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1、Chapter1TheAccountingEquationandDouble-entryBookkeepingTheFundamentalAccountingEquationnAssets=Liabilities+OwnersEquitynLiabilities=Assets-OwnersEquitynOwnersEquity=Assets-LiabilitiesRecordingBusinessTransactionsnSupposethatMrLiinitiallyinvests1000000yuanofhisowninGuangliServicesbydepositingthemoney
2、inthenameofthebusiness.nTostarttheoperationofhouse-movingservice,GuangliServicesbuysahousewhichcosts360000yuan.RecordingBusinessTransactionsRecordingBusinessTransactionsnGuangliServicesbuysthreetruckswhichcosts240000yuanfromanautodealer.Thebusinesspaystheautodealer200000yuanincash.Thebalanceof40000y
3、uanwillbepaid90dayslater.ThisisaliabilitycalledAccounts Payable.RecordingBusinessTransactionsRecordingBusinessTransactionsnGuangliServicesbuyshouse-movingequipmentincashfromHaimaEquipmentCompany,9000yuan.RecordingBusinessTransactionsRecordingBusinessTransactionsnGuangliServicespays3600yuanforaone-ye
4、arinsurancepolicyonthetrucksandequipment.Werecorditasanassetwithanaccountname,Prepaid Insurance.RecordingBusinessTransactionsRecordingRevenuesandExpensesnSoonaftertheopeningofthebusiness,GuangliServicesrendershouse-movingservicesforitscustomers,resultinginthefirstinflowofrevenue.Revenuesaretheamount
5、sofassetsthatabusinessearnsasaresultofsellinggoodsorrenderingservices.Theymaybeintheformofcashorcredit-cardreceiptsorreceivables.nAsaresultofreceivingacashrevenueof2000yuan,theaccountingequationischangedasfollows:RecordingRevenuesandExpensesnAfteraweeksoperation,thetrucksrunoutofgasoline.GuangliServ
6、icespaysthegasstation200yuanforthegasolinefilled.Thisisthefirstexpenseofthebusiness.Expensesaretheamountsofassetsthatabusinessusesupintheprocessofgeneratingrevenues.RecordingRevenuesandExpensesDouble-entryBookkeepingnDouble-entrybookkeepingisanaccountingsystembywhicheachbusinesstransactionisrecorded
7、inatleasttwoaccountsandtheaccountingequationiskeptinbalance.nItalsohelpsustocheckwhetherwehavemadeanyarithmeticmistakesinrecordingbusinesstransactionsTheTAccountFormnThecolumnarformtakesspace,sotheTaccountformisused.PlacementofTaccountsnAssets=Liabilities+OwnersEquity+Revenue-ExpensesRecordingTransa
8、ctionsintheTAccountFormnNowletsseehowGuangliServicesrecordsitstransactionsintheTaccountform.(pp.20-21)RulesforDebitandCreditnTheamountrecordedonthedebitsideofoneaccount(oraccounts)alwaysequalstheamountrecordedonthecreditsideofanotheraccount(oraccounts).TheTrialBalancenAtrialbalanceisalistofalltheacc
9、ountbalancesatagivenpointoftime.Thebalancesoftheaccountsarerecordedinatrialbalanceinthefollowingorder:Assets,Liabilities,OwnersEquity,Revenue,andExpenses.GuangliServicesTrialBalanceJanuary31,200Chapter2AccountingCycle(I)Journalizing,PostingandPreparingTrialBalanceAccountingCyclenAccountingcycle:aseq
10、uenceofaccountingprocedureswhicharerepeatedcontinuouslyduringeachaccountingperiod.nAnaccountingperiod/fiscalperiod:anyspanoftimecoveringacompleteaccountingcycle.nAnaccountingyear/fiscalyear:anaccountingperiodcomposedoftwelveconsecutivemonths.AccountingCyclejournalize business transactions post journ
11、al entries to ledger accounts prepare a trial balance complete a work sheet prepare financial statements journalize and post the adjusting entries journalize and post the closing entries prepare a post-closing trial balance TheGeneralJournalnAjournal:abookinwhichallbusinesstransactionsareinitiallyre
12、corded.nTheprocessofrecordingbusinesstransactionsinthejournaliscalledjournalizing.nThesimplestformofjournaliscalledageneraljournal.DATEDESCRIPTIONPOSTREF.DEBITCREDIT GENERAL JOURNAL PAGE TheGeneralJournalTheGeneralLedgernGeneralledger:abookcontainingalltheledgeraccountsofabusiness.DATEITEMPOSTREF.DE
13、BITCREDITBALANCEDEBITCREDITGENERAL LEDGERACCOUNTACCOUNTNO.TheChartofAccountsnChartofaccounts:theofficiallistofalltheaccountsandtheiraccountnumbers.ne.g.Guangli Services Chart of AccountsAssets(100-199)OwnersEquity(300-399)111Cash311Li,Capital112AccountsReceivable312Li,Drawing113PrepaidInsurance121Tr
14、ucksRevenue(400-499)123Equipment411IncomefromServices125HouseExpenses(500-599)Liabilities(200-299)511GasExpense211AccountsPayable512UtilitiesExpense513WagesExpensePostingtotheGeneralLedgernPosting:Theprocessoftransferringthejournalentriesfromthejournaltoledgeraccounts.nGenerally,wefollowfoursteps:nE
15、nterthedateoftransaction;nEntertheamountoftransactionandthenewbalanceoftheaccount;nInsertthepagenumberofthejournalinthePostingReferencecolumnoftheledgeraccount(cross-reference);nInserttheledgeraccountnumberinthePostingReferencecolumnofthejournal.GENERAL JOURNAL PAGE DATEDESCRIPTIONPOSTREF.DEBITCREDI
16、T200Jan.1Cash111100000000Li,Capital100000000OriginalinvestmentbyMr.LiinGuangliServices.GENERAL LEDGERACCOUNTCashACCOUNTNO.111DATEITEMPOSTREF.DEBITCREDITBALANCEDEBITCREDIT200Jan.111000000001000000001e.g.nAfterallthetransactionspostedfromthejournal,wecanformacompleterledger.(Anexamplecanbeseenonp35-38
17、.)nAtrialbalance(referredtoChapter1)canbepreparedtohelpyouprovetheequalityoftotaldebitamountsandtotalcreditamounts.PostingtotheGeneralLedgerGuangliServicesTrialBalanceJanuary31,200DEBITCREDITCash444450AccountsReceivable1300PrepaidInsurance3600Trucks240000Equipment9000House360000AccountsPayable40000L
18、i,Capital1000000Li,Drawing500IncomefromServices28300GasExpense200UtilitiesExpense250WagesExpense900010683001068300e.g.Chapter03AccountingCycle(II):Adjustments,WorkSheetandFinancialStatementsTheWorkSheetnWorksheet:achartthatprovidesnecessarydataforrecordingadjustingentriesandforpreparingsuchfinancial
19、statementsastheincomestatementandthebalancesheet.GuangliServicesWorkSheetFormonthendedJanuary31,200TrialBalanceAdjustmentsAdjustedTrialBalanceIncomeStatementBalanceSheetAccountNameDebitCreditDebitCreditDebitCreditDebitCreditDebitCreditTheWorkSheete.g.ThetitleWorkSheetTheperiodoftimecoveredThenameoft
20、hebusinessPlacementofAccountsintheWorkSheetnFirst,enterthebalancesoftheledgeraccountsinthefirsttwocolumnsoftheworksheet.TheupdatedledgeraccountbalancesareenteredintheAdjustedTrialBalancecolumns.nSecond,TherevenueandexpenseaccountsareplacedintheIncomeStatementcolumns.nThird,TheBalanceSheetcolumnswill
21、includeAssets,Liabilities,andOwnersEquity.(DrawingintheDebitside)PlacementofAccountsintheWorkSheetTrialBalanceAdjustmentsAdjustedTrialBalanceIncomeStatementBalanceSheetAccountClassificationDebitCreditDebitCreditDebitCreditDebitCreditDebitCreditAssetsLiabilitiesCapitalDrawingRevenueExpensesTheAdjustm
22、entsnAdjustments:internaltransactionsthatbringtheledgeraccountsuptodateattheendofanaccountingperiod.Onlyafewaccountsrequireadjusting.TakeGuangliServicesasanexample(onlyfouraccountsneedadjusting:PrepaidInsurance,Trucks,Equipment,andHouse).Adjustment for Prepaid InsurancenGuangliServiceshaspaid3600yua
23、ninadvanceforaone-yearinsurancepolicyonthetrucksandequipment.Nowonemonthhaspassed,thepremiumforJanuaryhasnowexpired,whichamountsto300yuan(3600yuandividedby12months).nTaccountsoftheadjustments:Adjustments for Depreciation of TrucksnSupposeGuangliServicesbelievesthatthetruckswillhaveausefullifeoftenye
24、ars,withanestimatedsalvagevalueof30000yuanattheendofthetenthyearandthecostofthetrucks240000yuan.Sothedepreciationforonemonthis:Adjustments for Depreciation of TrucksnIntheworksheet,GuangliServicesrecordsthedepreciationof1750yuanasadebittoDepreciationExpense:TrucksandacredittoAccumulatedDepreciation:
25、TrucksnAccumulatedDepreciation:thetotaldepreciationoftheassetsinceitwasoriginallypurchased.nTaccountsforadjustingthedepreciationofTrucks:Adjustments for Depreciation of Equipment,and HousenEquipmentandHousearewiththesamemethodofcomputingdepreciationastheTrucks.nTaccountsforadjustingthedepreciationof
26、Equipment:nTaccountsforadjustingthedepreciationofHouse:CompletingtheWorkSheetTrialBalanceAdjustmentsAdjustedTrialBalanceIncomeStatementBalanceSheetAnexamplecanbeseeninp49-50.PreparingFinancialStatementsnThreemajorfinancialstatements:nIncomestatementnBalancesheetnStatementofcashflowsTheIncomestatemen
27、tnAnincomestatementshowstherevenue,expenses,andthedifferencebetweenthem,thatis,netincomeornetloss.Itisalsocalledaprofitandlossstatement.TheIncomestatementGuangliServicesIncomeStatementFormonthendedJanuary31,200Revenue:IncomefromServices28300Expenses:GasExpense200UtilitiesExpense250WagesExpense9000In
28、suranceExpense300DepreciationExpense:Trucks1750DepreciationExpense:Equipment150DepreciationExpense:House1000TotalExpenses12650NetIncome15650TheStatementofOwnersEquitynThestatementofownersequityshowshowandwhytheownersequityaccountofabusinesshaschangedovertheaccountingperiod.GuangliServicesStatementof
29、OwnersEquityFormonthendedJanuary31,200Li,Capital,January1,2001000000Add:NetIncomeforJanuary15650Subtotal1015650Less:Withdrawals500Li,Capital,January31,2001015150e.g.TheBalanceSheetnAbalancesheetisalsocalledastatementoffinancialpositionbecauseitshowsthefinancialpositionofabusinessatagivenpointoftime.
30、nAssets=Liabilities+OwnersequityTheBalanceSheete.g.TherelationshipRecordingandPostingtheAdjustingEntriesnJournalizetheadjustingentriesinthegeneraljournalfromtheworksheet:AdjustingEntriesJan.31InsuranceExpense300PrepaidInsurance30031DepreciationExpense:Trucks1750AccumulatedDepreciation:Trucks175031De
31、preciationExpense:Equipment150AccumulatedDepreciation:Equipment15031DepreciationExpense:House1000AccumulatedDepreciation:House1000RecordingandPostingtheAdjustingEntriesnPosttheadjustingentriesintheledgeraccounts:RecordingandPostingtheAdjustingEntriesChapter4AccountingCycle(III):ClosingEntriesandPost
32、-closingTrialBalance2more“follow-up”stepsntheclosingprocedure;npreparationofapost-closingtrialbalance.nInaccountingpractice,abusinessusuallymakesclosingentriesonlyattheendofitsfiscalyear.ClosingEntriesnReduceitsbalancetozero-ndebitingtheaccountbythesameamountofitscreditbalance,orcreditingtheaccountb
33、ythesameamountofitsdebitbalance.nnIfDebitbalanceHowtoclose?IfCreditbalanceTemporary-equityaccountsVSpermanentaccountsnTemporary-equityaccounts:applytoonlyonefiscalperiodandwhichareclosedattheendofthatfiscalperiod.nRevenue,Expense,andDrawingaccountsarealltemporary-equityaccountsnpermanentaccounts:rem
34、ainopenallthetimeuntilthebusinessisliquidated.Assets=Liabilities+Capital+RevenueExpensesDrawingPermanentaccountsTemporaryaccountsOpenClosedThepracticalpurposeofclosingentriesistoupdatethesetemporary-equityaccountssothattheownerofthebusinessknowsthe“results”oftheoperations:The Closing Procedurenfours
35、teps:closetherevenueaccountsintotheIncomeSummary;closetheexpenseaccountsintotheIncomeSummary;closetheIncomeSummaryaccountintotheCapitalaccount;closetheDrawingaccountintotheCapitalaccount.IncomeSummaryinvolvedinthefirstthreestepsIncomeSummaryExpensesbal.RevenueBal.NetlossNetincome(ifRE)Step1Closingth
36、eRevenueAccountsnIncomefromServicesIncomeSummaryn-+nClosing28300Balance2830028300nnnwehaveputtherevenuebalanceintotherightsideofour“basket”Step2ClosingtheExpenseAccountsnSincetheexpenseaccountshavedebitbalances,weclosethemintotheIncomeSummaryaccountbycreditingthem.Step3ClosingtheIncomeSummaryAccount
37、nIncomeSummaryLi,Capitaln-+n1265028300Balance1000000Closing15650Balance15650NetIncome15650nStep4 ClosingtheDrawingAccountcreditingtheDrawingaccountanddebitingtheCapitalaccount.SummarizetheprocedureJournalizing the Closing Entriesnclosingentrieshavetoberecordedinthegeneraljournal.nWhenajournalentryin
38、volvestwoormoredebitsand/ortwoormorecredits,wecallitacompoundentry.Posting the Closing Entriesntheledgeraccountsnwritingtheword“Closing”intheItemcolumnoftheledger,andextendingalinethroughboththedebitandcreditbalancecolumns.PreparingthePost-closingTrialBalancenpost-closingtrialbalancelistsonlytheacco
39、untswhichappearonthebalancesheet,namely,assets,liabilities,andownersequity.nrealaccountsorpermanentaccountsExample:Thepost-closingtrialbalanceofGuangliServicesnCashnAccountingsReceivablenPrepaidInsurancenTrucksnSummarynAlltheeightstepsinvolvedintheaccountingcyclenTheaccountingcyclenKeytermsandexerci
40、sesChapter5SalesandSalesJournalLead-innChapterOnetoChapterFour:basicaccountingconceptsandproceduresofaservice-typesoleproprietorshipnNow,accountingpracticeofamerchandisingsoleproprietorshipExamplecontextnMrLidecidestoextendhisbusinesstothesaleofmerchandiseandthusopensastorecalledGuangliFurnitureStor
41、e,whichsellsfurnitureandfixtures.nFollowtheprocessTheAccountingEquationofaMerchandisingBusinessnRevenuefromthesalesofgoodsundertheSalesaccountnMerchandise:goodsacquiredbyamerchandisingbusinessforresaletoitscustomersinthesamephysicalcondition.nMerchandiseinventory:astockofgoodsthatamerchandisingbusin
42、essacquiresandkeepsonhandforresaletoitscustomersinitsnormaloperations.SalesReturnsandAllowancesSpecialJournalsnSpecialjournalsarethosejournalsinwhichthespecializedtypesoftransactionsarerecorded.nSpecialJournals:nSalesjournal(S)nPurchasesjournal(P)nCashreceiptsjournal(CR)nCashpaymentsjournal(CP)1.Spe
43、cialJournals:SalesJournal-salesoncreditPurchasesJournal-purchaseoncreditCashreceiptsJournal-allcashreceiptsCashpaymentsJournal-allcashpayments2.Generaljournal(J)The Sales JournalSalesjournalisusedtorecordsalesofmerchandiseoncreditonlynSincethemoneycolumnisheadedAccountsReceivableDrandSalesCr,asingle
44、lineissufficienttorecordatransaction,whereasatleastthreelinesareneededinthegeneraljournal(debit,credit,andexplanation).nNowletssupposethatinthefirstmonthofbusiness,GuangliFurnitureStorecompletedthefollowingcreditsales:SalesTaxSalestaxpayable:Valueaddedtax:Achargeontaxablesuppliesofgoodsandservicesby
45、ataxablepersoninthecourseorfurtheranceofabusiness.The Accounts Receivable LedgernPractical:tomaintainaseparateaccountforeachchargecustomer.nAccountsreceivableledger:nthechargecustomersandtheirrespectivebalancencontrollingaccountnsubsidiaryledgerPosting from the Sales JournalnCheckmark()isputinthePos
46、tingReferencecolumnnpoststhetotalofthecreditsalesfromthesalesjournaltothegeneralledgerbydebitingtheAccountsReceivable(controlling)accountandcreditingtheSalesaccount.PrepareascheduleofaccountsreceivablenListingindividualbalancesofallthechargecustomeraccountsnAccountsReceivable(controlling)accountinth
47、egeneralledgern=nthebalancesofthechargecustomeraccountsintheaccountsreceivableledger.SalesReturnsandAllowancesnSellerwillissueacreditmemorandumnSeller:debitingtheSalesReturnsandAllowancesaccountandcreditingtheAccountsReceivableaccount.nReturn:itisa100%refundtothecustomernAllowance:reductionfromtheor
48、iginalpriceContraaccountnSalesReturnsandAllowancesaccount:acontraaccounttotheSalesaccountnExample:PostingDirectlyfromSalesInvoicesnInthePostingReference:theaccountantwritestheinvoicenumberinsteadofthepagenumberofthejournal.nAccountanttotalstheinvoiceamountsandmakesasummarizingentryinthegeneraljourna
49、lnReviewChapter6PurchasesandPurchasesJournalPurchasenThepurchaseofmerchandiseforresaleisrecordedinanaccountcalledPurchasesnPurchasesaccount:anexpenseaccountandthusisplacedunderExpensePurchaseAccountsPurchasingProceduresandInternalControlofPurchasesnSubmitapurchaserequisitionnStrictinternalcontrolpol
50、icynFourmeasuresareusuallyadoptedtocontrolthepurchasesofgoods.ThePurchasesJournalnRecordthepurchasesofmerchandiseonaccountonly.CashDiscount/PurchasesDiscount/SalesDiscountn nAdeductionfromtheinvoicepricegrantedtoinduceearlypaymentoftheamountdue.nEachdefinitionnCredittermsnWhenmanufacturersandwholesa