on office space

cash ↑$18,000      prepaid rent ↑$18,000

       A↓                            A↑

      Cr                             Dr

Prepaid rent    $18,000

          Cash                       $18,000

make a general journal:

purchased office equipment costing $35,000 by paying $5,000 cash and signing a five-year note for the balance

cash ↓$5,000      equip ↑$35,000      N/P ↑$30,000

        A↓                     A↑                      L↑

        Cr                     Dr                      Cr

Equipment    $35,000

          Cash                      $5,000

          N/P                      $30,000

make a general journal:

received $1,000 from a customer for services to be performed next month

cash ↑$1,000      unearned rev ↑$1,000

       A↑                           L↑

       Dr                           Cr

Cash                          $1,000

Unearned Revenue              $1,000

make a general journal:

paid employees for hours worked $1,025

cash ↓$1,025      salary exp ↑$1,025

       A↓                       OE↓

       Cr                        Dr

Salary Expense    $1,025

          Cash                          $1,025

Mutual agency and unlimited liability is the characteristic of which of the following business entity?

a. sole proprietorship

b. corporation

c. partnership

d. manufacturer

c. partnership

which of the following is not an example of a liability

a. an amount that must be paid to supplier that sold the firm supplies

b. the claim of the owners on the firm's net assets

c. received 1 year's rent in advance from tenant

d. agreeing to a long-term paymetn to pay for equipment purchased by the business

b. the claim of the owners on the firm's net assets

the right to use resources that have expected future benefit is called a(n)

a. asset

b. liability

c. revenue

d. expense

a. asset

the accounting concept which assumes that, absent any information to the contrary, the business will continue into the foreseeable future is the:

a. business entity concept

b. monetary unit concept

c. going concern concept

d. dollar-value concept

c. going concern concept

in its annual report ABC Corporation reported the number of trailers it had in stock, rather than the cost in dollars of the trailers. This violates which of the following concepts:

a. business entity concept

b. going concern concept

c. monetary unit concept

d. periodicity concept

c. monetary unit concept

on which final statement would unearned revenue appear?

a. Statement of changes in stickholders' equity

b. income statement

c. balance sheet

d. statement of cash flows

c. balance sheet

a firm billed a customer for services but did not collect cash. What is the effect of this transaction?

a. increases assets, increases revenues

b. increases assets, increases liabilities

c. decreases assests, increases expenses

d. decreases assets, decreases liabilities

Rev ↑      A/R ↑ 

OE ↑        A ↑ 
a. increases assets, increases revenues

a firm received a payment in advance on a customer's special order. What is the effect of this transaction?

a. increases assets, increases revenues

b. increases assets, increases liabilities

c. decreases assests, increases expenses

d. decreases assets, decreases liabilities

cash ↑      unearned rev ↑

  A↑                  L↑

b. increases assets, increases liabilities

the journal entry to record a purchase of supplies on account would include a:

a. debit to cash

b. debit to accounts receivable

c. credit to supplies

d. credit to accounts payable

d. credit to accounts payable

all of the following accounts are increased by credits except:

a. salary payable

b. sales

c. account receivable

d. retained earnings

c. account receivable

a firm received and paid a utilities bill. how would this affect the elements of the fundamental accounting equation?

assets                   liabilities                owners' equity

a)   increase                decrease

b)   increase                                            increase

c)   decrease               decrease

d)   decrease                                           decrease

cash ↓      utility exp ↑

   A ↓             OE ↑

d. decrease assets, decrease owners' equity