ac101-m8 chapter 2

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LECTURE2

Instructor: Keo Sopheak

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1-Basic Accounting Equation

2-The Account

3-T-account/Debit and Credit

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Transaction (1): Ray Neal decides to open a computer programming

service which he names Softbyte. On September 1, 2012, Ray Neal

invests $15,000 cash in the business.

Transaction Analysis

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Transaction (2): Purchase of Equipment for Cash. Softbyte purchases

computer equipment for $7,000 cash.

SO 7


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Transaction (3): Softbyte purchases for $1,600 from Acme Supply

Company computer paper and other supplies expected to last several

months. The purchase is made on account.

SO 7


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Transaction (4): Softbyte receives $1,200 cash from customers for

programming services it has provided.

SO 7


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Transaction (5): Softbyte receives a bill for $250 from the Daily News

for advertising but postpones payment until a later date.


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Transaction (5): Softbyte receives a bill for $250 from the Daily News

for advertising but postpones payment until a later date.


9,200$ 1,600$-$ 7,000$ 15,000$ -$ 1,200$ (250)$1,850$

$17,800 $17,800

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Current Asset 1year

1xxx9


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Current Liabilities orShort term Liabilities

Long Term Liabilities

2xxx9

1year


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3xxx9 3xxx9 4xxx9 5xxx9


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Account: Record of increases and decreases in a specific

asset, liability, equity, revenue, or expense item.

2-The Account

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Current Asset

10100 Cash on Hand10110 Petty Cash10400 Saving Account11200 Inventory Asset12010 Note Receivable13000 Prepaid Profit Tax13030 Office Supply14001 Prepaid Insurance14003 Prepaid Advertising14013 Prepaid Rent14100 Vendor Advance14101 Advance Salary14300 VAT Input14600 VAT Credit Carry Forwards14700 Employee Advances

2-The Account

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Fixed Asset

12100 Computer13000 Furniture14000 Fax & Phone15000 Office Equipment15300 Other Depreciable Property15400 Leasehold Improvement15600 Building Improvement15700 Machine15800 Light16000 Vehicle17000 Building18000 Land19200 Vehicle Insurance

2-The Account

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Current Liabilities orShort term Liabilities

20000 Account Payable20005 Credit Card

20010 Note Payable

21000 Payroll Liabilities

21001 Salary Tax Payable

23400 VAT Payable

24800 Utilities Payable

24900 Phone, Fax & Email Payable

25000 Rent & Lease Payable

26000 Unearned Fees

2-The Account

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Long Term Liabilities

27500 Bond Payable

27600 Debt

40000 Passenger Service Revenue

40000 Sale

40400 Consulting Fees

2-The Account

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60000 Advertising Expense

60001 Salary Expense60020 Depreciation Expense

60030 License Amortization Expense

60100 Transport-Expense

60300 Other Expense61500 Bad Debt Expense

66500 Insurance Expenses

69500 Maintenance Expense

69990 Uncategorized Expenses

70000 Repair and Maintenance

2-The Account

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70010 Gasoline Expense

74000 Penalty Tax

75002 Wage Expense

76000 Freight Expense

76001 Tax Expense

78000 Travel Expense

78010 Fax and Phone Expense

78030 Cleaning Expense78100 Imported Tax

78300 Miscellaneous

78400 Clearances

78500 Utilities Expense79001 Clearance Expense

85001 Bank Charge

90000 Interest Expense

2-The Account

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Debit: An entry in the financial books of a firm that increasesan asset or an expense or an entry that decreases a liability,owner's equity (capital) or income.

Credit: An entry in the financial books of a firm that increasesa liability, owner's equity (capital) or revenue, or an entry thatdecreases an asset or an expense.


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ASSETS LIABILITIES EQUITIES


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Revenues Expenses

Owners

Capital

Owner's

Withdrawals

_+

_

Equity


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Account Name

Debit / Dr. Credit / Cr.

If Debits are greater than Credits, the account will havea debit balance.

$10,000 Transaction #2$3,000

$15,000

8,000Transaction #3

Balance

Transaction #1


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Account Name

Debit / Dr. Credit / Cr.$10,000 Transaction #2$3,000

Balance

Transaction #1

$1,000

8,000 Transaction #3

If Debits are less than Credits, the account will have acredit balance.

Debits and Credits

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Assets - Debits should exceedcredits.

Liabilities Credits should

exceed debits.

Normal balance is on the

increase side.

Chapter3-23

AssetsAssets


Normal BalanceNormal Balance

Chapter3-24

LiabilitiesLiabilities



Debits and Credits

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Owners investments andrevenues increase owners equity

(credit).

Owners drawings and expenses

decrease owners equity (debit).

Chapter3-25



OwnerOwners Capitals Capital

Chapter3-23

OwnerOwners Drawings Drawing



Chapter3-25



OwnerOwners Equitys Equity

Debits and Credits

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Purpose of earning revenues is tobenefit the owner(s).

Effect of debits and credits on

revenue accounts is the same as

their effect on Owners Capital.

Expenses have the opposite effect:

expenses decrease owners equity.

Chapter3-27



ExpenseExpense

Chapter3-26



RevenueRevenue

Debits and Credits

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Chapter3-23

AssetsAssets



Chapter3-27



ExpenseExpense

Normal

BalanceCredit

Normal

BalanceDebit

Debits/Credits Rules

Chapter

3-24

LiabilitiesLiabilities



Chapter

3-25



OwnersOwners EquityEquity

SO 2

Chapter3-26



RevenueRevenue

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ac101-m8 chapter 2

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