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1-1
Accounting Concept
• Business Entity– Financial information is recorded and
reported separately from the owner’s personal financial information
• Unit of Measurement– Business transactions are stated in
numbers that have common values – that is, using a common unit of measurement.
1-1
Classifications
• Accounts Receivable– ASSET
• Accounts Payable– LIABILITY
• Prepaid Insurance– ASSET
• Capital– OWNER’S EQUITY
• Cash– ASSET
• Supplies– ASSET
1-1
Classifications
• Accounts Receivable– ASSET
• Accounts Payable– LIABILITY
• Prepaid Insurance– ASSET
• Capital– OWNER’S EQUITY
• Cash– ASSET
• Supplies– ASSET
1-1
Owner’s Equity
• Capital – Increase– Cash deposits by owner– Assets donated by owner (ex: equipment)
• Withdraws – Decrease– Cash withdrawn for personal use by owner– Assets taken for personal use by owner
• Revenue – Increase– Sales– Income– Fees
• Expenses – Decrease– Rent– Utilities– Advertising
1-1
Accounting Concept
• Realization of Revenue– Revenue is Recorded at the time goods
or services are sold
1-1
Sales
Asset = Liabilities+
Owner’s Equity
Cash AR – Oakdale School
Supplies
Prepaid Insurance
AP – Supply Depot
Kim Park, Capital
+295.00$3,225.00 $5,000.00
+295.00
August 12. Received cash from sales, $295.00
Calculate the new balance
3,520.00 00.00 775.00 200.00 $5,295.00
200.00 775.00 1,200.00
1,200.00
00.00revenue
1-1
Sales on Account
Asset = Liabilities+
Owner’s Equity
Cash AR – Oakdale School
Supplies
Prepaid Insurance
AP – Supply Depot
Kim Park, Capital
+295.00$3,225.00 $5,000.00
+295.00
August 12. Sold services on account to Oakdale School, $350.00
Calculate the new balance
3,520.00 00.00 775.00 200.00 $5,295.00
200.00 775.00 1,200.00
1,200.00
00.00revenue
+350.00 +350.003,520.00 350.00 775.00 200.00 $5,645.001,200.00
revenue
1-1
Rent
Asset = Liabilities+
Owner’s Equity
Cash AR – Oakdale School
Supplies
Prepaid Insurance
AP – Supply Depot
Kim Park, Capital
+295.00$3,225.00 $5,000.00
+295.00
August 12. Paid cash for rent, $300.00
Calculate the new balance
3,520.00 00.00 775.00 200.00 $5,295.00
200.00 775.00 1,200.00
1,200.00
00.00revenue
+350.00 +350.003,520.00 350.00 775.00 200.00 $5,645.001,200.00
revenue
-300.00 -300.003,220.00 350.00 775.00 200.00 $5,345.001,200.00
expense
1-1
Telephone Asset = Liabilitie
s+Owner’s Equity
Cash AR – Oakdale School
Supplies
Prepaid Insurance
AP – Supply Depot
Kim Park, Capital
+295.00$3,225.00 $5,000.00
+295.00
August 12. Paid cash for telephone bill, $40.00
Calculate the new balance
3,520.00 00.00 775.00 200.00 $5,295.00
200.00 775.00 1,200.00
1,200.00
00.00revenue
+350.00 +350.003,520.00 350.00 775.00 200.00 $5,645.001,200.00
revenue
-300.00 -300.003,220.00 350.00 775.00 200.00 $5,345.001,200.00
expense
-40.00 -40.003,180.00 350.00 775.00 200.00 $5,305.001,200.00
expense
1-1
Receipts Asset = Liabilitie
s+Owner’s Equity
Cash AR – Oakdale School
Supplies
Prepaid Insurance
AP – Supply Depot
Kim Park, Capital
+295.00$3,225.00 $5,000.00
+295.00
August 12. Received cash on account from Oakdale School, $200.00Calculate the new balance
3,520.00 00.00 775.00 200.00 $5,295.00
200.00 775.00 1,200.00
1,200.00
00.00revenue
+350.00 +350.003,520.00 350.00 775.00 200.00 $5,645.001,200.00
revenue
-300.00 -300.003,220.00 350.00 775.00 200.00 $5,345.001,200.00
expense
-40.00 -40.003,180.00 350.00 775.00 200.00 $5,305.001,200.00
expense
-200.00 +200.003,380.00 150.00 775.00 200.00 $5,305.001,200.00
1-1
Withdrawals Asset = Liabilitie
s+Owner’s Equity
Cash AR – Oakdale School
Supplies
Prepaid Insurance
AP – Supply Depot
Kim Park, Capital
+295.00$3,225.00 $5,000.00
+295.00
August 12. Paid cash to owner for personal use, $125.00Calculate the new balance
3,520.00 00.00 775.00 200.00 $5,295.00
200.00 775.00 1,200.00
1,200.00
00.00revenue
+350.00 +350.003,520.00 350.00 775.00 200.00 $5,645.001,200.00
revenue
-300.00 -300.003,220.00 350.00 775.00 200.00 $5,345.001,200.00
expense
-40.00 -40.003,180.00 350.00 775.00 200.00 $5,305.001,200.00
expense
-200.00 +200.003,380.00 150.00 775.00 200.00 $5,305.001,200.00
-125.00 -125.003,255.00 150.00 775.00 200.00 $5,180.001,200.00
withdrawal
1-1
Classifications
•Accounts Receivable– ASSET
•Sales– REVENUE
•Accounts Payable– LIABILITY
•Rent Expense– EXPENSE
•Prepaid Insurance– ASSET
•Drawing– OWNER’S EQUITY
•Utilities Expense– EXPENSE
•Cash– ASSET
•Capital– OWNER’S
EQUITY
•Advertising Expense
– EXPENSE
•Supplies– ASSET
1-1
Classifications
• Accounts Receivable
– ASSET
• Sales– REVENUE
• Accounts Payable– LIABILITY
• Rent Expense– EXPENSE
• Prepaid Insurance– ASSET
• Drawing– OWNER’S EQUITY
•Utilities Expense– EXPENSE
•Cash– ASSET
•Capital– OWNER’S
EQUITY
•Advertising Expense
– EXPENSE
•Supplies– ASSET
1-1
Asset = Liabilities+
Owner’s Equity
Cash AR – Navarro Co.
Supplies
Prepaid Insurance
AP – Barrett Co.
Vincent Orr, Capital
+
-
-
+
-
++
Sales/revenue
-
Utility/expense
-withdrawal/OE
+
Sales/revenue
1-1
Asset = Liabilities+
Owner’s Equity
Cash AR – Navarro Co.
Supplies
Prepaid Insurance
AP – Barrett Co.
Vincent Orr, Capital
+ -
-
+
-
++
Sales/revenue
-
Rent/expense
-withdrawal/OE
+
Sales/revenue
1-1
Stereo
Asset =
Liability +
Owner’s Equity
1. Buy a stereo that costs $3,000.00
2. You have a down payment of $500.00
3. You borrow the rest from the bank.
$3,000.00 $500.00$2,500.00
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