Learning Objectives Using Accounting Principles and Records Explain

Learning Objectives Using Accounting Principles and Records Explain

Learning Objectives Using Accounting Principles and Records Explain the relationship between the accounting equation and accounting records. Explain the relationship between a subsidiary ledger and a controlling account. Lesson 1-1 Financial Reporting for Departments Financial information for a business can be recorded, summarized, and reported in a

variety of ways. If managers of individual departments want to use financial statements to assist in making decisions, information for each department must be recorded separately. 2015 Cengage Learning. All Rights Reserved. SLIDE 2 Lesson 1-1 Accounting Equation Financial rights to the assets of a business are called equities. Anything of value that is owned is called an asset.

An amount owed by a business is called a liability. The owners equity in a corporation is called stockholders equity. 2015 Cengage Learning. All Rights Reserved. SLIDE 3 Lesson 1-1 Accounting Records Accounting records show changes and the current account balance of each asset, liability, and owners equity (or stockholders equity) account. Business papers from which information is obtained for a journal entry are called source documents. The source document is the original business paper indicating that the transaction did occur and that

the amounts recorded in the accounting records are accurate and true. 2015 Cengage Learning. All Rights Reserved. SLIDE 4 Lesson 1-1 General Journal The recording of debit and credit parts of a transaction is called double-entry accounting. A form for recording transactions in chronological order is called a journal. A journal used to record only one kind of transaction is called a special journal. A general journal may be used to record all business transactions. 2015 Cengage Learning. All Rights Reserved. SLIDE 5

Lesson 1-1 Normal Balances of Accounts A record that summarizes all the transactions pertaining to a single item in the accounting equation is called an account. 2015 Cengage Learning. All Rights Reserved. SLIDE 6 Lesson 1-1 General and Subsidiary Ledgers A group of accounts is called a ledger. A ledger that contains all accounts needed to prepare financial statements is called a general ledger.

A ledger that is summarized in a single general ledger account is called a subsidiary ledger. An account in a general ledger that summarizes all accounts in a subsidiary ledger is called a controlling account. 2015 Cengage Learning. All Rights Reserved. SLIDE 7 Lesson 1-1 General and Subsidiary Ledger File Maintenance 1 The procedure for arranging accounts in a general 2 account numbers, and keeping ledger, assigning

records current is called file maintenance. 3 2015 Cengage Learning. All Rights Reserved. SLIDE 8 Lesson 1-1 Lesson 1-1 Audit Your Understanding 1. How is the accounting equation stated most commonly? ANSWER Assets = Liabilities + Owners Equity. 2015 Cengage Learning. All Rights Reserved. SLIDE 9

Lesson 1-1 Lesson 1-1 Audit Your Understanding 2. What is the normal balance of an asset account? A revenue account? ANSWER An asset account has a normal debit balance; a revenue account has a normal credit balance. 2015 Cengage Learning. All Rights Reserved. SLIDE 10 Lesson 1-1 Lesson 1-1 Audit Your Understanding 3. What are the three needs met by Whileys account numbering system?

ANSWER (a) A separate numeric listing is provided for each ledger division. (b) A predesigned arrangement of numbers is provided within each ledger division. (c) Account number digits are spaced to allow the addition of new accounts. 2015 Cengage Learning. All Rights Reserved. SLIDE 11 Learning Objectives Journalizing and Posting Purchases and Purchases Returns

Explain the purpose of a departmental accounting system. Journalize departmental purchases of merchandise on account using a purchases journal. Post merchandise purchases to an accounts payable ledger and a general ledger. Journalize departmental purchases returns and allowances. 2015 Cengage Learning. All Rights Reserved. Learning Objectives

Journalizing and Posting Purchases and Purchases Returns Explain the purpose of a departmental accounting system. Journalize departmental purchases of merchandise on account using a purchases journal. Post merchandise purchases to an accounts

payable ledger and a general ledger. Journalize departmental purchases returns and allowances. 2015 Cengage Learning. All Rights Reserved. Lesson 1-2 Departmental Accounting System LO3 An accounting system showing accounting information for two or more departments is called a departmental accounting system. A business that purchases and sells goods is called a merchandising business. All departmental purchases of merchandise on

account are recorded in a purchases journal and can be traced to a purchase invoice. 2015 Cengage Learning. All Rights Reserved. SLIDE 14 Lesson 1-2 Journalizing Purchases on Account May 1. Purchased furniture on account from Backyard Furniture Mfg., $1,869.35. Purchase Invoice No. 675. 1 Approval

Date 2 Vendor Name 3 Invoice Number 4 Invoice Amount 2015 Cengage Learning. All Rights Reserved. LO4 5 Sales

Department SLIDE 15 Lesson 1-2 Posting the Totals of a Purchases Journal Journal Page Number Date 2 3 Column Total 1 5 Account

Number Account Balance 2015 Cengage Learning. All Rights Reserved. LO5 4 SLIDE 16 Lesson 1-2 Journalizing Purchase Returns and Allowances merchandise is returned to a vendor, the vendors When account and Accounts Payable are reduced by a debit. LO6

Purchases Returns and Allowances is a contra account to the purchases account. An account that reduces a related account on a financial statement is called a contra account. 2015 Cengage Learning. All Rights Reserved. SLIDE 17 Lesson 1-2

Debit Memorandum LO6 A form prepared by the customer showing the price deduction taken by the customer for a return or an allowance is called a debit memorandum. 2015 Cengage Learning. All Rights Reserved. SLIDE 18 Lesson 1-2 Lesson 1-2 Audit Your Understanding 1. When Whileys grills department purchases merchandise on account, which general ledger accounts are affected, and how? ANSWER

PurchasesGrills is debited; Accounts Payable is credited. 2015 Cengage Learning. All Rights Reserved. SLIDE 19 Lesson 1-2 Lesson 1-2 Audit Your Understanding 2. Which general ledger accounts are affected, and how, by a return of furniture department merchandise? ANSWER Accounts Payable is debited; Purchases Returns and AllowancesFurniture is credited.

2015 Cengage Learning. All Rights Reserved. Lesson 1-2 Departmental Accounting System LO3 An accounting system showing accounting information for two or more departments is called a departmental accounting system. A business that purchases and sells goods is called a merchandising business. All departmental purchases of merchandise on account are recorded in a purchases journal and can be traced to a purchase invoice. 2015 Cengage Learning. All Rights Reserved. SLIDE 21

Lesson 1-2 Journalizing Purchases on Account May 1. Purchased furniture on account from Backyard Furniture Mfg., $1,869.35. Purchase Invoice No. 675. 1 Approval Date 2 Vendor Name

3 Invoice Number 4 Invoice Amount 2015 Cengage Learning. All Rights Reserved. LO4 5 Sales Department SLIDE 22 Lesson 1-2 Posting the Totals of a Purchases Journal

Journal Page Number Date 2 3 Column Total 1 5 Account Number Account Balance 2015 Cengage Learning. All Rights Reserved.

LO5 4 SLIDE 23 Lesson 1-2 Journalizing Purchase Returns and Allowances merchandise is returned to a vendor, the vendors When account and Accounts Payable are reduced by a debit. LO6 Purchases Returns and Allowances is a contra account to the purchases account.

An account that reduces a related account on a financial statement is called a contra account. 2015 Cengage Learning. All Rights Reserved. SLIDE 24 Lesson 1-2 Debit Memorandum LO6 A form prepared by the customer showing the price deduction taken by the customer for a return or an allowance

is called a debit memorandum. 2015 Cengage Learning. All Rights Reserved. SLIDE 25 Lesson 1-2 Lesson 1-2 Audit Your Understanding 1. When Whileys grills department purchases merchandise on account, which general ledger accounts are affected, and how? ANSWER PurchasesGrills is debited; Accounts Payable is credited. 2015 Cengage Learning. All Rights Reserved.

SLIDE 26 Lesson 1-2 Lesson 1-2 Audit Your Understanding 2. Which general ledger accounts are affected, and how, by a return of furniture department merchandise? ANSWER Accounts Payable is debited; Purchases Returns and AllowancesFurniture is credited. 2015 Cengage Learning. All Rights Reserved.

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