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FINANCIAL  ACCOUNTING  BASICS
P.  ACCOUNTING CYCLE ,[object Object],[object Object],[object Object]
P. ACCOUNTING CYCLE (cont) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
P. ACCOUNTING CYCLE (cont)   Example – ABC Company ,[object Object],[object Object],[object Object]
ABC Company – Ledger Balances + Cash -  + Inventory -  - Note Payable +   - Paid-in Capital +   - Retained Earnings +   + Accts Rec -   - Accts Payable + 10,000 10,000 5,000 5,000 8,000 8,000 5,000 2,000 4,000 - Sales Revenue + + COGS Expense - 2,000 2,500 2,500 8,000 8,000 4,000 5,000 5,000 5,000 2,000 0 14,500 10,000 5,000 7,500 6,000 0
Trial Balance ,[object Object],ABC Company January 31, Year 1 Trial Balance Account     Debit   Credit Cash 14,500 Inventory   2,000 Note payable   5,000 Paid-in capital 10,000 Retained earnings   0 Sales revenue   7,500 Cost-of-goods-sold expense   6,000   0  Total 22,500 22,500   Note that total debits ($22,500) = total credits ($22,500).  Note also that Retained earnings has a balance of zero because the revenue and expense accounts have not yet been closed to retained earnings.
Prepare Income Statement and Retained Earnings Statement ,[object Object],[object Object],[object Object],ABC Company Income Statement For the period January 1–31, Year 1 Sales revenue $7,500 Cost of goods sold expense   6,000 Income $1,500 ABC Company Retained Earnings Statement For the period January 1–31, Year 1 Retained earnings, January 1  $  0 Income, January   1,500 Dividends, January    0 Retained earnings, January 31 $1,500
ABC Company – Ledger Balances  (Post-closing) + Cash -  + Inventory -  - Note Payable +   - Paid-in Capital +   - Retained Earnings  + + Accts Rec  - - Accts Payable + 10,000 10,000 5,000 5,000 8,000 8,000 5,000 2,000 4,000 - Sales Revenue + + COGS Expense - 2,000 2,500 2,500 8,000 8,000 4,000 5,000 5,000 5,000 2,000 0 14,500 10,000 5,000 7,500 6,000 0 7,500 6,000 6,000 7,500 0 0 1,500
Post-Closing Trial Balance ,[object Object],ABC Company January 31, Year 1 Post-Closing Trial Balance Account   Debit   Credit Cash 14,500 Inventory   2,000 Note payable   5,000 Paid-in capital 10,000 Retained earnings   1,500 Sales revenue   0 Cost-of-goods-sold expense   0   0  Total 16,500 16,500
Prepare Balance Sheet ,[object Object],ABC Company Balance Sheet January 31, Year 1 Assets   Liabilities and Equity Cash $14,500   Note payable $  5,000 Inventory   2,000   Total liabilities   5,000 Total assets $16,500   Paid-in capital   10,000   Retained earnings   1,500   Total liab & equity $16,500
Prepare Statement of Cash Flows ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Prepare Statement of Cash Flows ,[object Object],ABC Company Statement of Cash Flows For the period January 1-31, Year 1 Operating Activities Cash collected from customers $  7,500 Cash paid to suppliers (8,000 ) Net cash flow from operating activities   (500 ) Investing Activities Purchases of long-term assets   0 Net cash flow from operating activities   0 Financing Activities Increase in paid-in capital   10,000  Increase in long-term debt (note payable)    5,000 Net cash flow from financing activities   15,000 Net change in cash during the period   14,500 Cash balance, January 1   0 Cash balance, January 31 $14,500
COMPREHENSIVE EXERCISE ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
COMPREHENSIVE EXERCISE  (cont) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

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Financial accounting basics ppt @ bec-doms

  • 2.
  • 3.
  • 4.
  • 5. ABC Company – Ledger Balances + Cash - + Inventory - - Note Payable + - Paid-in Capital + - Retained Earnings + + Accts Rec - - Accts Payable + 10,000 10,000 5,000 5,000 8,000 8,000 5,000 2,000 4,000 - Sales Revenue + + COGS Expense - 2,000 2,500 2,500 8,000 8,000 4,000 5,000 5,000 5,000 2,000 0 14,500 10,000 5,000 7,500 6,000 0
  • 6.
  • 7.
  • 8. ABC Company – Ledger Balances (Post-closing) + Cash - + Inventory - - Note Payable + - Paid-in Capital + - Retained Earnings + + Accts Rec - - Accts Payable + 10,000 10,000 5,000 5,000 8,000 8,000 5,000 2,000 4,000 - Sales Revenue + + COGS Expense - 2,000 2,500 2,500 8,000 8,000 4,000 5,000 5,000 5,000 2,000 0 14,500 10,000 5,000 7,500 6,000 0 7,500 6,000 6,000 7,500 0 0 1,500
  • 9.
  • 10.
  • 11.
  • 12.
  • 13.
  • 14.