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1 Copyrright Doug Hillman 1997

Tho Syslon of
Accounling
2
2 Copyrright Doug Hillman 1997
Tho Lnlily Concopl
Any organizational
unit
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Tho Lnlily Concopl
Any organizational
unit for which we
want
4 Copyrright Doug Hillman 1997
Tho Lnlily Concopl
Any organizational
unit for which we
want financial
information
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Assols
Anything of value held by an
organization
Assets have
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Assols
Anything of value held by an
organization
Assets have
Potential usefulness
7 Copyrright Doug Hillman 1997
Assols
Anything of value held by an
organization
Assets have
Potential usefulness
Future usefulness
Copyrright Doug Hillman 1997
Assols
Anything of value held by an
organization
Assets have
Potential usefulness
Future usefulness
Economic Value
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Lquilios
Claims against the total assets of an
organization
Liabilities
Claims of nonowners
Owner's Equity
Claims of owners
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#ovonuos
nflows of assets that result from
performing services or selling goods
Revenues are realized when
the service is performed or
11 Copyrright Doug Hillman 1997
#ovonuos
nflows of assets that result from
performing services or selling goods
Revenues are realized when
the service is performed or
the goods are delivered
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Lxponsos
Outflows of assets or incurrence of
liabilities while earning revenues
A business incurrs expenses to earn
revenues
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Tho Accounling Lqualion
Things of Value = Claims
Assets = Equities
Assets = Liabilities + Owner's Equity
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Tho Accounl
Account Title
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Tho Accounl
Left side Left side
Account Title
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Tho Accounl
Left side Left side Right Right side side
Account Title
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Tho Accounl
Left side Left side Right Right side side
the debit side the debit side
Account Title
18 Copyrright Doug Hillman 1997
Tho Accounl
Left side Left side Right Right side side
the debit side the debit side the credit side the credit side
Account Title
19 Copyrright Doug Hillman 1997
Sunnaiy of lho Dolil/Ciodil
#uIos
Assets
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Sunnaiy of lho Dolil/Ciodil
#uIos
Assets
Appear on the left (debit) side of the
equation
21 Copyrright Doug Hillman 1997
Sunnaiy of lho Dolil/Ciodil
#uIos
Assets
Appear on the left (debit) side of the
equation
Therefore we:
ncrease them with debits
Decrease them with credits
22 Copyrright Doug Hillman 1997
Sunnaiy of Dolil/Ciodil
#uIos
Liabilities
23 Copyrright Doug Hillman 1997
Sunnaiy of Dolil/Ciodil
#uIos
Liabilities
Appear on the right (credit) side of the
equation
24 Copyrright Doug Hillman 1997
Sunnaiy of Dolil/Ciodil
#uIos
Liabilities
Appear on the right (credit) side of the
equation
Therefore we:
ncrease them with credits
Decrease them with debits
25 Copyrright Doug Hillman 1997
Sunnaiy of Dolil/Ciodil
#uIos
Owners' Equity
26 Copyrright Doug Hillman 1997
Sunnaiy of Dolil/Ciodil
#uIos
Owners' Equity
Appear on the right (credit) side of the
equation
27 Copyrright Doug Hillman 1997
Sunnaiy of Dolil/Ciodil
#uIos
Owners' Equity
Appear on the right (credit) side of the
equation
Therefore:
ncrease them with credits
Decrease them with debits
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Sunnaiy of Dolil/Ciodil
#uIos
Changes in owners' equity
ssuances of common stock
29 Copyrright Doug Hillman 1997
Sunnaiy of Dolil/Ciodil
#uIos
Changes in owners' equity
ssuances of common stock
Causes increase in owners' equity
30 Copyrright Doug Hillman 1997
Sunnaiy of Dolil/Ciodil
#uIos
Changes in owners' equity
ssuances of common stock
Causes increase in owners' equity
Recorded by regular owners' equity
rules
ncreased with credits
Decreased with debits
31 Copyrright Doug Hillman 1997
Sunnaiy of Dolil/Ciodil
#uIos
Changes in owners' equity
Dividends
32 Copyrright Doug Hillman 1997
Sunnaiy of Dolil/Ciodil
#uIos
Changes in owners' equity
Dividends
Cause decreases in owners' equity
33 Copyrright Doug Hillman 1997
Sunnaiy of Dolil/Ciodil
#uIos
Changes in owners' equity
Dividends
Cause decreases in owners' equity
Recorded opposite as regular owners'
equity
ncreased with debits
Decreased with credits
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Sunnaiy of Dolil/Ciodil
#uIos
Changes in owners' equity
Revenues
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Sunnaiy of Dolil/Ciodil
#uIos
Changes in owners' equity
Revenues
Cause increases in owners' equity
36 Copyrright Doug Hillman 1997
Sunnaiy of Dolil/Ciodil
#uIos
Changes in owners' equity
Revenues
Cause increases in owners' equity
Recorded by regular owners' equity
rules
ncreased with credits
Decreased with debits
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Sunnaiy of Dolil/Ciodil
#uIos
Changes in owners' equity
Expenses
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Sunnaiy of Dolil/Ciodil
#uIos
Changes in owners' equity
Expenses
Cause decreases in owners' equity
39 Copyrright Doug Hillman 1997
Sunnaiy of Dolil/Ciodil
#uIos
Changes in owners' equity
Expenses
Cause decreases in owners' equity
Recorded opposite as regular owners'
equity
ncrease with debits
Decreased with credits
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#ocoids in lho Accounling
Syslon
Journal
Book of original entry
Chronological record of events
Ledger
Book of final entry
Categorical record of events
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ouinaI Lnliios
What information do we need to record?
Date
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ouinaI Lnliios
What information do we need to record?
Date
Debit account
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ouinaI Lnliios
What information do we need to record?
Date
Debit account
Debit amount
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ouinaI Lnliios
What information do we need to record?
Date
Debit account
Debit amount
Credit account
45 Copyrright Doug Hillman 1997
ouinaI Lnliios
What information do we need to record?
Date
Debit account
Debit amount
Credit account
Credit amount
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ouinaI Lnliios
What information do we need to record?
Date
Debit account
Debit amount
Credit account
Credit amount
Supplementary information
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ouinaI Lnliy
Dec. 1
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ouinaI Lnliy
Dec. 1 Cash
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ouinaI Lnliy
Dec. 1 Cash 25,000
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ouinaI Lnliy
Dec. 1 Cash 25,000
Common Stock
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ouinaI Lnliy
Dec. 1 Cash 25,000
Common Stock 25,000
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ouinaI Lnliy
Dec. 1 Cash 25,000
Common Stock 25,000
ssuance of
common stock
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!osling
Process of transferring
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!osling
Process of transferring the
amounts in the journal
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!osling
Process of transferring the
amounts in the journal to
the ledger
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!osling !iocoss
Locate the ledger account for the debit
account
Enter the date, journal page number,
and debit amount in the ledger
Enter the ledger account number in the
journal entry
57 Copyrright Doug Hillman 1997
!osling !iocoss
Locate the ledger account for the credit
account
Enter the date, journal page number,
and credit amount in the ledger
Enter the ledger account number in the
journal
58 Copyrright Doug Hillman 1997
TiiaI aIanco
A test of the accuracy of journalizing and
posting process
Preparation
59 Copyrright Doug Hillman 1997
TiiaI aIanco
A test of the accuracy of journalizing and
posting process
Preparation
List each ledger account and place
the ending account balance in the
proper column
60 Copyrright Doug Hillman 1997
TiiaI aIanco
A test of the accuracy of journalizing and
posting process
Preparation
List each ledger account and place
the ending account balance in the
proper column
Total the debit and credit columns
61 Copyrright Doug Hillman 1997
TiiaI aIanco
A test of the accuracy of journalizing and
posting process
Preparation
List each ledger account and place
the ending account balance in the
proper column
Total the debit and credit columns
Compare the totals
62 Copyrright Doug Hillman 1997
inanciaI Slalononls
Prepared from the information contained
in the trial balance
Four primary statements
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inanciaI Slalononls
Prepared from the information contained
in the trial balance
Four primary statements
ncome Statement
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inanciaI Slalononls
Prepared from the information contained
in the trial balance
Four primary statements
ncome Statement
Statement of Owner's Equity
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inanciaI Slalononls
Prepared from the information contained
in the trial balance
Four primary statements
ncome Statement
Statement of Owner's Equity
Balance Sheet
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inanciaI Slalononls
Prepared from the information contained
in the trial balance
Four primary statements
ncome Statement
Statement of Owner's Equity
Balance Sheet
Statement of Cash Flows
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inanciaI Slalononls
Title
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ncono slalononl
Title
Company name
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ncono slalononl
Title
Company name
Statement name
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ncono slalononl
Title
Company name
Statement name
For the period ending date or date
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ncono slalononl
Title - For the period ending date
List revenues and subtotal
List expenses and subtotal
Subtract expenses from revenues
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Slalononl of Ovnois' Lquily
Title
For the period ending date
List the beginning balance in common
stock
Add issuances of common stock
Subtotal ending common stock
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Slalononl of Ovnoi's Lquily
List beginning balance in retained
earnings
Add net income
Deduct dividends
Subtotal ending retained earnings
Total common stock and retained
earnings
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aIanco Shool
Title
Date
Assets
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aIanco Shool
Title
Date
Assets
First list and subtotal current assets
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aIanco Shool
Title
Date
Assets
First list and subtotal current assets
Then list and subtotal property, plant,
and equipment
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aIanco Shool
Title
Date
Assets
First list and subtotal current assets
Then list and subtotal property, plant,
and equipment
Determine total assets
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aIanco Shool
Liabilities
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aIanco Shool
Liabilities
First list and subtotal current liabilities
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aIanco Shool
Liabilities
First list and subtotal current liabilities
Then list and subtotal long-term
liabilities
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aIanco Shool
Liabilities
First list and subtotal current liabilities
Then list and subtotal long-term
liabilities
Total all liabilities
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aIanco Shool
Owners' Equity
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aIanco Shool
Owners' Equity
Enter ending common stock and
retained earnings from Statement of
Owners' Equity
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aIanco Shool
Owners' Equity
Enter ending common stock and
retained earnings from Statement of
Owners' Equity
Total liabilities and owners' equity
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Slalononl of Cash Iovs
Title
For the period ending
Three sections
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Slalononl of Cash Iovs
Title
For the period ending
Three sections
Cash Flows from Operating Activities
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Slalononl of Cash Iovs
Title
For the period ending
Three sections
Cash Flows from Operating Activities
Cash Flows from nvesting Activities
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Accounling Lqualion
Capital is always Credited
Drawings is always Debited
ntroduction of Capital increases cash
Drawing decreases cash
Liabilities are always Credited
Anything receivable is assets and it is always debited
Anything payable is liabilities and it is always credited
Outstanding expanses means-payable but not paid
Accrued expanses means- receivable but not received
Note:- All transaction should be viewed from the view point of
Business
89 Copyrright Doug Hillman 1997
Accounling Lqualion
Started business with cash Rs 10,000
Deposited into bank Rs 2,000
Rent paid Rs 500
Goods purchased for cash Rs 8000
Goods sold for cash Rs 5000
Goods purchased on credit Rs 5000
Goods sold on credit for Rs 5000
Purchased furniture Rs 2000
Goods sold for Rs 3000
90 Copyrright Doug Hillman 1997
IIuslialion 1
Started business with stock Rs 3000; furniture Rs
4000, Cash Rs 15000
Paid salary to the staff Rs 2000
Goods sold for cash Rs 3000
Goods purchased for cash Rs 6000
Wages outstanding Rs 500
ntroduced further capital Rs 11000
Withdrawn cash for personal use
Purchased goods on credit Rs 5000
Sold good on credit for Rs 6000