Fundamentals of Accounting - NSCC NetID: Personal …faculty.northseattle.edu/wholt/acc4qb/FundAcctQB.pdfSouth Seattle Community College Fundamentals of Accounting Pg. 38 EXERCISE

Fundamentals of Accounting For QuickBooks Users

South Seattle Community College

Instructor Bill Holt

[email protected]

South Seattle Community College Fundamentals of Accounting

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CONTENTS

THE ACCOUNTING PROCESS............................................................................................. 3 RECORDING BUSINESS TRANSACTIONS ......................................................................... 4 ANALYZING BUSINESS TRANSACTIONS ........................................................................... 7 THREE PARTS OF AN ACCOUNT........................................................................................ 8 DOUBLE ENTRY RECORDING RULES................................................................................ 9 NORMAL ACCOUNT BALANCES ....................................................................................... 10 JOURNALIZING ................................................................................................................... 11 FORMS OF ACCOUNTS...................................................................................................... 13 STEPS IN POSTING ............................................................................................................ 14 ADJUSTING ENTRIES......................................................................................................... 15 ACCRUAL RELATIONSHIPS............................................................................................... 17 DEPRECIATION................................................................................................................... 18 TRIAL BALANCE WORK SHEET......................................................................................... 21 FINANCIAL STATEMENTS.................................................................................................. 27 CLOSING PROCESS ........................................................................................................... 28 ACCOUNTING CYCLE......................................................................................................... 29 STANDARD CLASSIFICATIONS ......................................................................................... 30 EXERCISES ......................................................................................................................... 31 Note: For additional information beyond this introductory manual, please refer to the class text: Accounting Principles, Sixth Edition by Weygandt, Kieso, & Kimmel, [ISBN: 0-471-38228-0] ©2002 John Wiley & Sons.


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THE ACCOUNTING PROCESS THE ACCOUNTING PROCESS

THE ACCOUNTING EQUATION

Assets - Current assets include cash on hand, investments that can be liquidated quickly, inventory, and payments due from customers. Fixed assets are permanent aspects of the business: the property and building, equipment and fixtures, and any other tangible property. Liabilities - This includes the debts a business owes and any other claims on company assets. Current liabilities entail those debts that will be settled during the current fiscal year. Long-term liabilities will include things like mortgages and equipment costs. Owner's equity - This is the owner's investment in a business. For a single-owner company, the equity would be the difference between assets and liabilities. In a partnership, the equity would be each owner's share of the business. And with a corporation, that's generally the amount of outstanding common stock.


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RECORDING BUSINESS TRANSACTIONS


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ANALYZING BUSINESS TRANSACTIONS


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THREE PARTS OF AN ACCOUNT


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DOUBLE ENTRY RECORDING RULES


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NORMAL ACCOUNT BALANCES


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JOURNALIZING


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FORMS OF ACCOUNTS


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STEPS IN POSTING


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ADJUSTING ENTRIES


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PREPAYMENTS


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ACCRUAL RELATIONSHIPS


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DEPRECIATION


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WORK SHEET TRIAL BALANCE & WORK SHEET


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FINANCIAL STATEMENTS


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CLOSING PROCESS


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ACCOUNTING CYCLE


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STANDARD CLASSIFICATIONS


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EXERCISES EXERCISE 1 Analyze the transactions of a business organized as a proprietorship described below and indicate their effect on the basic accounting equation. Use a plus sign (+) to indicate an increase and a minus sign (–) to indicate a decrease. Assets = Liabilities + Owner's Equity 1. Received cash for services rendered. _______ ______ _______ 2. Purchased office equipment on credit. _______ ______ _______ 3. Paid employees' salaries. _______ ______ _______ 4. Received cash from customer in payment on account. _______ ______ _______ 5. Paid telephone bill for the month. _______ ______ _______ 6. Paid for office equipment purchased in transaction 2. _______ ______ _______ 7. Purchased office supplies on credit. _______ ______ _______ 8. Owner withdrew cash for personal expenses. _______ ______ _______ 9. Obtained a loan from the bank. _______ ______ _______ 10. Billed customers for services rendered. _______ ______ _______ EXERCISE 2 Prepare an income statement, an owner's equity statement, and a balance sheet for the dental practice of Carl Craft, DDS, from the items listed below for the month of September. Carl Craft, Capital, September 1 $40,000 Accounts payable 7,000 Equipment 30,000 Service revenue 24,000 Carl Craft, Drawings 5,000 Dental supplies expense 3,500 Cash 6,000 Utilities expense 700 Dental supplies 2,800 Salaries expense 7,000 Accounts receivable 14,000 Rent expense 2,000


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EXERCISE 2 (CONT.)

CARL CRAFT, DDS Income Statement For the Month Ended September 30, 2002

1 Revenues 1 2 2 3 Expenses 3 4 4 5 5 6 6 7 7 8 Total expenses 8 9 Net Income 9

CARL CRAFT, DDS Owner's Equity Statement For the Month Ended September 30, 2002

1 Carl Craft, Capital, September 1 1 2 2 3 3 4 4 5 Carl Craft, Capital, September 30 5

CARL CRAFT, DDS Balance Sheet September 30, 2002

1 Assets 1 2 2 3 3 4 4 5 5 6 Total assets 6

7 7 8 Liabilities 8 9 9

10 10 11 Owners equity 11 12 12 13 Total Liabilities and owner's equity 13

14 14


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EXERCISE 3 Journalize the following business transactions in general journal form. Identify each transaction by number. You may omit explanations of the transactions. 1. The owner, Nick Brown, invests $20,000 in cash in starting a real estate office

operating as a sole proprietorship. 2. Purchased $400 of office supplies on credit. 3. Purchased office equipment for $7,500, paying $2,500 in cash and signed a 30-day,

$5,000, note payable. 4. Real estate commissions billed to clients amount to $5,000. 5. Paid $700 in cash for the current month's rent. 6. Paid $200 cash on account for office supplies purchased in transaction 2. 7. Received a bill for $500 for advertising for the current month. 8. Paid $2,200 cash for office salaries. 9. Brown withdrew $1,200 from the business for living expenses. 10. Received a check for $4,000 from a client in payment on account for commissions

billed in transaction 4. General Journal

Date Account Titles and Explanation Ref. Debit Credit 1 1 1 2 2 3 3 4 2 4 5 5 6 6 7 3 7 8 8 9 9

10 10 11 4 11 12 12 13 13 14 5 14 15 15 16 16 17 6 17 18 18 19 19 20 7 20 21 21 22 22 23 8 23 24 24 25 25 26 9 26 27 27 28 28 29 10 29 30 30 31 31


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EXERCISE 4 Grant Company is a newly organized business. The list of accounts to be opened in the general ledger is as follows: Accounts Payable Prepaid Insurance Accounts Receivable Prepaid Rent Accumulated Depreciation Rent Expense Cash Salary Expense Depreciation Expense Salaries Payable Equipment Service Revenue Insurance Expense Supplies Lee Grant, Capital Supplies Expense Lee Grant, Drawing Organize the accounts into the order in which they should appear in the ledger of Grant Company and assign account numbers. Use the following system to assign account numbers. 1—199 Assets 200—299 Liabilities 300—399 Owner's Equity 400—499 Revenues 500—599 Expenses

Account Account Title

1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9

10 10 11 11 12 12 13 13 14 14 15 15 16 16 17 17 18 18 19 19 20 20


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EXERCISE 5 The ledger accounts of the Pine Street Gym at June 30, 2002 are shown below: Accounts Payable $ 8,100 Weight Equipment $ 22,000 Accounts Receivable 1,050 Notes Payable 44,000 Building 48,400 Office Supplies 350 Al Hill, Capital 63,100 Office Equipment 2,000 Cash 12,000 Al Hill, Drawing 10,500 Exercise Equipment 18,900 Instructions Prepare a trial balance with the ledger accounts arranged in the proper financial statement order. Include the appropriate heading.

Pine Street Gym Trial Balance June 30, 2002

Debit Credit

1 Cash 1

2 Accounts Receivable 2

3 3

4 4

5 5

6 6

7 7

8 Accounts Payable 8

9 9

10 10

11 11

12 Totals 12


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EXERCISE 6 Wyatt Company prepares monthly financial statements. Below are listed some selected accounts and their balances in the September 30 trial balance before any adjustments have been made for the month of September.

WYATT COMPANY Trial Balance (Selected Accounts)

September 30, 2002 Debit Credit Office Supplies $ 2,700 Prepaid Insurance 5,000 Office Equipment 16,200 Accumulated Depreciation—Office Equipment $ 400 Unearned Rent Revenue 1,200 (Note: Debit column does not equal credit column because this is a partial listing of selected account balances) An analysis of the account balances by the company's accountant provided the following additional information:

1. A physical count of office supplies revealed $1,500 on hand on September 30. 2. A two-year life insurance policy was purchased on June 1 for $6,000. 3. Office equipment depreciated $2,400 per year. 4. The amount of rent received in advance that remains unearned at September 30 is $300.

Instructions Using the above additional information, prepare the adjusting entries that should be made by Wyatt Company on September 30.

General Journal

Date Account Titles and Explanation Ref. Debit Credit

1 1 1 2 2 3 3 4 2 4 5 5 6 3 6 7 7 8 8 9 4 9

10 10 11 11 12 12


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EXERCISE 7 The adjusted trial balance of Payne Financial Planners appears below and using the information from the adjusted trial balance, you are to prepare for the month ending December 31: 1. an income statement. 2. an owner's equity statement. 3. a balance sheet.

PAYNE FINANCIAL PLANNERS Adjusted Trial Balance

December 31, 2002

Debit Credit Cash $ 5,300 Accounts Receivable 2,200 Office Supplies 1,800 Office Equipment 15,000 Accumulated Depreciation—Office Equipment $ 4,000 Accounts Payable 4,200 Unearned Revenue 5,000 Olsen, Capital 14,400 Olsen, Drawing 2,500 Service Revenue 4,300 Office Supplies Expense 600 Depreciation Expense 2,500 Rent Expense 2,000 $31,900 $31,900


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EXERCISE 7 (CON’T)

PAYNE FINANCIAL PLANNERS Income Statement For the Month Ended December 31, 2002

1 Revenues 1 2 2 3 Expenses 3 4 4 5 5 7 7 8 Total expenses 8 9 Net Income (Loss) 9

PAYNE FINANCIAL PLANNERS Owner's Equity Statement For the Month Ended December 31, 2002

1 Payne, Capital, December 1 1 2 2 3 3 4 4 5 Payne, Capital, December 30 5

PAYNE FINANCIAL PLANNERS Balance Sheet December 31, 2002

1 Assets 1 2 2 3 3 4 4 5 5 6 6 7 Total assets 7

8 8 9 Liabilities 9

10 10 11 11 12 Total Liabilities 12 13 Owners equity 13 14 14 15 Total Liabilities and owner's equity 15

16 16


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EXERCISE 8 The work sheet for Young Rental Company appears below. Using the adjustment data below, complete the work sheet. Add any accounts that are necessary. Adjustment data:

(a) Prepaid rent expired during August, $2. (b) Depreciation expense on office equipment for the month of August, $10. (c) Supplies on hand on August 31 amounted to $6. (d) Salaries expense incurred at August 31 but not yet paid amounted to $15. YOUNG RENTAL COMPANY Work Sheet For the Quarter Ended August 31, 2002 Adjusted Trial Balance Adjustments Trial Balance Income Statement Balance Sheet Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.

1 Cash 30 1 2 Accounts Receivable 12 2 3 Prepaid Rent 8 3 4 Supplies 10 4 5 Office Equipment 50 5 6 Accum. Depreciation- Equipment 10 6 7 Accounts Payable 20 7 8 Young, Capital 30 8 9 Young, Drawing 2 9

10 Rent Revenue 82 10 11 Depreciation Expense 6 11 12 Rent Expense 4 12 13 Salaries Expense 20 13 14 Totals 142 142 14 15 Supplies Expense 15 16 Salaries Payable 16 17 Totals 17 18 Net Income 18 19 Totals 19 20 20


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EXERCISE 9 Presented below is an adjusted trial balance for Rand Company, at December 31, 2002. Cash $ 19,700 Accounts payable $ 15,000 Accounts receivable 20,000 Notes payable 9,000 Prepaid insurance 15,000 Accumulated Depreciation— Equipment 35,000 Equipment 14,000 Depreciation expense 7,000 Service revenue 30,000 M. Rand, Drawing 5,500 M. Rand, Capital 24,000 Advertising expense 1,400 Unearned revenue 16,000 Rent expense 800 Salary expense 1,000 Insurance expense 2,600 $108,000 $108,000 Instructions (a) Prepare closing entries for December 31, 2002. (b) Determine the balance in M. Rand's capital account after the entries have been posted. General Journal

Date Account Titles and Explanation Ref. Debit Credit

1 Dec-31 1 2 2 3 3 4 Dec-31 4 5 5 6 6 7 7 8 8 9 9

10 10 11 Dec-31 11 12 12 13 13 14 Dec-31 14 15 15 16 16

17 Balance 17

18 M. Rand, Capital 18 19 19

Documents

Fundamentals of Accounting - NSCC NetID: Personal …faculty.northseattle.edu/wholt/acc4qb/FundAcctQB.pdfSouth Seattle Community College Fundamentals of Accounting Pg. 38 EXERCISE