Introduction to Accounting Introduction to Accounting 120120

Chapter 4Review Balancing T-Accounts, U4A3Thursday, April 14,

2o10

In Today’s ClassIn Today’s Class

•We will mark U4A2.•Review: Balancing T-Account Lecture and Presentation

•Assign: U4A3, Due Thursday!

In The News… In The News… Dollar closes Dollar closes above parabove par

• The Canadian dollar Wednesday closed above parity with the U.S. currency for the first time in 22 months, since July 28, 2008.

• The loonie finished up .27 of a cent at 100.08 cents US.

• Tihanyi attributed the timing of the close above parity to the fact that both financial markets and commodity prices were stronger Wednesday.

• Oil, a major Canadian export, rose more than two per cent, with the May contract for light sweet crude closing up $1.79 a barrel to $85.84 US in New York.

• "The rebound in oil back to close to $85, $86 (US) a barrel was definitely a good driver for the Canadian dollar," said Tihanyi.

• http://www.cbc.ca/money/story/2010/04/14/dollar-parity-close.html

In The News… In The News… Toyota to test Toyota to test all SUVs all SUVs

• Toyota Motor said on Thursday it would conduct safety tests on all its sport utility models after a report claiming that a handling problem in a new version Lexus put drivers at risk of rollover accidents.

• Toyota took the unusual step of stopping sales of the Lexus GX 460 after Consumer Reports magazine warned against buying the vehicle and called it a “safety risk” because of a potential handling problem in turns.

• Toyota first moved to suspend Lexus GX sales in the United States earlier this week and then extended that sales halt to the Middle East and Russia, the other markets where it is sold.

• http://www.theglobeandmail.com/globe-investor/toyota-to-test-all-suvs/article1535101/

In The News…In The News… Twitter Ads Test Billion-Twitter Ads Test Billion-Dollar ValuationDollar Valuation

• In toying with ads, Twitter — the net’s largest micro-publishing service — is going where every internet company in search of a dollar has gone before. But the history of how advertising has been introduced into a formerly commercial-free community is mixed, and success for this billion-dollar baby depends on how they decide to zag.

• Twitter, the net’s largest micro-publishing service, launched an advertising service Tuesday that will let advertisers — beginning with some of the world’s top brands such as Starbucks — have their tweets show up in the top of search results. It’s a first attempt by the service to make money from its users.

Marking U4A2Marking U4A2

•We will now mark U4A2 together.•Mark Question III out of 20 Points

(0.5 for each right portion).•Mark Question IV out of 22 Points (1

point for each correct line).•Mark fairly and accurately, then

hand back in, tally score out of 48 points.

  Balancing T-AccountsBalancing T-Accounts

• There are three steps to calculate the balance of a T-Account.

1. Separately add the two sides of the account.

2. Subtract the smaller number from the larger number.

3. Record the difference on the side with the largest balance. This indicates if the account has a debit or credit balance.

  Balancing T-AccountsBalancing T-Accounts

• ASSETS

  Balancing T-AccountsBalancing T-Accounts

• LIABILITIES

• OWNER'S EQUITY

  Balancing T-AccountsBalancing T-Accounts

• The T-Account Ledger• There are ten accounts in the Atlantic Fleet

ledger. Each account contains:• The name of the account • The opening balance of the account • Entries indicating individual changes

resulting from specific transactions The next step is to calculate the new balance of each account.

  Balancing T-AccountsBalancing T-Accounts

• There are three steps to calculate the balance of a T-Account.1. Separately add the two sides of the account. Record

the results beneath the last entry. 2. Subtract the smaller number

from the larger number. 3. Record the result beneath the

larger number. This indicates if the account has a debit or credit balance.

  Balancing T-Accounts Balancing T-Accounts (Continued)(Continued)

• Examine the balancing of the other Atlantic Fleet accounts.

  Balancing T-Accounts Balancing T-Accounts (Continued)(Continued)

• Examine the balancing of the other Atlantic Fleet accounts.

Interpreting T-Account Interpreting T-Account InformationInformation

• It is important that accounting learners understand the information stored in each account.

• You know that:– Assets have debit balances. – Liabilities have credit balances. – Owner's equity has credit balances.

• You know that:– Assets increase with a debit and decrease with a credit. – Liabilities increase with a credit and decrease with a debit. – Owner's equity increases with a credit and decreases with a debit.

• Occasionally, however, an account will have an exceptional balance. An exceptional balance occurs when an account balance is not on the normal side. If Bank ended with a $100 credit balance, it would be exceptional.

Exceptional Account Exceptional Account BalancesBalances

• An exceptional balance does not necessarily mean that an accounting error was made. Examine the following situations and try to determine the end result…1. The company overpays an account payable2. A regular A/R customer, with no account balance,

returns merchandise for credit.3. The company returns goods, for credit, to a supplier

with whom they have no balance.4. The bank account has a balance of $3 000. Cheques

issued total $3 500

Exceptional Account Exceptional Account BalancesBalances

1. The company overpays an account payable1. A/P has a debit balance.

2. A regular A/R customer, with no account balance, returns merchandise for credit.1. A/R has a credit balance.

3. The company returns goods, for credit, to a supplier with whom they have no balance.1. A/P has a debit balance.

4. The bank account has a balance of $3 000. Cheques issued total $3 5001. Bank has a credit balance

Review of Terms!Review of Terms!

• There are a few terms or phrases, which you have come across in this and the previous unit, that require a little more explanation.

• Bank: You are aware of the term bank indicating the balance of a company's bank account. In this and the previous unit, transactions occurred that affected this account. The receipt of cash increased the account and the issuing of cheques decreased the account. As far as accounting is concerned, cheques are equivalent to cash and cash is termed bank. 

• On Account: If an item is bought on account or on credit, it means it is not paid for at the time of purchase. This transaction increases accounts payable.

Review of Terms!Review of Terms!

• There are a few terms or phrases, which you have come across in this and the previous unit, that require a little more explanation.– If a service is sold on account or on credit, it means

payment is not received at the time of sale. This transaction increases accounts receivable. 

– If a payment is made to a creditor, it is a payment on account and reduces the debt owed to the account payable. 

– If a payment is received from a debtor, it is a receipt on account and reduces the amount collectable from the account receivable.

Assignment Time!Assignment Time!

• You will now work on U4A3.• Complete U4A3 in groups of 2

or individually.• Due on Thursday, April 15th

Band of the Day• Broken Social Scene – Cause = Time

Band of the Day• Broken Social

Scene• Toronto, ON• Has a revolving cast of 10+

members (including: Feist, Jason Collette, Amy Milan and Emily Haines).

• www.brokensocialscene.ca• www.myspace.com/brokensocialscene• http://radio3.cbc.ca/bands/Broken-Social-Scene