University:
Sloan School of Management
Course:
15.511 | Financial Accounting
Academic year:

2023
Views:

278

Pages:

9
Author:

colariaxp

Corporate Accounting Recitation 2 Agenda: Recitation 2 Journal entry and T-account Rules and exercises Cash accounting vs. Accrual accounting Depreciation and Inventory Accounting entry for sales, Adjusting entries, and Closing entries Textbook problem 3-29 Journal entries Assets: debit means increases, credit means decreases Liabilities and Owners’ Equity: debit means decreases, credit means increases Revenues: debit means decreases, credit means increases COGS and expenses: debit means increases, debit means decreases T-accounts Assets Increases Decreases Liabilities Decreases Increases Owners’ Equity Decreases Increases Retained Earnings Decreases Increases Revenues Decreases Increases COGS/Expenses Increases Decreases Journal entry exercises (1) Dr. Accounts Receivable Cr. Dr. Cr. Accounts Receivable Dr. Accounts Payable Cr. Dr. Cr. Accounts Payable Dr. Cr. Accumulated Depreciation Dr. Retained Earnings Cr. Dr. Cr. Prepaid Insurance Journal entry exercises (2) Dr. Property Tax Payable Cr. Dr. Cost of Good Sold Cr. Dr. Merchandise Inventory Cr. Dr. Dr. Advances from Customers Cr. Dr. Cr. Advances to Suppliers Cr. Revenues Dr. Cr. Retained earnings T-account exercise (1) Cash From owners and lenders, from sales, etc. Inventory Pay owners, pay lenders, purchase raw material, pay employees, etc. Account Receivables Sales Cash collections, write-offs Purchase/ COGS production PP&E Purchase or build Sell PP&E Accumulated Depreciation Sell PP&E Depreciation expense T-account exercise (2) Account payable Payment Purchases Long-term debt Pay principal back Borrowing Owners’ Equity Dividend, stock repurchase Contribute capital, retained earnings Retained earnings COGS, expenses, dividends Revenues Revenues Closing to retained earnings Sales revenue, other revenue COGS/expenses COGS, expenses, tax expense, etc. Closing to retained earnings Adjusting entries Adjusting entries record activities that have taken place, but which have not yet been recorded. Four scenarios Cash first, expenses later: prepaid expense, supplies, PP&E Expenses first, cash later: wage accrued but not paid Cash first, revenues later: unearned revenues (earned as time goes by vs. earned when service delivered) Revenues first, cash later: interest revenues accrued vs. credit sales