BSAD 221
Introductory Financial
Accounting
Donna Gunn, CA
International Exchange
• Argentina
• France
• Turkey
• Australia
• Germany
• United Kingdom
• Barbados
• Isreal
• United States
• Czech Republic • Mexico
• Denmark
• Peru
• Finland http://sites.stfx.ca/international_exchange/
• Poland
Contact Brenda Riley: briley@stfx.ca
Trial Balance
Account
Listing of all
accounts
and their
balances at
a given point
in time
Debit
Cash
80,000
Accounts Receivable
72,000
Advertising Supplies
25,000
Prepaid Insurance
6,000
Office Equipment
50,000
Notes Payable
Accounts Payable
Unearned Service Revenue
Common Shares
Retained Earnings
Service Revenue
Salaries Expense
45,000
Rent Expense
9,000
TOTALS
287,000
Credit
50,000
25,000
12,000
80,000
20,000
100,000
287,000
Transaction
A transaction is any event that has financial impact
on the business
• Can be measured
• Provides objective information
• Must be able to assign $ amount to transaction
Recording Transactions
Every transaction affects at least two
accounts (duality of effects).
The accounting equation must remain in
balance after each transaction.
A = L + SE
What the
company
owns
What the
company
owes
What the
owners have
invested
The Account
Assets are economic resources that
benefit the business now and in the future
Cash
Accounts receivable
Inventory
Notes receivable
Prepaid expenses
Land
Buildings
Equipment,
furniture,
and fixtures
2-
The Account
Liabilities are the debts of the company.
Bank loan
Notes payable
Accounts payable
Accrued liabilities
(for expenses incurred but not paid)
Long-term liabilities (bonds and mortgages)
2-
The Account
Shareholders’ (owners’) equity is the
owners’ investment in a corporation.
•Contributed Capital
•Retained Earnings
•- impacted by Revenues and Expenses
•Dividends
2-
Recording Transactions
Accounts and effects
• Identify the accounts affected and classify them
by type of account (A, L, SE).
• Determine the direction of the effect (increase or
decrease) on each account.
Balancing
• Verify that the accounting equation (A=L+SE)
remains in balance.
The Debit-Credit Framework
Debits and credits affect the Balance Sheet
Model as follows:
A = L + SE
ASSETS
LIABILITIES
EQUITIES
Debit
Credit
for
for
Increase Decrease
Debit
Credit
for
for
Decrease Increase
Debit
Credit
for
for
Decrease Increase
Trial Balance
Account
Listing of all
accounts
and their
balances at
a given point
in time
Debit
Cash
80,000
Accounts Receivable
72,000
Advertising Supplies
25,000
Prepaid Insurance
6,000
Office Equipment
50,000
Notes Payable
Accounts Payable
Unearned Service Revenue
Common Shares
Retained Earnings
Service Revenue
Salaries Expense
45,000
Rent Expense
9,000
TOTALS
287,000
Credit
50,000
25,000
12,000
80,000
20,000
100,000
287,000
How Do Companies Keep Track of
Account Balances?
A T-account is a tool used to
represent an account.
Account Name
Left
Right
How Do Companies Keep Track of
Account Balances?
Journal entries
T-accounts
How Do Companies Keep Track of
Account Balances?
The left side of the
T-account is always the debit
side.
The
rightside
sideofof
The right
thethe
T-account
thethe
credit
T-accountis
is als
always
credit
side.
side.
Account Name
Left
Right
Debit
Credit
T-Accounts and the Trial
Balance
Account
Cash
80,000
Notes Payable
50,000
Dividends
5,000
Revenue
100,000
Debit
Cash
80,000
Accounts Receivable
72,000
Advertising Supplies
25,000
Prepaid Insurance
6,000
Office Equipment
50,000
Notes Payable
Accounts Payable
Unearned Service Revenue
Common Shares
Dividends
5,000
Service Revenue
Salaries Expense
40,000
Rent Expense
9,000
TOTALS
287,000
15
Credit
50,000
25,000
12,000
100,000
100,000
287,000
Journal Entry
Company X provides $1,000 of services and is paid in cash.
Cash is received so cash will be increased. As cash is an
asset the increase is shown as a debit.
Revenue is earned, so revenue will be increased. Revenues
are an increase to equity, therefore the increase is shown as
a credit.
Dr.
Cash
Cr. Revenue
$1,000
$1,000
To record service revenue of $1,000
T-Accounts and the Trial
Balance
Account
Cash
80,000
1,000
81,000
Revenue
100,000
1,000
101,000
Debit
Cash
81,000
Accounts Receivable
72,000
Advertising Supplies
25,000
Prepaid Insurance
6,000
Office Equipment
50,000
Notes Payable
Accounts Payable
Unearned Service Revenue
Common Shares
Dividends
5,000
Service Revenue
Salaries Expense
40,000
Rent Expense
9,000
TOTALS
288,000
17
Credit
50,000
25,000
12,000
100,000
101,000
288,000