2. Class Rules
One More Time !
Respect Everyone !
Me
Your Classmates
Some people here are actually trying to learn this
stuff
Yourself – you should too
Stay Focused on Class while in Class
No Social Media – pc etc’s for the right reasons
Act with some Decorum
Appropriate, Maturity
9. A Business Transaction
Any event that has a monetary impact on the
business
Gets into the company's accounting system and on
the company’s financial statements
Debits ALWAYS equal Credits
10. Debits and Credits
A T-account represents a ledger account and is a tool used
to understand the effects of one or more transactions.
C 4
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16. Bea’s Bubble Gum Chart of Accounts
Balance Sheet Income Statement
Normal Debit Normal Credit Normal Debit Normal Credit
Assets Liabilities
Cash Accounts Payable
Accounts
Receivable Notes Payable
Supplies
Bubble Gum
Machine
Equity
O/E Bea
O/E - Pablo Expense Sales
Retained
Earnings
Miscellaneous
Expense Sales
Interest Expense
Tax Expense
Cost of Goods Sold
17. What’s the Accounting Entry
Bea invested $25,000 that her grandma gave her into
her new business: “
Bea’s Best Bubblegum”
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18. Bea invested $25,000 that her
grandma gave her into her new
business
Debit Credit
7/7 Cash $25,000
7/7 Owners Equity Bea $25,000
19. What’s the Accounting Entry
Bea took a 10 year loan from the 1st Bank of Aboud for
$10,000 at 2% to purchase the world’s best
bubblegum making machine.
20. Bea took a 10 year loan from the 1st Bank
of Aboud for $10,000 at 2% to purchase
the world’s best bubblegum making
machine.
Debit Credit
7/7 Bubble Gum Machine $10,000
7/7 Notes Payable BG Machine $10,000
21. Do an Accounting Entry
Bea made her 1st Sale !
She sold $6,000 of her gum to “ the Dentist’s Pleasure
Candy Store ( DPCS) . DPCS was invoiced but has not
yet paid cash
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22. She sold $6,000 of her gum to “ the Dentist’s
Pleasure Candy Store ( DPCS) . DPCS was
invoiced but has not yet paid cash
Debit Credit
7/7 Accounts Receivable $6,000
7/7 Sales $6,000
23. Do a Accounting Entry
Bea bought the supplies to create her best Bubblegum
: $5,000 on credit from her supplier
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24. Bea bought the supplies to create her best
Bubblegum : $5,000 on credit from her
supplier
Debit Credit
7/7 Supplies $5,000
Accounts Payable $5,000
25. Accounts Receivable / Accounts Payable
An asset account .Accounts receivable (AR) refers to
money owed by customers for goods or services that
have been delivered or used, but not yet paid for.
A liability account will show the amount a company
owes for items or services purchased on credit .
One company’s accounts receivable is another
company's account payable.
26. Do an Accounting Entry
Bea paid all of her Miscellaneous Expenses for the
period of $100 with Cash
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27. Bea paid all of her Miscellaneous Expenses for
the period of $100 with Cash
Debit Credit
7/7 Miscellaneous Expenses $100
7/7 Cash $100
28. Do an Accounting Entry
Pablo bought in on Bea’s company with $5,000 in
cash
29. Pablo bought in on Bea’s company with
$5,000 in cash
Debit Credit
7/11 Interest Expense $200
Cash $200
$10,000*.02 = $200
30. Do a Accounting Entry
Bea paid 1 year's interest to the Bank of Aboud
31. Bea paid 1 year's interest to the Bank
of Aboud
Debit Credit
7/7 Cash $25,000
Owners Equity Bea $25,000
32. Now Use the Entries to Build:
1. Income Statement
Bea’s tax rate is 20%
2. Balance Sheet
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33. Cost of Goods Sold
How much of Bea’s supplies were used
for the gum that she sold
Debit Credit
7/11 Cost of Goods Sold $3,000
Supplies $3,000
We checked the store room and she used $3,000
35. Bea’s Income Statement
Sales 6000
less Cost of Goods Sold- Supplies -3000
Profit Margin 3000
less Miscellaneous Expense -100
Earnings Before Interest & Taxes 2900
Interest Expense -200
Earnings Before Taxes 2700
Taxes -540
Net Income 2160
37. The Capitalists
One company’s right side of the balance sheet
liabilities and equity
Is another's company's left side of the balance
sheet
assets
Assets ( stuff you have to run the business)
= Liabilities + Equity (how its paid for)
Wow !
38. Debt
A loan in a number of different ways to a
company
The loaned amount will repaid at some
defined time
An interest rate will be assessed as the cost
for the use of the money
No ownership stake
But senior to equity stake
