DEALER FINANCIAL STATEMENT

1 Statement in Financial Position 3 Balance Sheet

Debit accounts: Drawings, Expenses, Assets
2 Changes in Equity 4 Cash Flow
•Go on “left”

•Debits increase these balances, Credits decrease them

ASSET (Dr)
Credit accounts: Liabilities, Equity, Revenue/Capital
Current Assets: short-term assets that are expected to be used up or spent within 12 months in a business
•Go on “right”
Cash: the money you have in your business bank account.
•Credits increase these balances, and Debits decrease them
Accounts receivable: any payments that your clients and customers owe you. (sold-seller)
Credit – sources
Merchandise Inventory: any goods you have in stock that you intend to sell, have not been sold.
Debit – destinations

Drawings - assets such as Cash or Goods which are withdrawn from a business by the owner(s) for their personal use Supplies/Prepaid Expense: future expenses that are paid in advance

Expenses - Pay the business’s bills like rent or employee salaries

Non-Current Asset: long-term asset (1 year and up)
Assets - Purchase assets, like a laptop to work on Property and equipment: any buildings or tools that you need to operate your business (Equipment, Land, Building,
Furniture & Fixtures)
Liabilities - Borrowed from a third-party like a bank

*Obligations – you have no choice LIABILITIES (Cr)

*Responsibilities – expectations from others Current Liability: a company’s short-term financial obligations that are due within one year or within a normal operating
cycle
--It will be an obligation once you accepted a responsibility (doesn’t comply with the obvious, ex: family matters)

Equity - Owner invested into business from his/her own pocket Accounts payable: payments you owe your suppliers, you’re a buyer-bought

Revenue - Business earned it by selling a product or service

Bank loans: the principal you owe investors
ACCOUNTING CYCLE
Salaries and wages payable: what you’ve agreed to pay your employees in the future, but haven’t paid out yet.
1 Identifying Transaction 4 Trial Balance 7 Financial Statement

2 Journal Entry 5 Adjusting Journal Entry 8 Closing Entry Non-current liabilities: long-term debt that ranges beyond 12 months.

3 Posting to the Ledger 6 Worksheet 9 Post-Closing Trial Balance

Notes Payable: a general ledger liability account in which a company records the face amounts of the promissory notes that it
10 Reversing Entries has issued

EQUITY (Cr)
(Cr) Capital: whatever is left over from the money that the company’s founders initially invested in the business.

(Dr) Drawings: assets such as Cash or Goods which are withdrawn from a business by the owner(s) for their personal use Delivery Expense: represents cost of gas, oil, courier fees, and other costs incurred by the business in transporting the
goods sold to the customers. Delivery expense is also known as Freight-out.
Capital + Income = Equity Depreciation Expense: refers to the portion of the cost of fixed assets (property, plant, and equipment)

Preferred stock: like regular stock, but it entitles you to some extra perks. (People who hold preferred stock usually have first Insurance Expense: insurance premiums paid or payable to an insurance company who accepts to guarantee the business
dibs on profits.) against losses from a specified event

Retained earnings: any profits that owners decided to keep in the company for future spending, rather than pay out to Interest Expense: cost of borrowing money
themselves.
Repairs and Maintenance: cost of repairing and servicing certain assets such as building facilities, machinery, and
equipment
REVENUE/CAPITAL/INCOME (Cr)
Service Revenue: revenue earned from rendering services. Supplies Expense: cost of supplies (ball pens, ink, paper, spare parts, etc.) used by the business. Specific accounts may be
in place such as Office Supplies Expense, Store Supplies Expense, and Service Supplies Expense. (keywords)
Sales: revenue from selling goods to customers.
•Sales Returns and
Allowances - also a contra-revenue account and therefore shown as a deduction to Sales
•Sales Discounts - a contra-revenue account that represents reduction in the amount paid by customers for early payment *Cash will always be credited in expenses

Sales – Sales Return – Sales Discount = Net Sales

Rent Income: earned from leasing out commercial spaces or properties.

Interest Income: revenue earned from lending money or investing in debt securities.

Dividend Income: revenue earned from investing in equity shares or receiving dividends from associates.

Professional Income: revenue earned from providing professional services such as accounting, legal, consulting, etc.

EXPENSES (Dr)
Salaries Expense: compensation to employees for their services to the company

Advertising: costs of promoting the business such as those incurred in newspaper publications, television and radio
broadcasts, billboards, flyers, etc.

Rent: cost paid or to be paid to a lessor for the right to use a commercial property such as an office space, a storeroom, a
building, etc.

Utilities Expense: water and electricity costs paid or payable to utility companies

Cost of Sales: it represents the value of the items sold to customers before any mark-up.
•Purchases – cost of merchandise acquired that are to be sold in the normal course of business.
•Freight in – If the business shoulders the cost of transporting the goods it purchased.
 CHART OF ACCOUNTS JOURNAL ENTRIES

No. Account Title Account To Increase Entries Dr Cr

Purchased - Cash (periodic)
100 Current Asset Debit
101 Cash Asset Debit Purchase/Asset xxx
102 Accounts Receivable Asset Debit Cash xxx
Purchased – On Account (periodic)
103 Merchandise Inventory Asset Debit
104 Supplies/Prepaid Asset Debit Purchase/Asset xxx
Expense Cash xxx
Purchased – Cash (perpetual)
Non-current Asset
105 Land Asset Debit Inventory/Asset xxx
Cash xxx
106 Building Asset Debit
Purchased – On Account (perpetual)
107 Equipment Asset Debit
108 Furniture and Fixtures Asset Debit Inventory/Asset xxx
Cash xxx
200 Liabilities Credit Sold – Cash (periodic)
201 Accounts Payable Liabilities Credit
202 Notes Payable Liabilities Credit Cash xxx
Sales xxx
203 Loan Payable Liabilities Credit Sold – On Account (periodic)
300 Equity
301 Capital Equity Credit Accounts Receivable xxx
Sales xxx
302 Drawing Equity Debit Sold – Cash (perpetual)
400 Income
Cash xxx
401 Sales/Revenue Income Credit Sales xxx
402 Sales Return Income Debit
403 Sales Discount Income Debit Cost of Good Sold xxx
Merchandise Inventory xxx
400 Expenses/Cost of Good Debit Sold – On Account (perpetual)
Sale
401 Purchase Expenses Debit Account Receivable xxx
Sales xxx
402 Purchase Return Expenses Credit
403 Purchase Discount Expenses Credit Cost of Good Sold xxx
404 Salary Expenses Debit Merchandise Inventory xxx
Payment of Buyer
405 Advertising Expenses Debit
406 Utilities Expenses Debit Accounts Payable xxx
Cash xxx
407 Rent Expense Expenses Debit Payment Received of Seller

Cash xxx
Account Receivable xxx
Investment of Owner
Cash xxx
Capital (----) xxx Freight In xxx
Withdrawal of Owner Cash xxx
Freight of Seller, Prepaid, Shipping Point (perpetual)
Drawing (----) xxx
Cash xxx Account Receivable xxx
Return of Purchase Goods – Cash (periodic) Cash xxx
Freight of Seller, Collect, Shipping Point (perpetual)
Cash xxx
Purchase Return xxx NO ENTRY
Return of Purchase Goods – Cash (periodic) Freight of Seller, Prepaid, Destination, Point
(perpetual)
Sales Return xxx xxx
Cash xxx Freight Out xxx
Return of Purchase Goods – On Account (periodic) Cash
Freight of Seller, Collect, Destination, Point (perpetual)
Accounts Payable xxx
Purchase Return xxx NO ENTRY
Return of Purchase Goods – On Account (periodic) Discount of Payment, Buyer (periodic)

Sales Return xxx Accounts Payable xxx

Accounts Receivable xxx Purchase Discount xxx
Return of Sold Goods – Cash (perpetual) Cash xxx
Discount of Payment, Seller (periodic)
Cash xxx
Merchandise Inventory xxx Cash xxx
Return of Sold Goods – Cash (perpetual) Sales Discount xxx
Accounts Receivable xxx
Merchandise Inventory xxx Discount of Payment, Buyer (perpetual)
Cash xxx
Return of Purchase Goods – On Account (perpetual) Accounts Payable xxx
Merchandise Inventory xxx
Accounts Payable xxx Cash xxx
Merchandise Inventory xxx Discount of Payment, Seller (perpetual)
Return of Purchase Goods – On Account (perpetual)
Cash xxx
Merchandise Inventory xxx Merchandise Inventory xxx
Accounts Receivable xxx Accounts Receivable xxx
Freight of Buyer, Prepaid, Shipping Point (periodic) Paid of Expenses

Freight In xxx Expenses xxx

Accounts Payable xxx Cash xxx
Freight of Buyer, Collect, Shipping Point (periodic) Borrowed Money from Bank (w/ promissory note)

Freight In xxx Cash xxx

Cash xxx Notes Payable xxx
Borrowed Money from Bank (w/o promissory note)
Freight of Buyer, Prepaid, Destination, Point (periodic)
Cash xxx
NO ENTRY Loans Payable xxx
Freight of Buyer, Collect, Destination, Point (periodic) Interest of Investment (accrued)
Interest Receivable xxx
Interest Revenue xxx
Interest Earned

Cash xxx
Interest Receivable xxx
Revenue Earned (accrued)

Receivable xxx
Revenue xxx

Cash xxx
Receivable xxx
Expenses (incurred)

Expenses xxx
Payable xxx

Payable xxx
Cash xxx
Depreciation

Depreciation Expense – Asset xxx

Accumulated Depreciation xxx
Prepaid (Asset of Business)

Prepaid Expenses xxx

Cash xxx

Expenses xxx
Prepaid Expenses xxx
Unearned Revenue (has not performed)

Cash xxx
Unearned Revenue xxx

Unearned Revenue xxx

Service Revenue xxx
Service Perform (Cash)

Cash xxx
Service Revenue xxx

Service Perform (On Account)

Account Receivable xxx

Service Revenue xxx