Century 21 Accounting, 8eMulticolumn Journal

Chapter Outlines

PART 1 ACCOUNTING FOR A SERVICE BUSINESS ORGANIZED AS A PROPRIETORSHIP

Chapter 1 Starting A Proprietorship: Changes that Affect the Accounting Equation

The Accounting EquationWhat Is Accounting?The Business—TechKnow ConsultingThe Accounting Equation

How Business Activities Change the Accounting EquationReceiving Cash

Received Cash from Owner as an InvestmentPaying Cash

Paid Cash for SuppliesPaid Cash for Insurance

Transactions on AccountBought Supplies on AccountPaid Cash on Account

How Transactions Change Owner’s Equity in an Accounting EquationRevenue Transactions

Received Cash from SalesSold Services on Account

Expense Transactions: Paying Cash for ExpensesOther Cash Transactions

Received Cash on AccountPaid Cash to Owner for Personal UseSummary of Changes in Owner’s Equity

Chapter 2 Analyzing Transactions into Debit and Credit Parts

Using T AccountsAnalyzing the Accounting EquationAccountsAccount BalancesIncreases and Decreases in Accounts

Analyzing How Transactions Affect AccountsReceived Cash from Owner as an InvestmentPaid Cash for SuppliesPaid Cash for InsuranceBought Supplies on AccountPaid Cash on Account

Analyzing How Transactions Affect Owner’s Equity AccountsReceived Cash from SalesSold Services on AccountPaid Cash for an ExpenseReceived Cash on AccountPaid Cash to Owner for Personal Use

Chapter 3 Journalizing Transactions

Journals, Source Documents, and Recording Entries in a JournalJournals and JournalizingA Five-Column Journal

Using a JournalAccuracyChronological RecordDouble-Entry AccountingSource Documents

ChecksSales InvoicesOther Source Documents

ReceiptsMemorandumsCalculator Tapes

Received Cash from Owner as an InvestmentPaid Cash for Supplies

Journalizing Buying Insurance, Buying on Account, and Paying on AccountPaid Cash for InsuranceBought Supplies on AccountPaid Cash on Account

Journalizing Transactions that Affect Owner’s Equity and Receiving Cash on AccountReceived Cash from SalesSold Services on AccountPaid Cash for an ExpenseReceived Cash on AccountPaid Cash to Owner for Personal Use

Proving and Ruling a JournalProving a Journal PageRuling a Journal PageStarting a New Journal PageProving and Ruling a Journal at the End of a Month

Proving CashRuling a Journal at the End of a Month

Standard Accounting Practices

Chapter 4 Posting to a General Ledger

Preparing a Chart of AccountsAccount FormRelationship of a T Account to an Account FormChart of Accounts

Preparing a Chart of AccountsAccount Numbers

Assigning Account NumbersOpening an Account in a General Ledger

Posting Separate Amounts from a Journal to a General LedgerPosting an Amount from a General Debit Column

Posting a Separate Amount from a General Debit ColumnPosting a Second Amount to an AccountPosting an Amount from a General Credit Column

Posting Column Totals from a Journal to a General LedgerCheck Marks Show that Amounts Are Not Posted

Journal Entries that Are Not Posted IndividuallyTotals of General Debit and General Credit Amount Columns

Posting the Total of the Sales Credit ColumnPosting the Total of the Cash Debit ColumnPosting the Total of the Cash Credit Column

Completed Accounting Forms and Making Correcting EntriesJournal Page with Posting CompletedGeneral Ledger with Posting CompletedMemorandum for a Correcting EntryJournal Entry to Record a Correcting Entry

Chapter 5 Cash Control Systems

How Businesses Use CashChecking Accounts

Depositing CashDeposit Recorded on a Check StubBlank Endorsement, Special Endorsement, and Restrictive Endorsement

Blank EndorsementSpecial EndorsementRestrictive Endorsement

Completed Check Stub and CheckRecording a Voided Check

Bank ReconciliationBank StatementBank Statement ReconciliationRecording a Bank Service Charge on a Check StubJournalizing a Bank Service Charge

Dishonored Checks and Electronic BankingRecording a Dishonored Check on a Check StubJournalizing a Dishonored CheckJournalizing an Electronic Funds TransferJournalizing a Debit Card Transaction

Petty CashEstablishing a Petty Cash FundMaking Payments from a Petty Cash Fund with a Petty Cash SlipReplenishing Petty Cash

Chapter 6 Work Sheet for a Service Business

Consistent ReportingCreating a Work Sheet

Fiscal PeriodsWork SheetPreparing the Heading of a Work SheetPreparing a Trial Balance on a Work Sheet

Planning Adjusting Entries on a Work SheetPlanning Adjustments on a Work SheetSupplies Adjustment on a Work SheetPrepaid Insurance Adjustment on a Work SheetProving the Adjustments Columns of a Work Sheet

Extending Financial Statement Information on a Work SheetExtending Balance Sheet Account Balances on a Work SheetExtending Income Statement Account Balances on a Work SheetRecording Net Income, and Totaling and Ruling a Work SheetCalculating and Recording a Net Loss on a Work Sheet

Finding and Correcting Errors on the Work SheetCorrecting Accounting Errors on the Work SheetChecking for Typical Calculation ErrorsChecking for Errors in the Work Sheet

Check for Errors in the Trial Balance ColumnCheck for Errors in the Adjustments ColumnsCheck for Errors in the Income Statement and Balance Sheet Columns

Correcting an Error in Posting to the Wrong AccCorrecting an Incorrect Amount and an Amount Posted to the Wrong ColumnChecking for Errors in Journal EntriesPreventing Errors

Chapter 7 Financial Statements for a Proprietorship

Reporting Financial InformationPreparing an Income Statement

Income Statement Information on a Work SheetHeading of an Income StatementRevenue, Expenses, and Net Income Sections of an Income StatementComponent Percentage Analysis of an Income Statement

Acceptable Component PercentagesTotal Expenses Component PercentageNet Income Component Percentage

Income Statement with Two Sources of Revenue and a Net LossBalance Sheet Information on a Work Sheet

Balance SheetHeading of a Balance SheetAssets and Liabilities Sections of a Balance SheetOwner’s Equity Section of a Balance SheetOwner’s Equity Reported in Detail on a Balance Sheet

Chapter 8 Recording Adjusting and Closing Entries for a Service Business

Adjusting EntriesRecording Adjusting Entries

Adjusting Entry for SuppliesAdjusting Entry for Prepaid Insurance

Recording Closing EntriesNeed for Permanent and Temporary AccountsNeed For Closing Temporary AccountsNeed for the Income Summary AccountClosing Entry for an Income Statement Account with a Credit BalanceClosing Entry for Income Statement Accounts with Debit BalancesClosing Entry to Record Net Income or Loss and Close the Income Summary

AccountClosing Entry for the Owner’s Drawing Account

Preparing a Post-Closing Trial BalanceGeneral Ledger Accounts after Adjusting and Closing Entries Are PostedPost-Closing Trial BalanceAccounting Cycle for a Service Business

PART 2 ACCOUNTING FOR A MERCHANDISING BUSINESS ORGANIZED AS A CORPORATION

Chapter 9 Journalizing Purchases and Cash Payments

Journalizing Purchases Using a Purchases JournalMerchandising BusinessesThe Business—Hobby Shack, Inc.Using Special JournalsPurchasing MerchandisePurchases on AccountPurchases JournalPurchase InvoicePurchasing Merchandise on AccountTotaling and Ruling a Purchases Journal

Journalizing Cash Payments Using a Cash Payments JournalCash Payments JournalCash Payment of an ExpenseBuying Supplies for CashCash Payments for Purchases

Trade DiscountCash Purchases

Cash Payments on Account with Purchases DiscountsCash Payments on Account Without Purchases Discounts

Performing Additional Cash Payments Journal OperationsPetty Cash ReportReplenishing a Petty Cash FundTotaling, Proving, and Ruling a Cash Payments Journal Page to Carry Totals ForwardStarting a New Cash Payments Journal PageTotaling, Proving, and Ruling a Cash Payments Journal at the End of a Month

Journalizing Other Transactions Using a General JournalGeneral JournalMemorandum for Buying Supplies on AccountBuying Supplies on AccountDebit Memorandum for Purchases Returns and AllowancesJournalizing Purchases Returns and Allowances

Chapter 10 Journalizing Sales and Cash Receipts Using Special Journals

Journalizing Sales on Account Using a Sales JournalSales TaxSales of Merchandise on AccountSales JournalSales InvoiceSale on AccountTotaling, Proving, and Ruling a Sales Journal

Journalizing Cash Receipts Using a Cash Receipts JournalProcessing Sales TransactionsProcessing Credit CardsCash Receipts JournalCash and Credit Card SalesCash Receipts on AccountCalculating Cash Receipts on Account with Sales DiscountJournalizing Cash Receipts on Account with Sales DiscountsTotaling, Proving, and Ruling a Cash Receipts JournalProving Cash at the End of a Month

Recording Transactions Using a General JournalCredit Memorandum for Sales Returns and Allowances

Sales Returns and AllowancesJournalizing Sales Returns and Allowances

Chapter 11 Posting To General and Subsidiary Ledgers

Posting to an Accounts Payable LedgerLedgers and Controlling Accounts

General LedgerSubsidiary Ledgers

Accounts Payable Ledger and General Ledger Controlling AccountAccounts Payable Ledger FormsPosting from a Purchases Journal to an Accounts Payable LedgerPosting from a Cash Payments Journal to an Accounts Payable LedgerPosting Credit Entries from a General Journal to an Accounts Payable LedgerCompleted Accounts Payable LedgerProving the Accounts Payable Ledger

Posting to an Accounts Receivable LedgerAccounts Receivable Ledger and General Ledger Controlling AccountAccounts Receivable Ledger FormsPosting From a Sales Journal to an Accounts Receivable LedgerPosting From a Cash Receipts Journal to an Accounts Receivable LedgerPosting a Credit Entry from a General Journal to an Accounts Receivable LedgerCompleted Accounts Receivable LedgerProving the Accounts Receivable Ledger

Posting from Journals to a General LedgerStarting a New Page for an Account in a General LedgerPosting from the General Amount Columns of a Cash Payments Journal to a General

LedgerPosting a Debit Entry from a General Journal to a General LedgerPosting a Credit Entry from a General Journal to a General Ledger

Posting Special Journal Totals to a General LedgerPosting the Total of a Purchases Journal to a General LedgerPosting Special Amount Column Totals of a Cash Receipts Journal to a General

LedgerPosting Special Amount Column Totals of a Cash Payments Journal to a General

LedgerOrder of Posting from Special Journals

Correcting Errors in Subsidiary Ledger AccountsJournalizing Correcting Entries Affecting Customer AccountsPosting Correcting Entries Affecting Customer Accounts

Chapter 12 Preparing Payroll Records

Preparing Payroll Time CardsPaying EmployeesAnalyzing a Payroll Time CardCalculating Employee Hours WorkedCalculating Employee Total Earnings

Determining Payroll Tax WithholdingPayroll Taxes

Employee Income TaxEmployee’s Withholding Allowance CertificateEmployee’s Income Tax Withholding—Single PersonsEmployee’s Income Tax Withholding—Married PersonsEmployee Social Security and Medicare Tax

Preparing Payroll RecordsPayroll RegisterEmployee Earnings Records

Preparing Payroll ChecksPayroll Bank AccountEmployee’s Payroll CheckElectronic Funds Transfer

Chapter 13 Payroll Accounting, Taxes, and Reports

Recording a PayrollDifferent Forms of Payroll InformationPayroll RegisterAnalyzing Payment of a PayrollJournalizing Payment of a Payroll

Recording Employer Payroll TaxesCalculating Employer Payroll Taxes

Employer Social Security and Medicare TaxesUnemployment Taxable EarningsUnemployment Taxes

Federal Unemployment TaxState Unemployment Tax

Journalizing Employer Payroll TaxesReporting Withholding and Payroll Taxes

Employer Annual Report to Employees of Taxes WithheldEmployer’s Quarterly Federal Tax ReturnPreparing Employer’s Quarterly Federal Tax ReturnEmployer Annual Reporting of Payroll Taxes

Paying Withholding and Payroll TaxesPaying the Liability for Employee Income Tax, Social Security Tax, and Medicare

TaxForm 8109, Federal Deposit CouponJournalizing Payment of Liability for Employee Income Tax, Social Security Tax,

and Medicare TaxPaying the Liability for Federal Unemployment TaxJournalizing Payment of Liability for Federal Unemployment TaxJournalizing Payment of Liability for State Unemployment Tax

Chapter 14 Distributing Dividends and Preparing a Work Sheet for a Merchandising Business

Distributing Corporate Earnings to StockholdersFinancial InformationStockholders’ Equity Accounts Used by a CorporationDeclaring a DividendPaying a Dividend

Beginning an 8-Column Work Sheet for a Merchandising BusinessEntering a Trial Balance on a Work SheetPlanning Adjustments on a Work SheetRecording a Trial Balance on a Work SheetAnalyzing and Recording Supplies Adjustments

Analyzing Supplies AdjustmentsRecording Supplies Adjustments on a Work Sheet

Analyzing and Recording a Prepaid Insurance AdjustmentAnalyzing a Prepaid Insurance AdjustmentRecording a Prepaid Insurance Adjustment

Planning and Recording a Merchandise Inventory AdjustmentMerchandise InventoryAnalyzing and Recording a Merchandise Inventory AdjustmentAnalyzing an Adjustment When Ending Merchandise Inventory Is Greater Than

Beginning Merchandise InventoryPlanning and Recording an Allowance for Uncollectible Accounts Adjustment

Allowance Method of Recording Losses from Uncollectible AccountsEstimating Uncollectible Accounts ExpenseAnalyzing and Recording an Adjustment for Uncollectible Accounts Expense

Planning and Recording Depreciation AdjustmentsCategories of Assets

Depreciating Plant AssetsCalculating Depreciation Expense and Book Value

Straight-Line DepreciationCalculating Accumulated DepreciationCalculating Book Value

Analyzing and Recording Adjustments for Depreciation ExpenseCalculating Federal Income Tax and Completing a Work Sheet

Federal Income Tax Expense AdjustmentCalculating Federal Income TaxRecording the Federal Income Tax AdjustmentCompleting a Work SheetA Completed 8-Column Work SheetA 10-Column Work Sheet (left page)A 10-Column Work Sheet (right page)

Chapter 15 Financial Statements for a Corporation

Preparing an Income StatementUses of Financial StatementsIncome Statement Information on a Work SheetRevenue Section of an Income Statement for a Merchandising BusinessCost of Merchandise Sold Section of an Income Statement for a Merchandising

BusinessCompleting an Income Statement for a Merchandising Business

Analyzing an Income StatementUsing Component Percentages

Acceptable Component PercentagesAnalysis of Component Percentages

Cost of Merchandise Sold Component PercentageGross Profit on Sales Component PercentageTotal Expenses Component PercentageNet Income before Federal Income Tax Component Percentage

Analyzing an Income Statement Showing a Net LossActions to Correct Unacceptable Component Percentages

Unacceptable Component Percentage for Gross Profit on SalesUnacceptable Component Percentage for Total ExpensesUnacceptable Component Percentage for Net Income before Federal Income Tax

Financial RatiosEarnings per SharePrice-Earnings Ratio

Preparing a Statement of Stockholders’ EquityCapital Stock Section of the Statement of Stockholders’ EquityRetained Earnings Section of the Statement of Stockholders’ Equity

Preparing a Balance SheetBalance Sheet Information on a Work SheetCurrent Assets Section of a Balance SheetPlant Assets Section of a Balance SheetLiabilities Section of a Balance SheetStockholders’ Equity Section of a Balance SheetCompleted Balance SheetSupporting Schedules for a Balance Sheet

Chapter 16 Recording Adjusting and Closing Entries for a Corporation

Recording Adjusting EntriesAdjusting Entries Recorded from a Work SheetAdjusting Entry for Allowance for Uncollectible AccountsAdjusting Entry for Merchandise InventoryAdjusting Entry for Supplies—OfficeAdjusting Entry for Supplies—StoreAdjusting Entry for Prepaid InsuranceAdjusting Entry for Depreciation—Office EquipmentAdjusting Entry for Depreciation—Store EquipmentAdjusting Entry for Federal Income Taxes

Recording Closing Entries for Income Statement AccountsThe Income Summary AccountClosing Entry for Accounts with Credit BalancesClosing Entry for Income Statement Accounts with Debit BalancesSummary of Closing Entry for Income Statement Accounts with Debit BalancesClosing Entry to Record Net IncomeClosing Entry for DividendsCompleted Closing Entries for a Corporation Recorded in a Journal

Preparing a Post-Closing Trial BalanceCompleted General Ledger After Adjusting and Closing Entries Are PostedPost-Closing Trial BalanceAccounting Cycle for a Merchandising Business Organized as a Corporation

PART 3 ACCOUNTING FOR A MERCHANDISING BUSINESS ORGANIZED AS A CORPORATION—ADJUSTMENTS AND VALUATION

Chapter 17 Accounting for Uncollectible Accounts Receivable

Uncollectible AccountsThe Business—Restaurant Supply Co.Estimating and Recording Uncollectible Accounts ExpenseAnalyzing and Journalizing an Adjustment for Uncollectible Accounts ExpensePosting an Adjusting Entry for Uncollectible Accounts Expense

Writing Off and Collecting Uncollectible Accounts ReceivableJournalizing Writing Off an Uncollectible Account ReceivablePosting an Entry to Write Off an Uncollectible Account ReceivableReopening an Account Previously Written OffRecording Cash Received for an Account Previously Written OffPosting Entries for Collecting a Written-Off Account Receivable

Chapter 18 Accounting for Plant Assets and Depreciation

Buying Plant Assets and Paying Property TaxRecording the Buying of a Plant AssetCalculating and Paying Property Tax

Calculating Depreciation ExpenseStraight-Line DepreciationCalculating Depreciation Expense for Part of a YearCalculating Accumulated Depreciation and Book Value

Calculating Accumulated DepreciationCalculating Book Value

Journalizing Depreciation ExpensePreparing Plant Asset RecordsJournalizing Annual Depreciation ExpensePosting an Adjusting Entry for Depreciation Expense

Disposing of Plant AssetsSale of a Plant Asset for Book ValueRecording a Plant Asset’s Depreciation Expense for a Partial YearSale of a Plant Asset for More than Book ValueSale of a Plant Asset for Less than Book Value

Declining-Balance Method of DepreciationCalculating Depreciation Using the Double Declining-Balance MethodCalculating the Last Year’s Depreciation ExpenseComparison of Two Methods of Depreciation

Chapter 19 Accounting for Inventory

Determining the Quantity of Merchandise InventoryWhy Merchandise Inventory Is ImportantThe Most Efficient Quantity of InventoryMethods Used to Determine the Quantity of Merchandise InventoryInventory RecordStock RecordPerpetual Inventory Using a Computer

Determining the Cost of Merchandise InventoryFirst-In, First-Out Inventory Costing MethodLast-In, First-Out Inventory Costing MethodWeighted-Average Inventory Costing MethodCalculating the Cost of Merchandise SoldComparison of Inventory Methods

Estimating InventoryGross Profit Method of Estimating InventoryEstimating Inventory for Other Months

Chapter 20 Accounting for Notes and Interest

Promissory NotesWhen Lending and Borrowing Are NecessaryUses of Promissory NotesInterest on Promissory NotesMaturity Date of Promissory Notes

Notes PayableSigning a Note PayablePaying Principal and Interest on a Note PayableSigning a Note Payable for an Extension of TimePaying a Note Payable Issued for an Extension of Time

Notes ReceivableAccepting a Note Receivable from a CustomerCollecting Principal and Interest on a Note ReceivableRecording a Dishonored Note Receivable

Chapter 21 Accounting for Accrued Revenue and Expenses

Accrued RevenueAccounting for Interest at the Fiscal Year EndAnalyzing an Adjustment for Accrued Interest IncomePosting an Adjusting Entry for Accrued Interest IncomeReversing Entry for Accrued Interest IncomeCollecting a Note Receivable Issued in a Previous Fiscal Period

Accrued ExpensesAnalyzing an Adjustment for Accrued Interest ExpensePosting an Adjusting Entry for Accrued Interest ExpenseReversing Entry for Accrued Interest ExpensePaying a Note Payable Signed in a Previous Fiscal PeriodEffect of Not Using Reversing Entries

Chapter 22 End-Of-Fiscal-Period Work for a Corporation

Preparing a Work Sheet for a CorporationPreparing Financial StatementsUse of a Work Sheet

Entering a Trial Balance on a Work SheetPlanning Adjustments on a Work Sheet

Interest Income AdjustmentSupplies AdjustmentFederal Income Tax AdjustmentCompleting a Work SheetCompleted Work Sheet

Preparing an Income StatementIncome StatementUses of an Income StatementAnalyzing an Income Statement

Acceptable Component PercentagesPreparing a Statement of Stockholders’ Equity and Balance Sheet

Statement of Stockholders’ EquityBalance SheetPreparing a Balance Sheet

AssetsLiabilitiesStockholders’ Equity

Analyzing a Balance SheetWorking CapitalCurrent Ratio

Adjusting, Closing, and Reversing Entries for a CorporationAdjusting EntriesClosing Entries for a CorporationClosing Entry for Accounts with Credit BalancesClosing Entry for Accounts with Debit BalancesClosing Entry to Record Net IncomeClosing Entry for DividendsReversing EntriesAccounting Cycle for a Merchandising Business Organized as a Corporation

PART 4 ADDITIONAL ACCOUNTING PROCEDURES

Chapter 23 Accounting for Partnerships

Forming a PartnershipPartnershipsThe Business—GiftPak CompanyPartnership AgreementsInitial Investments by OwnersWithdrawal of Cash by PartnerWithdrawal of Merchandise by Partner

Distribution of Net Income and Owners’ Equity StatementsDistribution of Net Income StatementDistribution of Net Income Statement with Unequal Distribution of EarningsPartners’ Capital and Drawing AccountsOwners’ Equity StatementOwners’ Equity Statement with an Additional Investment and a Net LossBalance Sheet for a Partnership

Dissolving a PartnershipAccount Balances Before RealizationGain on RealizationRecognizing a Gain on RealizationLoss on RealizationLiquidating LiabilitiesAccount Balances After Liquidation of Noncash Assets and Payment of LiabilitiesDistributing Loss or Gain on Realization to PartnersDistributing Remaining Cash to Partners

Chapter 24 Recording International and Internet Sales

Recording International SalesInternational SalesInternational Sales Compared with Domestic SalesProcessing an International SaleCollecting Payment for an International SaleJournalizing an International SaleJournalizing Time DraftsJournalizing Cash Receipts from Time Drafts

Trade AcceptancesRecording Internet Sales

Internet SalesJournalizing an Internet Sale