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.

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Page 1: Role of Accounting Records 1.Establishing accountability for the assets and or transactions under an individual’s control. 2.Keeping track of routine business

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.

Page 2: Role of Accounting Records 1.Establishing accountability for the assets and or transactions under an individual’s control. 2.Keeping track of routine business

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.

Page 3: Role of Accounting Records 1.Establishing accountability for the assets and or transactions under an individual’s control. 2.Keeping track of routine business

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

Page 4: Role of Accounting Records 1.Establishing accountability for the assets and or transactions under an individual’s control. 2.Keeping track of routine business

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

Page 5: Role of Accounting Records 1.Establishing accountability for the assets and or transactions under an individual’s control. 2.Keeping track of routine business

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

Page 6: Role of Accounting Records 1.Establishing accountability for the assets and or transactions under an individual’s control. 2.Keeping track of routine business

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

Page 7: Role of Accounting Records 1.Establishing accountability for the assets and or transactions under an individual’s control. 2.Keeping track of routine business

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

Page 8: Role of Accounting Records 1.Establishing accountability for the assets and or transactions under an individual’s control. 2.Keeping track of routine business

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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