Intermediate Accounting Notes
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Assets=claims – liability – Equity – contributed capital – common stock/ treasury stock – earned capital – rev/ Exp. / gains/ lossesDebitContra Assets account Current vs non-current (1 yr) *notes receivable: could be current or non-current cuz there are both principle and interest. *prepaid: depends on when you get the benefit. Creditcurrent vs non-current liabilitypermanent accounts & Nominal accounts ⬇️ ⬇️bal. sheet inc. stmt. ExampleTruck purchased at price of $20,000 for $18,000 plus options of 2,500. 5 yr life, no savageAt end of yr 3 , sold for for 9,300Record yr 0, yr1, yr 3Year 0 Dr Assets – Truck 22,500 Cr Cash 20,500Year 1 Dr Depreciation Expense 4,100 Cr Accumulated Dep 4,100Year 3 Dr Dep 4,100 Cr Accu. Dep 4,100 Dr Accumulated Dep 12,300 Cr Assets 12,300 Carrying Amount of the truck=8,200 So gain=1,100 Dr Cash 9,300 Cr Gain 1,100 Cr Truck 8,200Accounting CycleEconomic Event takes placeAnalyze the transaction. – Measurement. ( is law suit an economic event? depends on probability/ability to assess/ ability to measure) – Timing3. Journalization. Dr Cr Explanation. – Prep – Approve – Post General journal. Sales journals Cash receipt journal Purchases J. Disbursement J.4. Posted to Account General ledger. (contains all the accounts) -subsidiary ledger (such as account receivable) AR[pic 1][pic 2] customer details
5. Trial BalanceList of all a/c + its balanceA/C # A/C Name DR CR1001 cash 10001101 A/R 10500……… X XAdjustment ❓ – Depreciation (also a kind of deferral) – Accruals (see if miss some expenses? ) Incurred but not paid Earned but not received. – Deferral. (like prepaid.)EX. Note Payable 8/m on 11/1 @7.2% payable every six month 12/31/XX Dr interest expense Cr interest payable 1/1/XX Dr Interest Payable 12,000 Cr Interest Exp 12,0005/1/XX Dr interest Expense 36,000 Cr Cash 36,0006.produce financial statements “BIG 4”7. Close process 1) close all revenue account to income summary 2) close all expense account to income summary 3) close income summary to retained earnings. income summary ➡️ a nominal account. Balance of income summary➡️net incomeChapter 24Footnote Disclosure FN #1 – Organizational issues.FN #2 – Summary of Significant Accounting Policies (SOSAP) ex: depreciation method; FIFO or LIFO; Cost of Inventory. * FIN 48 income tax * Contingencies. * Investments.Risk ( risk at how you value them) – lv 1 traded on the security market. observable