schaums easy outline bookkeeping and accounting pps

[...]... against liabilities and capital provided by the accounting equation is insufficient to give complete answers For the first, we must know the type and amount of income and the type and 17 Copyright © 2004 by The McGraw-Hill Companies, Inc Click here for terms of use 18 BOOKKEEPING AND ACCOUNTING amount of each expense for the period in question For second, it is necessary to obtain the type and amount of each... the sum of its credits; it has a credit balance when the sum of the credits is the greater In double-entry accounting, which is in almost universal 8 BOOKKEEPING AND ACCOUNTING use, there are equal debit and credit entries for every transaction Where only two accounts are affected, the debit and credit amounts are equal If more than two accounts are affected, the total of the debit entries must equal... significantly from the cash basis of accounting, which recognizes revenue and expense generally with the receipt and payment of cash Essential to the accrual basis is the matching of ex­ penses with the revenue that they helped produce Under the accrual sys­ tem, the accounts are adjusted at the end of the accounting period to prop­ erly reflect the revenue earned and the cost and expenses applicable to the... $400 worth of supplies were purchased There were none on hand before This would increase the asset Supplies and decrease the asset Cash At the end of April, when expense and revenue were to be matched and statements prepared, a count of the supplies on hand will be made Assume that the inventory count shows that $250 of supplies are still on hand Then the amount consumed during April was $150 The two... ance of $3,500 on the equipment, what would the opening entry be? 16 BOOKKEEPING AND ACCOUNTING Solution: Cash 12,000 Supplies 1,400 Equipment 22,600 Furniture 10,000 Accounts Payable 3,500 P Wallace, Capital 42,500 Chapter 4 Financial Statements In This Chapter: ✔ Introduction ✔ Income Statement ✔ Accrual Basis and Cash Basis of Accounting ✔ Balance Sheet ✔ Capital Statement ✔ Classified Financial... inserted near the last figure on the side with the larger amount Debits and Credits When an amount is entered on the left side of an account, it is a debit, and the account is said to be debited When an amount is entered on the right side, it is a credit, and the account is said to be credited The abbrevia­ tions for debit and credit are Dr and Cr., respectively Whether an increase in a given item is credited... contribute to revenue In many companies, there are hundreds and perhaps thousands of in­ come and expense transactions in a month To lump all these transactions under one account would be very cumbersome and would, in addition, make it impossible to show relationships among the various items To solve this problem, we set up a temporary set of income and expense ac­ counts The net difference of these accounts,... known as a profit and loss statement, an op­ erating statement, or a statement of operations Accrual Basis and Cash Basis of Accounting Because an income statement pertains to a definite period of time, it be­ comes necessary to determine just when an item of revenue or expense is to be accounted for Under the accrual basis of accounting, revenue is recognized only when it is earned and expense is recognized... “reference book” of the accounting system and is used to classify and summarize transactions and to prepare data for financial statements It is also a valuable source of information for managerial purposes, giving, for example, the amount of sales for the period or the cash balance at the end of the period The Chart of Accounts It is desirable to establish a systematic method of identify­ ing and locating each... cost and expenses applicable to the period Most business firms use the accrual basis, whereas individuals and professional people generally use the cash basis Ordinarily, the cash ba­ sis is not suitable when there are significant amounts of inventories, re­ ceivables, and payables 20 BOOKKEEPING AND ACCOUNTING Balance Sheet The information needed for the balance sheet items are the net balances at the . Schaum’s Easy Outline: Introduction to Psychology Schaum’s Easy Outline: French Schaum’s Easy Outline: German Schaum’s Easy Outline: Spanish Schaum’s Easy Outline: Writing and Grammar SCHAUM’S Easy. Schaum’s Easy Outline: Linear Algebra Schaum’s Easy Outline: Mathematical Handbook of Formulas and Tables Schaum’s Easy Outline: Precalculus Schaum’s Easy Outline: Probability and Statistics. Schaum’s Easy Outline: Statistics Schaum’s Easy Outline: Trigonometry Schaum’s Easy Outline: Business Statistics Schaum’s Easy Outline: Economics Schaum’s Easy Outline: Principles of Accounting