Accounting 209 Review

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Accounting 209 Review

• Wednesday, September 13, 2000

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Tonights Schedule

• Do We want to go over Cash Flow Quiz?
• More Terminology
• Adjustments to the financial statements
• Review Financial Statements
• Problem 28, Chapter 4

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Fear is the end of all Growth -unknown-
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A Brief Bit About Chapter 4

• VERY IMPORTANT
• Terminology
• Must be specific
• Pages 4-2 and 4-3 for balance sheet items
• Appendix A details the recording process
• Appendix B details the adjusting and closing
  processes

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Accrued vs. Cash Method

• Recognize Revenue when it is earned not when cash
  received
• What we will use in this class
• Easier for bigger companies

• Recognize Revenue when cash is received
• Very annoying when you have a large amount of
  receivables
• You should forget because will not be on test

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Adjusting Entries

• At end of accounting period there will be
  certain transactions that are still in process or
  have occurred but not yet recorded.

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Prepaid Expenses

• Certain goods or services are purchased prior to
  their use by the business but have been used up
  during the period
• Keywords Used up
• Examples supplies, insurance, rent

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Accrued Expense

• An expense that has occurred but have not been
  paid yet because payment is not yet due
• Keywords Not Yet Due
• Mountain

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Picture of an actual Mountain for the uncreative
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Accrued Expense

• An expense that has occurred but have not been
  paid yet because payment is not yet due
• Keywords Not Yet Due
• Mountain
• Examples Wages, Interest on loans
• Interest payments due quarterly

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Interest Rate payment of 10.00

• Statement of Cash Flows
• No Effect, since no cash would is received or
  paid
• Income Statement
• Interest Expense of 10 would be included
• Balance Sheet
• A liability (interest payable) would be increased
  and equity (retained earnings) would be decreased
  by the 10 interest expense incurred.

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Depreciation Expense

• Systematic allocation of the cost of an asset to
  the periods that benefit from its use.
• Keywords allocation during periods
• Examples Automobile Depreciation, Building
  depreciation

Specific Period
Specific Period
Specific Period
Specific Period
Specific Period
Accumulated Depreciation
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Unearned Revenues

• You got Paid but still owe service or product
• Keywords Still Owe
• Example Subscriptions Fee for Magazines not
  delivered yet

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Subscription Fees of 50

• Statement of Cash Flows
• Cash inflow of 50
• Income Statement
• No Effect since no revenues earned
• Balance Sheet
• A liability (unearned revenue) is created and
  Cash is increased by 50.

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Accrued Revenue

• A Revenue that took place but did not bill yet.
• Keywords Did Not Bill Yet
• The Mountain should look familiar
• Examples Quarterly payments
• Earned 100 but will not be paid until next month

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Earned 100 but will not be paid until next month

• Statement of Cash Flows
• No Effect since no cash Received or Paid
• Income Statement
• Revenue of 100
• Balance Sheet
• Both an asset (Receivable) and equity (retained
  Earnings) are in increased by 100.

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Financial Statements

• Income Statement
• Revenues - Expenses Net Income (Net Loss)
• Statement of Equity
• Beg. Investment NI - NL - Divs. End.
• Balance Sheet
• Assets Liabilities Equity
• Statement of Cash Flows
• Cash in - Cash out Change in Cash

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A.) Emmit organized Smith Company, invested 50
of his personal funds in the business, and issued
common stock for 50
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A.) Emmit organized Smith Company, invested 50
of his personal funds in the business, and issued
common stock for 50

• Balance sheet
• Cash ?50, Stock ?50
• Income statement
• no effect
• Statement of Cash Flows
• Cash outflow of 50
• Statement of Equity
• Investments ?50

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B.) Borrowed 30 by signing a non-interest
bearing note-payable to Jerry Jones
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B.) Borrowed 30 by signing a non-interest
bearing note-payable to Jerry Jones

• Balance sheet
• Cash ?30, Note Payable ?30
• Income statement
• no effect
• Statement of Cash Flows
• Cash inflow of 30
• Statement of Equity
• No effect

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C.) Purchased supplies, paying the 10 purchase
price in cash.
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C.) Purchased supplies, paying the 10 purchase
price in cash.

• Balance sheet
• Cash ?10, Supplies ?10
• Income statement
• no effect
• Statement of Cash Flows
• Cash outflow of 10
• Statement of Equity
• No effect

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D.) Painted his first house and billed and
collected a fee of 70 in cash from the customer.
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D.) Painted his first house and billed and
collected a fee of 70 in cash from the customer.

• Balance sheet
• Cash ?70, Retained Earnings ?70
• Income statement
• Revenue ?70
• Statement of Cash Flows
• Cash inflow of 70
• Statement of Equity
• Net Income ?70

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E.) Paid salaries of 50 to his employees.
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E.) Paid salaries of 50 to his employees.

• Balance sheet
• Cash ?50, Retained earnings ?50
• Income statement
• Expenses ?50
• Statement of Cash Flows
• Cash outflow of 50
• Statement of Equity
• Net income ?50

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F.) Repaid 20 of the 30 borrowed from Jerry
Jones.
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F.) Repaid 20 of the 30 borrowed from Jerry
Jones.

• Balance sheet
• Cash ?20, Note payable ?20
• Income statement
• no effect
• Statement of Cash Flows
• Cash outflow of 20
• Statement of Equity
• no effect

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G.) Paid a cash dividend of 3.
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G.) Paid a cash dividend of 3.

• Balance sheet
• Cash ?3, Retained earnings ?3
• Income statement
• no effect
• Statement of Cash Flows
• Cash outflow of 3
• Statement of Equity
• Dividends ?3

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H.) Supplies on hand at the end of the month had
an original cost of 2.
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H.) Supplies on hand at the end of the month had
an original cost of 2.

• Balance sheet
• Supplies ?8, Retained earnings ?8
• Income statement
• Expenses ?8
• Statement of Cash Flows
• No effect
• Statement of Equity
• Net income ?8

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Next Time we will discuss credits and debits

• And the double entry method system