Blocher/Chen/Lin

1
Accounting Records and Systems
4
Part One Financial Accounting

• The McGraw-Hill Companies, Inc., 1999

2
The Account
Slide 4-1
Cash
(decrease)
750 7,200 4,800 3,000 15,750
(increase) Beginning balance -0- 5,000
4,000 200 12,000 21,200
New balance 5,450
3
Debits and Credits
Slide 4-2
Assets
Liabilities
Owners Equity
Debit Credit Debit Credit
Debit Credit
-
- -
4
The Accounting Process
Slide 4-3
1. Analyze transactions
5
Transaction Analysis
Slide 4-4
On August 1, Snelson invested 5,000 in the
business as owner.
5,000
5,000
6
Transaction Analysis
Slide 4-5
On August 1, the firm paid 750 rent for the
month of August.
750
750
7
Transaction Analysis
Slide 4-6
The firm borrowed 4,000 from a bank on a 9
percent note payable, with interest payable
quarterly and the principal due in full at the
end of two years.
4,000
4,000
8
Transaction Analysis
Slide 4-7
Equipment costing 7,200 was purchased for cash.
The expected life of the equipment was 10 years.
7,200
7,200
Refer to pages 94 through 96 for the remaining
entries for the month of August.
9
Balancing an Account
Slide 4-8

• Balance 5,450

10
The Trial Balance
Slide 4-9
CAMPUS PIZZERIA, INC. Trial Balance As of August
31
Balance Debit Credit
Cash. 5,450 Accounts
receivable. -0- Inventory
.. 550 Prepaid expenses.. 75
0 Equipment, at cost 7,200 Accounts
payable. 2,200 Notes
payable.. 4,000 Paid-in
capital.. 5,000 Sales
revenue... 12,200 Cost of
sales. 6,000 Wage
expense.. 3,000 Utilities
expense.. 450
Totals.. 23,400 23,400
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Adjusting Entries
Slide 4-10
Fuel oil was purchased for 1,000.
1,000
1,000
12
Adjusting Entries
Slide 4-11
By the end of the accounting period, 600 of the
fuel had been consumed.
600
600
13
Adjusting Entries
Slide 4-12
Paid an insurance premium on company car, 1,200.
1,200
1,200
14
Adjusting Entries
Slide 4-13
At year-end, 800 of this is an expense.
800
800
15
Adjusting Entries
Slide 4-14
Employees earned 150 of wages during the period.
These wages have not been paid.
150
150
16
Adjusting Entries
Slide 4-15
Annual depreciation on equipment totaled 2,000.
2,000
2,000
Additional adjusting entries are explained on
pages 99 through 101 of the textbook.
17
Closing Entries
Slide 4-16
Closing the Sales Revenues account
Sales
Income Revenues
Summary

12,200 200
12,400 12,400
18
Closing Entries
Slide 4-17
Closing the Cost of Sales account
Cost of
Income Sales
Summary

6,000 12,400
6,000 6,000
19
Closing Entries
Slide 4-18
Closing the Income Summary account
(17) 382
(H) 1,728
20
Financial Statements
Slide 4-19
CAMPUS PIZZERIA, INC. Balance Sheet As of August
31
Assets
Liabilities and Owners Equity
Cash 5,450 Accounts payable 2,200 Accounts
receivable 200 Notes payable 4,000 Inventory 550 A
ccrued expenses 30 Prepaid expenses
0 Income tax liability 382 Total
current assets 6,200 Total liabilities
6,612 Equipment, at cost 7,200 Paid-in
capital 5,000 Less Accum. Depr.
60 Retained earnings 1,728 Equipment, net
7,140 Total owners equity 6,728 Total
assets 13,340 Total liab. and own. eq. 13,340
21
Financial Statements
Slide 4-20
CAMPUS PIZZERIA, INC. Income Statement For the
Month of August
Sales revenues 12,400 Cost of sales
6,000 Gross margin 6,400 Operating
expenses Wages 3,000 Rent 750 Utilities 450
Depreciation 60 Interest 30 4,290 Income
before income taxes 2,110 Income tax expense
382 Net income 1,728
22
Chapter 4
The End