This is an introductory financial accounting course that covers all the financial accounting concepts offered in an introductory financial accounting course at university or college. We begin with an understanding of how the accountant presents the Income Statement and Balance sheet. Then we learn how to record business transactions using Debits and Credits. There are two practice sets of accounting records where you will learn how to keep the books for a service company and again fora merchandise company. The accounting records will be in an excel file that is part of material of this course. We will be continually uploading more problems with video solutions for you to practice.
Learn and Master the Financial Accounting Process.
This course is unique in that it contains a number of excel projects on using a set of accounting records first for a service company and then a merchandise company. There are practice midterm and final exams with marking keys that highlight where an exam marker will award you marks.
If you can get an "A" on the midterm and final exams in this course - you'll get an A from your accounting prof.
This lecture is an overview of accounting. The terms used by the accounting profession are the terms used by all business people hence accounting is referred to as "The Language of Business".
This lecture introduces you to the three different forms that a business can be and pros and cons of each. Also the three types of businesses are introduced.
Learn the three forms of businesses by playing this game
There are many business terms you will learn throughout this course.
This the accounting concepts put into games.
Download this link play the game and learn the different account classifications
In this lecture we are introduced to the income statement and the statement of retained earnings. I would like you to think of the income statement as a report from the company on their operations for a particular period of time.
Some new terms
Profitability is the ability to generate income. Solvency is the ability to pay debts as they become due.
The financial statement that reflects a company’s profitability is the income statement.
The statement of retained earnings shows the change in retained earnings between the beginning and end of a period (e.g. a month or a year).
The balance sheet reflects a company’s solvency and financial position
Learn the different accounts in the income statement and retained earnings statement
On June 1, Vincent Service Co. was started with an initial investment in the company of $22,100 cash. Here are the assets and liabilities of the company at June 30, and the revenues and expenses for the month of June, its first month of operations:
Cash $ 4,600 Notes payable $12,000
Accounts receivable 4,000 Accounts payable 500
Service revenue 7,500 Supplies expense 1,000
Supplies 2,400 Maintenance and repairs expense 600
Advertising expense 400 Utilities expense 300
Equipment 26,000 Salaries and wages expense 1,400
In June, the company issued no additional stock, but paid dividends of $1,400.
(a) Prepare an income statement and a retained earnings statement for the month of
June and a balance sheet as at June 30, 2012.
Fedexpress Delivery was started on May 1 with an investment of $45,000 cash. Following are the assets and liabilities of the company on May 31, 2012, and the revenues and expenses for the month of May, its first month of operations.
Accounts receivable $ 6,200 Notes payable $28,000
Service revenue 10,400 Salaries and wages expense 2,000
Advertising expense 800 Equipment 56,000
Accounts payable 2,400 Maintenance and repairs expense 2,900
Cash 15,800 Insurance expense 400
No additional common stock was issued in May, but a dividend of $1,700 in cash was paid.
(a) Prepare an income statement and a retained earnings statement for the month of
May and a balance sheet at May 31,
Learn the different account classifications in a Classified Balance sheet
This lecture is an example of a typical exam question on the preparation of financial statements. Download Whitton Corporation and do it as an exam question - that is present the financial statements in good form starting with the income statement. Then look at the examiner's marking key and mark yourself. Then view the showme that demonstrates the way I would mark it.
In section 2 I illustrated the income statement, statement of retained earnings and balance sheet. These statements are the end products of the financial accounting process.
The raw data of accounting are the business transactions.
You learned how to record transactions as increases or decreases in the assets, liabilities, and stockholders' equity items of the accounting equation. This procedure showed you how various transactions affected the accounting equation.
An account is a part of the accounting system used to classify and summarize the increases, decreases, and balances of each asset, liability, stockholders' equity item, dividend, revenue, and expense.
To illustrate recording the increases and decreases in an account, texts use the T-account, which looks like a capital letter T. The name of the account, such as Cash, appears across the top of the T. We record increases on one side of the vertical line of the T and decreases on the other side.
ANALYZING TRANSACTIONS WITH DEBITS AND CREDITS
Selected transactions for Ace Place, an interior decorator corporation, in its first month of
business, are as follows.
1. Issued stock to investors for $15,000 in cash.
2. Purchased used car for $10,000 cash for use in business.
3. Purchased supplies on account for $300.
4. Billed customers $3,700 for services performed.
5. Paid $200 cash for advertising start of the business.
6. Received $1,100 cash from customers billed in transaction (4).
7. Paid creditor $300 cash on account.
8. Paid dividends of $400 cash to stockholders.
Prepare the debit–credit journal entry for each transaction.
This information relates to Wilson Real Estate Agency.
Oct. 1 Stockholders invest $30,000 in exchange for common stock of the corporation.
2 Hires an administrative assistant at an annual salary of $36,000.
3 Buys office furniture for $3,800, on account.
6 Sells a house and lot for M.E. Petty; commissions due from Petty, $10,800
(not paid by Petty at this time).
10 Receives cash of $140 as commission for acting as rental agent renting an
27 Pays $700 on account for the office furniture purchased on October 3.
30 Pays the administrative assistant $3,000 in salary for October.
Prepare the debit–credit journal entries for each transaction.
The May transactions of ABC Corporation were as follows.
May 4 Paid $700 due for supplies previously purchased on account.
7 Performed advisory services on account for $6,800.
8 Purchased supplies for $850 on account.
9 Purchased equipment for $1,000 in cash.
17 Paid employees $530 in cash.
22 Received bill for equipment repairs of $900.
29 Paid $1,200 for 12 months of insurance policy. Coverage begins June 1.
Prepare the debit–credit journal entries for each transaction.
Redix Finance Company, which provides financial advisory services, engaged in the
following transactions during May 2010:
May 1 Received 300,000 cash for shares of capital stock issued when company was organized.
2 The company borrowed 40,000 from the bank on a note.
7 The company bought 182,400 of computer equipment for cash.
11 Cash received for services performed to date was 15,200.
14 Services performed for a customer who agreed to pay within a month were 10,000.
15 Employee wages were paid, 13,200.
19 The company paid 14,000 on the note to the bank.
31 Interest paid to the bank for May was 140.
31 The customer of May 14 paid 3,200 of the amount owed to the company.
31 An order was received from a customer for services to be rendered next week, which will be billed at 12,000.
Journalize the above transactions and post to the following accounts in the ledger. Cash, Accounts
Receivable, Equipment, Notes Payable, Capital Stock, Service Revenue, Salary Expense, Interest expense
Sutherland Oasis was started on April 1 by David Sutherland. These selected events and transactions occurred during April.
Apr. 1 Stockholders invested $70,000 cash in the business in exchange for common stock.
4 Purchased land costing $50,000 for cash.
8 Purchased advertising in local newspaper for $1,200 on account.
11 Paid salaries to employees $2,700.
12 Hired park manager at a salary of $3,600 per month, effective May 1.
13 Paid $7,200 for a 1-year insurance policy.
17 Paid $600 cash dividends.
20 Received $6,000 in cash from customers for admission fees.
25 Sold 100 coupon books for $90 each. Each book contains ten coupons that entitle the holder to one admission to the park. (Hint: The revenue is not earned until the coupons are used.)
30 Received $7,900 in cash from customers for admission fees.
30 Paid $400 of the balance owed for the advertising purchased on account on April 8.
The company uses the following accounts: Cash, Prepaid Insurance, Land, Accounts Payable,
Unearned Service Revenue, Common Stock, Dividends, Service Revenue, Advertising Expense,
and Salaries and Wages Expense.
Adjusting entries are journal entries made at the end of an accounting period or at any time financial statements are to be prepared to bring about a proper matching of revenues and expenses.
Adjusting entries fall into two broad classes: deferred (meaning to postpone or delay) items and accrued (meaning to grow or accumulate) items. Deferred items consist of adjusting entries involving data previously recorded in accounts. These entries involve the transfer of data already recorded in asset and liability accounts to expense and revenue accounts, respectively. Accrued items consist of adjusting entries relating to activity on which no data have been previously recorded in the accounts.
The matching principle requires that expenses incurred in producing revenues be deducted from the revenues they generated during the accounting period. The matching principle is one of the underlying principles of accounting. This matching of expenses and revenues is necessary for the income statement to present an accurate picture of the profitability of a business.
Adjusting entries reflect unrecorded economic activity that has taken place but has not yet been recorded. Why has the company not recorded this activity by the end of the period? One reason is that it is more convenient and economical to wait until the end of the period to record the activity. A second reason is that no source document concerning that activity has yet come to the accountant’s attention.
Try this problem on adjusting entries
The work sheet is a columnar sheet of paper or a computer spreadsheet on which accountants summarize information needed to make the adjusting and closing entries and to prepare the financial statements. Usually, they save these work sheets to document the end-of-period entries. A work sheet is only an accounting tool and not part of the formal accounting records. Therefore, work sheets may vary in format; some are prepared in pencil so that errors can be corrected easily. Other work sheets are prepared on personal computers with spreadsheet software. Accountants prepare work sheets each time financial statements are needed—monthly, quarterly, or at the end of the accounting year.
In Section 2, you learned that revenue, expense, and dividends accounts are nominal (temporary) accounts that are merely subclassifications of a real (permanent) account, Retained Earnings. You also learned that we prepare financial statements for certain accounting periods. The closing process transfers (1) the balances in the revenue and expense accounts to a clearing account called Income Summary and then to Retained Earnings and (2) the balance in the Dividends account to the Retained Earnings account. The closing process reduces revenue, expense, and Dividends account balances to zero so they are ready to receive data for the next accounting period.
Accountants may perform the closing process monthly or annually. The Income Summary account is a clearing account used only at the end of an accounting period to summarize revenues and expenses for the period.
After this video I would like you to follow through with me a demonstration problem - Lopez Delivery. In the demo I will demonstrate the accounting cycle.
First print off the Demo problem, journal sheet and T accounts and try and journalise the transactions post to the T and come up with a trial balance. Then go through the videos Step1, Step 2&3 and Step 4 &5.
An introduction to a business that requires someone to keep the accounting records. Download the case and the excel spreadsheet. Try the case on your own then watch the videos.
In Part 2 your journalise and post to the ledger and take atrial balance.
In Part 3 you complete the worksheet and prepare financial statements
This is a typical 2 hour midterm exam in an Introductory Financial Accounting course. Print if off and complete it to the best of your ability. Then check the solution.
This is one midterm exam with video solution and marking key.This is question 1 on presentation of financial statements. Download the exam and try on your own - then watch the video and mark your own paper.
Accounting theory is "a set of basic concepts and assumptions and related principles that explain and guide the accountant's actions in identifying, measuring, and communicating economic information".
Understanding the theory behind the accounting process, however, helps one make decisions in diverse accounting situations. Accounting theory provides a logical framework for accounting practice.
I am a Professor of Accounting with over thirty-five years experience teaching accounting to college students, undergraduate and MBA university students as well as CMA candidates seeking to earn their Professional Certified Management Accountant Designation.
I achieved my Certified Management Accountant Designation 40 years ago. With that I then earned my Masters of Business Administration degree and later a PHD in accounting.
I have developed and will continue to develop a number of courses in both Financial Accounting and Management Accounting for you - a college or university student (or even a secondary student) to help you to achieve the best result in your undergraduate accounting course. If you get an "A" from me I guarantee you will get an "A" from your accounting prof.
For Graduate students, I have a course to prepare those of you who do not have a business degree for the Masters of Business Administration. Also I have a course at the masters level called Managerial Accounting.
For CMA Candidates, I have courses to prepare you to successfully pass their Certified Management Accounting Exams offered by Institute of Management Accountants.