Student Version
o Repetition is an important component, a key part
of learning. In memory, the more times patterns of
thought are repeated, the more likely you will be
able to recall information.
o These PowerPoint slides have been modified from
the lecture decks by making them fill-in-the-blank.
Why? So that you get an opportunity to repeat a
visual cue (from the lecture or the book) via
completing text here.
o In addition, most text book exhibits have been
removed as they are available in your text directly.
c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part.
c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part.
Using Accounts to Record Transactions
o Accounting ___________ are designed to show
the ___________ and ___________ in each
accounting equation ___________ as a separate
___________ . This ___________ is called an
___________ .
THE T ACCOUNT
___________
The T account
has a
___________
THE T ACCOUNT
Title
The left side of
the account is
called the
_________ side.
THE T ACCOUNT
Title
_____
_____
The right side of
the account is
called the
_________ side.
THE T ACCOUNT
Cash
(a)
(d)
_____
Side of
Account
Balance
25,000 (b)
7,500 (e)
(f)
(h)
5,900
Balance of the account
20,000
3,650
950
2,000
_____
Side of
Account
__________ of ___________
o
A group of accounts for a business entity is
called a _________.
o
A list of the accounts in the _________is called
a __________ of _________.
Chart of Accounts
o _________ are resources owned by the
business. Some examples of _________follow:
 _____________________
 _____________________
 _____________________
 _____________________
Chart of Accounts
o _________ are _________ owed to outsiders
(_________). Some examples of _________
follow:
 _____________________
 _____________________
 _____________________
 _____________________
Chart of Accounts
o
_________ _________ is the _________ right to
the assets of the business after all _________
have been _________. For a _________, the
_________ _________ is represented by the
balance of the _________ _________ account.
o
A _________ account represents the amount of
_________ made by the owner.
Chart of Accounts
o _________ are increases in owner’s _________
as a result of _________ services or products to
_________. Some examples of _________
accounts follow:
 ____________________________
 ____________________________
 ____________________________
Chart of Accounts
o The using up of assets or _________ services in
the process of generating _________ results in
_________ . Some examples of _________
follow:
 ____________________________
 ____________________________
 ____________________________
c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part.
Double-Entry Accounting System
o All businesses use what is called the _________
accounting system. This system is based on
the _________ _________ and requires:
 Every business _________ to be recorded in at least
_________ accounts.
 The total _________ recorded for each transaction to
be _________ to the total _________ recorded.
_________ _________ Accounts
o
The _________ and _________ rules for
_________ _________ accounts are as follows:
_________ _________ Accounts
o The _________ and _________ rules for
_________ _________ accounts are based on
their relationship with _________ _________ .
_________ _________
• The _____ and ______ rules for
recording owner ________ are based
on the effect of owner withdrawals on
owner’s ________.
______ Balances
o
The ______ of the _________ in an account
is usually equal to or _________ than the
sum of the _________ in the account. Thus,
the _________ balance of __ ______ is
either a ______ or a ______ depending on
whether ______ in the account are
recorded as ______ or ______ .
Rules of Debit and Credit – Normal Balances of Accounts
Normal Balances
Increases
(Normal Bal.) Decreases
Balance sheet accounts:
Asset
Liability
Owner’s Equity:
Capital
Drawing
Income statement accounts:
Revenue
Expense
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
Transaction A
o On November 1, Chris Clark opens a new
business and deposits $25,000 in a bank account in
the name of NetSolutions.
TRANSACTION A
Step 2
Step 3
Step 1
Step 5
Step 4
Step 3
Accounting Equation Impact
Assets
=
Liabilities
_________
+
Owner’s Equity (investment)
_________
Journalizing
Journalizing requires the following steps:
o Step 1.
The date of the transaction is entered
in the Date column.
o Step 2.
The title of the account to be debited
is recorded at the left-hand margin under the
Description column, and the amount to be
debited is entered in the Debit column.
(continued)
Journalizing
o Step 3.
The title of the account to be credited
is listed below and to the right of the debited
account title, and the amount to be credited is
entered in the Credit column.
o Step 4.
A brief description may be entered
below the credited account.
(continued)
Journalizing
o Step 5.
The Post. Ref. (Posting Reference)
column is left blank when the journal entry is
initially recorded. This column is used later
when the journal entry amounts are transferred
to the accounts in the ledger.
Journalizing
o A transaction is initially entered in a record
called a ________.
Journalizing
o A transaction is initially entered in a record
called a journal.
o The process of recording a transaction in the
journal is called ____________.
Journalizing
o A transaction is initially entered in a record
called a journal.
o The process of recording a transaction in the
journal is called journalizing.
o The entry in the journal is called a _______
_________.
Transaction B
o On November 5, NetSolutions paid $20,000 for
the purchase of land as a future building site.
TRANSACTION B
Accounting Equation Impact
Assets
=
Liabilities
_________
_________
+
Owner’s Equity
Transaction C
o On November 10, NetSolutions purchased
supplies on account for $1,350.
TRANSACTION C
Accounting Equation Impact
Assets
_________
=
Liabilities
+
_________
Owner’s Equity
Transaction D
o On November 18, NetSolutions received cash
of $7,500 from customers for services
provided.
TRANSACTION D
Accounting Equation Impact
Assets
_________
=
Liabilities
+
Owner’s Equity (Revenue)
_________
Transaction E
o On November 30, NetSolutions incurred the
following expenses: wages, $2,125; rent, $800;
utilities, $450; and miscellaneous, $275.
TRANSACTION E
Accounting Equation Impact
Assets
=
Liabilities
___________
___________
_________
__________
_________
+ Owner’s Equity (Expense)
Transaction F
o On November 30, NetSolutions paid creditors
on account, $950.
TRANSACTION F
Accounting Equation Impact
Assets
=
Liabilities
_________
_________
+
Owner’s Equity
Transaction G
o NetSolutions purchased $1,350 of supplies on
November 10. Chris Clark determined that the
cost of supplies on hand on November 30 was
$550.
TRANSACTION G
Supplies used = $_____ - $____= $___
Accounting Equation Impact
Assets
=
_________
Liabilities
+ Owner’s Equity (Expense)
_________
Transaction H
o On November 30, Chris Clark withdrew $2,000
from NetSolutions for personal use.
TRANSACTION H
Accounting Equation Impact
Assets
=
_________
Liabilities
+ Owner’s Equity (Drawing)
_________
c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part.
_________ _________ _________ to Accounts
o The process of _________ the debits and
credits from the _________ _________ to the
_________ is called _________.
Posting Journal Entries to Accounts
o On December 1, NetSolutions paid a premium
of $2,400 for an insurance policy for liability,
theft, and fire. The policy covers a one-year
period.
POSTING JOURNAL
ENTRIES TO
ACCOUNTS
Accounting Equation Impact
Assets
=
Liabilities
_________
_________
+ Owner’s Equity
Exhibit 4 - Steps in Posting
o Step 1.
The date of the transaction is entered
in the Date column of Prepaid Insurance.
Exhibit 4 - Steps in Posting
o Step 2.
The amount (2,400) is entered in the
Debit column of Prepaid Insurance.
2,400
2,400
Exhibit 4 - Steps in Posting
o Step 3.
The journal page number (2) is
entered in the account’s Post. Ref. column.
2
Exhibit 4 - Steps in Posting
o Step 4.
The account number (15) is entered in
the journal’s Post. Ref. column.
Recording and Posting of a Debit and a Credit
These steps
are
repeated to
post to the
Cash
account.
December Transactions
o On December 1, NetSolutions paid rent for
December, $800. The company from which
NetSolutions is renting its store space now
requires the payment of rent on the first of
each month, rather than at the end of the
month.
DECEMBER
TRANSACTIONS
Accounting Equation Impact
Assets
=
_________
Liabilities
+ Owner’s Equity (Expense)
_________
December Transactions
o On December 1, NetSolutions received an offer
from a local retailer to rent the land purchased on
November 5. The retailer plans to use the land as a
parking lot for its employees and customers.
NetSolutions agreed to rent the land to the retailer
for three months, with the rent payable in advance.
NetSolutions received $360 for three months’ rent
beginning December 1.
o The _________ created by receiving the cash in
advance of providing the service is called
_________ _________ .
DECEMBER
TRANSACTIONS
Accounting Equation Impact
Assets
_________
=
Liabilities
+
_________
Owner’s Equity
December Transactions
o On December 4, NetSolutions purchased office
equipment on account from Executive Supply
Co. for $1,800.
DECEMBER
TRANSACTIONS
Accounting Equation Impact
Assets
_________
=
Liabilities
+
_________
Owner’s Equity
December Transactions
o On December 6, NetSolutions paid $180 for a
newspaper advertisement.
DECEMBER
TRANSACTIONS
Accounting Equation Impact
Assets
=
_________
Liabilities
+ Owner’s Equity (Expense)
_________
December Transactions
o On December 11, NetSolutions paid creditors
$400.
DECEMBER
TRANSACTIONS
Accounting Equation Impact
Assets
=
Liabilities
_________
_________
+
Owner’s Equity
December Transactions
o On December 13, NetSolutions paid a
receptionist and a part-time assistant $950 for
two weeks’ wages.
DECEMBER
TRANSACTIONS
Accounting Equation Impact
Assets
=
_________
Liabilities
+ Owner’s Equity (Expense)
_________
December Transactions
o On December 16, NetSolutions received $3,100
from fees earned for the first half of December.
DECEMBER
TRANSACTIONS
Accounting Equation Impact
Assets
_________
=
Liabilities
+ Owner’s Equity (Revenue)
_________
December Transactions
o Fees earned on account totaled $1,750 for the
first half of December.
DECEMBER
TRANSACTIONS
Accounting Equation Impact
Assets
_________
=
Liabilities
+ Owner’s Equity (Revenue)
_________
December Transactions
o On December 20, NetSolutions paid $900 to
Executive Supply Co. on the $1,800 debt owed
from the December 4 transaction.
DECEMBER
TRANSACTIONS
Accounting Equation Impact
Assets
=
_________
Liabilities
_________
+
Owner’s Equity
December Transactions
o On December 21, NetSolutions received $650
from customers in payment of their accounts.
DECEMBER
TRANSACTIONS
Accounting Equation Impact
Assets
=
Liabilities
_________
_________
+
Owner’s Equity
December Transactions
o On December 23, NetSolutions paid $1,450 for
supplies.
DECEMBER
TRANSACTIONS
Accounting Equation Impact
Assets
=
Liabilities
_________
_________
+
Owner’s Equity
December Transactions
o On December 27, NetSolutions paid the
receptionist and the part-time assistant $1,200
for two weeks’ wages.
DECEMBER
TRANSACTIONS
Accounting Equation Impact
Assets
=
_________
Liabilities
+
Owner’s Equity (Expense)
_________
December Transactions
o On December 31, NetSolutions paid its $310
telephone bill for the month.
DECEMBER
TRANSACTIONS
Accounting Equation Impact
Assets
=
_________
Liabilities
+
Owner’s Equity (Expense)
_________
December Transactions
o On December 31, NetSolutions paid its $225
electric bill for the month.
DECEMBER
TRANSACTIONS
Accounting Equation Impact
Assets
=
_________
Liabilities
+
Owner’s Equity (Expense)
_________
December Transactions
o On December 31, NetSolutions received $2,870
from fees earned for the second half of
December.
DECEMBER
TRANSACTIONS
Accounting Equation Impact
Assets
_________
=
Liabilities
+
Owner’s Equity (Revenue)
_________
December Transactions
o On December 31, fees earned on account
totaled $1,120 for the second half of
December.
DECEMBER
TRANSACTIONS
Accounting Equation Impact
Assets
_________
=
Liabilities
+
Owner’s Equity (Revenue)
_________
December Transactions
o On December 31, Chris Clark withdrew $2,000
for personal use.
DECEMBER
TRANSACTIONS
Accounting Equation Impact
Assets
=
_________
Liabilities
+
Owner’s Equity (Drawing)
_________
c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part.
_________ Balance
o The _________ of debits and credits in the
_________ should be _________ at the end of
_________ accounting period by preparing a
_________ _________ .
UNADJUSTED TRIAL
BALANCE
Trial Balance Errors - _________
o
A _________ occurs when the order of the
digits is _________ by _________ , such as
writing $542 as $452 or $524.
Trial Balance Errors - _________
o
In a _________ , the entire number is moved
_________ or _________ spaces to the right or
the left by _________ , such as writing $542.00
as $54.20 or $97.50 as $975.00.
Errors ______ Affecting the Trial Balance
o
If an error has already been _________ and
_________ to the _________ , a _________
_________ entry is normally prepared.
Errors Not Affecting the Trial Balance
o Another type of error is a _________ error.
o Assume that on May 5 a $12,500 purchase of
office equipment on account was incorrectly
journalized and posted as a debit to Supplies
and a credit to Accounts Payable for $12,500.
o The entry to _________ the error is:
c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part.
_________ Analysis
o In _________ analysis, the amount of each item
on a _________ financial statement is _________
with the _________ item on an _________
statement.
o When _________ _________ are being
compared, the _________ statement is used as
the base for _________ the amount and the
_________ of change.
HORIZONTAL
ANALYSIS
c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part.