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Tutorial 1 Slides

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rena
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© © All Rights Reserved
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COMM 293

Financial Accounting
Tutorial 1
The accounting equation, assets equal liabilities plus shareholders’ equity, always
holds true.

Assets = Liabilities + Shareholders Equity

What we have What we owe Amounts invested by


shareholders and retained
earnings
The key financial statements are the balance sheet (financial position), income statement (P&L),
statement of changes in equity, and statement of cash flows.

Current liabilities
Current assets e.g. A/P Revenues Operating Activities
e.g. cash, A/R,
Inventory Non-current liabilities
e.g. long term loan Expenses
P&L Investing Activities
e.g. cost of goods sold, SG&A,
e.g. investment in PP&E
interest, and tax expenses
Shareholders’ equity
Non-current assets
e.g. common shares
e.g. PP&E, patents Financing Activities
and retained earnings Profits (Losses)
e.g. common shares issued

Total assets Total liabilities & equity

Balance Sheet Income Statement Cash Flow Statement


D.E.A.D allows to remember that we debit increases in expenses, assets, and dividends. While we
credit increases in all other accounts.

Credit

T Accounts Liabilities
Debit
Debit

Assets
Debits Credits Credit

Credit
Shareholders’ Equity

Debit
Practice problems!
Work on your own or with the people around you!
Questions before problem 1 slide?
Any questions?
Problem Set 1, P1

For each item indicate the type of account (Asset, Liability, Owners’ Equity, Revenue,
Expense) and whether it is reported in the income statement or balance sheet.

1. Retained Earnings
2. Accounts Payable
3. Advertising Expense
4. Cash
5. Accounts Receivable
6. Sales Revenue
7. Equipment
8. Supplies Expense

1 2 3
Problem 1 Problem 2 Problem 3
Problem Set 1, P17

How does the following transaction impact total assets (increased total assets, decreased
total assets, or no change in total assets)?

(a) Issued stock in exchange for cash


(b) Purchased a computer for cash
(c) Purchased office equipment with money borrowed from bank.
(d) Paid the first month's utility bill.
(e) Collected an accounts receivable.
(f) Paid dividends.

1 2 3
Problem 1 Problem 2 Problem 3
Transactions for Tom Petty Company for the month of October are presented below. Journalize
each transaction and identify each transaction by number. You may omit journal explanations.

1. Owner invested $40,000 cash in the business in exchange for stock.

2. Purchased land costing $28,000 for cash.

3. Purchased equipment costing $15,000 for $3,000 cash and the remainder on credit.

4. Purchased supplies on account for $800.

5. Paid $1,000 for a one-year insurance policy.

6. Received $3,000 cash for services performed.

7. Received $4,000 for services previously performed on account.

8. Paid wages to employees for $2,500.

9. Paid dividends of $2,000.

1 2 3
Problem 1 Problem 2 Problem 3
Thank you for attending
Any questions?
Question 1: Problem Set 1, P1 [Answers]

For each item indicate the type of account (Asset, Liability, Owners’ Equity, Revenue,
Expense) and whether it is reported in the income statement or balance sheet.

1. Retained Earnings 1. Owner’s Equity, Balance sheet


2. Accounts Payable 2. Liability, Balance sheet
3. Advertising Expense 3. Expense, Income statement
4. Cash 4. Asset, Balance sheet
5. Accounts Receivable 5. Asset, Balance sheet
6. Sales Revenue 6. Revenue, Income statement
7. Equipment 7. Asset, Balance sheet
8. Supplies Expense 8. Expense, Income statement
Question 2: Problem Set 1, P17 [Answers]

How does the following transaction impact total assets (increased total assets, decreased
total assets, or no change in total assets)?

(a) Issued stock in exchange for cash


Dr. Cash, Cr. Common Stock -> increases assets
(b) Purchased a computer for cash
Dr. Equipment, Cr. Cash -> no change in assets
(c) Purchased office equipment with money borrowed from bank.
Dr. Equipment, Cr. Notes Payable -> increases assets
(d) Paid the first month's utility bill.
Dr. Utility Expense, Cr. Cash -> decreases assets
(e) Collected an accounts receivable.
Dr. Cash, Cr. Accounts Receivable -> no change in assets
(f) Paid dividends.
Dr. Dividends, Cr. Cash -> decreases assets
Question 3: Tom Petty Company [Answers]

Question Account Debit Credit Question Account Debit Credit

1 Cash 40,000 6 Cash 3,000

Common Stock 40,000 Service Revenue 3,000

2 Land 28,000 7 Cash 4,000

Cash 28,000 Accounts Receivable 4,000

3 Equipment 15,000 8 Salaries and Wages Expense 2,500

Cash 3,000 Cash 2,500

Accounts Payable 12,000 9 Dividends 2,000

Cash 2,000
4 Supplies 800

Accounts Payable 800

5 Prepaid Insurance 1,000

Cash 1,000

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