role of accounting records 1.establishing accountability for the assets and or transactions under an...
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Role of Accounting Records
1. Establishing accountability for the assets and or transactions under an individual’s control.
2. Keeping track of routine business activities such as the amounts of money in the company bank accounts, amounts due from credit customers, or amounts owed to supplies.
3. Obtaining detailed information about a particular transaction.
4. Evaluating the performance and efficiency of various departments within the organization.
5. Maintaining documentary evidence of the company’s business activities. ( example for tax purposes)
6. Verifying authenticity, accuracy and validity of transactions in connection with the examination or review undertaken by external auditors.
Accounts/ledgers
The record used to keep track of the increases and decreases in financial statement items.
Chart of Accounts
A list of accounts in the ledger, arranged in order in which they appear in the financial statements.
•Balance sheet accounts are listed first
•Income statement accounts are listed in order of revenues and expenses
Current Assets (account numbers 10000 - 16999)10100 Cash - Regular Checking10200 Cash - Payroll Checking10600 Petty Cash Fund12100 Accounts Receivable12500 Allowance for Doubtful Accounts13100 Inventory14100 Supplies15300 Prepaid Insurance
Property, Plant, and Equipment (account numbers 17000 - 18999)
17000 Land17100 Buildings17300 Equipment17800 Vehicles18100 Accumulated Depreciation - Buildings18300 Accumulated Depreciation - Equipment18800 Accumulated Depreciation - Vehicles
Current Liabilities (account numbers 20000 - 24999)
20100 Notes Payable - Credit Line #120200 Notes Payable - Credit Line #221000 Accounts Payable22100 Wages Payable23100 Interest Payable24500 Unearned Revenues
Long-term Liabilities (account numbers 25000 - 26999)25100 Mortgage Loan Payable25600 Bonds Payable25650 Discount on Bonds Payable
Stockholders' Equity (account numbers 27000 - 29999)27100 Common Stock, No Par27500 Retained Earnings29500 Treasury Stock
Operating Revenues (account numbers 30000 - 39999)31010 Sales - Division #1, Product Line 01031022 Sales - Division #1, Product Line 02232015 Sales - Division #2, Product Line 01533110 Sales - Division #3, Product Line 110
Cost of Goods Sold (account numbers 40000 - 49999)41010 COGS - Division #1, Product Line 01041022 COGS - Division #1, Product Line 02242015 COGS - Division #2, Product Line 01543110 COGS - Division #3, Product Line 110
Marketing Expenses (account numbers 50000 - 50999)50100 Marketing Dept. Salaries50150 Marketing Dept. Payroll Taxes50200 Marketing Dept. Supplies50600 Marketing Dept. Telephone
Payroll Dept. Expenses (account numbers 59000 - 59999)
59100 Payroll Dept. Salaries59150 Payroll Dept. Payroll Taxes59200 Payroll Dept. Supplies59600 Payroll Dept. Telephone
Other (account numbers 90000 - 99999)91800 Gain on Sale of Assets96100 Loss on Sale of Assets
The account is a means of accumulating in one place all the information about changes in specific financial items.
Determining the balances of a T-Account
•If the debit total exceeds the credit total, the account has a debit balance.
•If the credit exceeds the debit total, the account has a credit balance.
Example:
Jan 2 50,000
Jan 25 2,000
Jan 31 7,000
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Balance 33,500
Jan 10 20,000
Jan 27 2,000
Jan 31 3,500
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Cash
Flow of Data from Source Documents through Trial Balance
Enter Business Transactions in the
General Journal
Analyze Transactions using source documents and chart of accounts
Post the entries in the Journal to the
General Ledger
From the General Ledger prepare a
Trial Balance
General JournalPage 1
Date
Account Titles and Explanation Post Ref
Debit Credit
2007
Jan 2 Cash 100 50,000
Ramos, Capital 300 50,000
Owner’s original investment in appliance repair business.
Account Ramos, Capital Account No. 300
Date2007 ITEM POST
REF DEBIT CREDITBALANCES
DEBIT CREDIT
JAN 2 J1 50,000 50,000
Ledger
Ramos Appliance Repair Service
Trial Balance
January 31, 2007 Account Title Balance
Debit Credit
Cash P 33,500
Accounts Receivable -
Shop Supplies 4,000
Tools and equipment 18,000
Accounts payable P 3,000
S.Ramos, capital 50,000
Service revenue 7,000
Utilities expense 1,000
Wage expense 2,500
Supplies expense 1,000
Total P 60,000 P 60,000
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