ACCT 2101- TEST 1 UGA

Assets

something that the entity owns that create a future benefit... land, inventory, construction, are all examples of situations where in the future they are beneficial. So its an asset

Liability

Claims against an entity from an outsider asking for cash or assets... examples would be deferred payments, payables, discontinued liability/ operation

Rewriting the equation

A= L + SE

For the creditors (peps you owe):

L= A- SE

Owners of the entity:

SE= A- L

Stockholdes Equity

This is what is the owners claims on the assets... This is broken down further (see graphic in the pptx)

What are revenues?

Up in assets from operation activities

What are expenses?

Down in assets. Net assets that were sacrificed to obtain revenues

All Assets, Liabilities, and Stockholder Equity is broken down into current and non- current; except for SE, which is broken down between contributed capitol (an investment) and retained earnings

The next part is on transaction analysis

A transaction that says... "Issue common stock to owners for 40,000"

This is an increase in cash, so an asset... to make this balance this also goes into common which is under SE

A transaction that says... "Buy PP&E for 3,400 cash

In this situation, you are decreasing your cash but you're gaining an asset... so - in cash and + in the PP&E section, both assets

A transaction that says... "Purchase inventory on credit for 55,000"

Here, there is an increase in inventory... also there is an increase in acct. payable, because its on credit, so liability

Pay vendor 32,000 of the amount owed

This says, "amount owed." that tells you that it was on credit. being that you are paying it off, it is deceasing that acct. payable liability. Thus, this also decreases your cash

Prepaid Expanses

An expense is something that gotta pay, so this means that in some instances you would prepay it, before you use it. This is a benefit to you, so its an asset... (prepaid rent/ insurance are examples)

Payables

This is stuff you need to pay in the future... this is accounts payable... an example of this is a wholesaler who gets products and when it sales it they pay the producer... this is like home depot

Obligation (unearned revenue)

This is when the entity requires a prepayment before anything happens... airliners

Accrued Liabilities

First, when you accrue something, you build it up overtime... examples of this is wages payable, interest payable, wages payable... this are accrued because the increase overtime if you don't pay them off...

What do you put in your land value section?

the historical cost (what you payed for it)... we are moving to fair value though

What is good will?

reputation of a company

Closing the books

Spread sheets for large companies can get large very fast... the solution is debits and credits

Assets increase with what?

Debit

Liabilities increase with what?

Credit

SE increase with what?

Credit

Dividends increase with what?

Debit

Revenue increase with what?

Credit

Expense increases with what?

Debit

Examples of a beginning Debit and Credit. Here is the situation...

"on 9/14 a co. bought 1,000 worth of supplies on account. at 9/30, the co. had used all but $350 worth of supplies. on 10/9 the co. payed is account." for the 9/14 date.

What do you know?

- your supplies went up (asset) also your acct. payable went up (liability)... this applies only for the 9/14 date

- This increase in both assets and liabilities yields the following cr./dr. entry

Date: Acct: Dr.: Cr.

9/14 Supplies 1,000

Acct. Pay 1,000

the same example

"on 9/14 a co. bought 1,000 worth of supplies on account. at 9/30, the co. had used all but $350 worth of supplies. on 10/9 the co. payed is account." for the 9/30 date.

What do you know?

Available supplies: 1,000

On hand: 350

Used: 650

so you know that your supply account has gone down and your supplies expense account does up. This yield the following entry.

Date: Acct: Dr.: Cr.

9/30 Supplies Exp. 650

Supplies 650

the same example

"on 9/14 a co. bought 1,000 worth of supplies on account. at 9/30, the co. had used all but $350 worth of supplies. on 10/9 the co. payed is account." for the 10/9 date

What do you know?

both your cash and acct. payable accounts decrease. Thus, given debit and credit theory, it would yield the following journal

Date: Acct: Dr.: Cr.

10/9 Acct. Pay 1,000

Cash 1,000

from the journal to the ledger

Here, the ledger will consolidate the entry specific transaction for the entire fiscal period. So, this means all you need to do is take your debit and credit entires and just put them in a t- account. Look at the pptx.

What is a trial balance?

a list of account balances separated in to t, debit and credit, columns

Accounts payable, debit or credit? Why?

Credit... accounts payable falls under a liability. you know that the chart has the little + on the right side, which is the credit side. Therefore it is a credit.

Cash, debit or credit? Why?

Debit... looking at the chart, the + sign is on the left, or debit side. So this is a thus a debit

Ending retained earnings is computed how?

Beginning retained earn

+ net income

- dividends

____________________________________

= Ending retain earn

Look at the example problem at the end of the pptx from session 4 "double entry acct."

Return on sales formula? What does it represent?

defined as: net income / sales

****

The number of pennies of profit left from each dollar, after paying expenses

Accrual Adjustment for prepaid expense?

Deferral- down in balance acct..; up in income account.

Accrual adjustment for unearned revenue?

Deferral- down in balance acct..; up in income account.

Accrual adjustment for accrued expenses?

Accural- up in balance acct..; down in income account.

Accrual adjustment in accrued revenues?

Accural- up in balance acct..; down in income account.

An example of an accrual?

"pay 600 in advance, company then delivered 300 worth"

here, you know the unearned revenue is 300 bucks, being that only half the service was provided.... by contrast the sales revenue would be 300 because the work was performed.

Adjustment: Description: Dr. Cr.

Unearned Unearned rev. 300

Rev.

Slaes rev. 300

Study your accrual, the managerial notes are in your word document... so take a look at both of these

What is a statement of cashflows?

the change is cash tabulated... you break this up into 3 activities... 1) operation 2) investing 3) financing

Operation activities examples of inflows?

1) Sale of good/ service

2) Internest received

3) dividends received

***last 2, because the FSB said so

Operation activities examples of outflows?

1) Buy good

2) Pay employee

3) Pay operating expenses

4*) interest payed

BECUASE FSB SAID SO

Investing activities examples of outflows?

1) sale of plant asset

2) Sale of securities

3) Sale of a bus. section

4) collection of the principle of the loan

Investing activities examples of inflows?

1) Buy plant asset

2) Buy securities

3) Buy a bus. section

4) make loan

Financing activities example of inflows?

1) issue stock

2) issue bond

3) Issue note

Financing activities examples of outflows?

1) Pay divs.

2) pay the loan prin.

3) buy treasury stock

All parts of the cash flow defined?

Operating; STL & STA

Invest; LTA

Finance; LTL & SE