Chapter 3 Accounting cycles, Accounting Entry Principle, and Transaction Analysis

Transcription

1 Chapter 3 Accounting cycles, Accounting Entry Principle, and Transaction Analysis 2/2017 Sub Topics 1. Accounting Cycles 2. Accounting Entry Principle 3. Transaction Analysis 1

2 1. ACCOUNTING CYCLE Identify and record transactions Chapter 3 Prepare Financial Statements Posting to Ledgers and Journals Chapter 4&5 Accounting Adjustment Prepare Trial Balance 2

3 1. ACCOUNTING CYCLE Identifying and Recording Process Identify and Analyze Transaction Posting in General Journal (GJ) Posting in General Ledger (GL) Prepare Trial Balance 3

4 2. ACCOUNTING PRINCIPLE Accrual Basis Cash Basis Revenues are reported on the income statement when they are earned (or when services are performed). Expenses are reported on the income statement in the period when they occur. Revenues are reported on the income statement in the period in which the cash is received. Expenses are reported on the income statement in the period when the cash is paid out. 4

5 2. ACCOUNTING PRINCIPLE Accounting Equation Sole Proprietorship Assets Liabilities Equity Owner s Capital + Revenues Expenses Owner s Withdrawals 5

6 2. ACCOUNTING PRINCIPLE Accounting Equation Partnership Assets Liabilities Equity + Unappropriated Retained Earnings Partners Capital Revenues Expenses Share of Profit 6

7 2. ACCOUNTING PRINCIPLE Accounting Equation Company Limited Assets Liabilities Equity + Retained Earnings Share Capital Revenues Expenses Dividend Expenses 7

8 2. ACCOUNTING PRINCIPLE Assets Liabilities Equity Share Capital + Retained Earnings Revenues _ Expenses _ Dividends Revenue Profit RE Equity Expense Profit RE Equity 8

9 3. TRANSACTION ANALYSIS Transactions are a business s economic events recorded by accountants TED Company buys a computer 40,000 Baht from BEST Company. TED has not paid yet. Asset (Computer) increase 40,000 Baht Liability (Account Payable) increase 40,000 Baht TED Company pays 30,000 Baht to BEST Company for Computer bill. Asset (Cash) decrease 30,000 Baht Liability (Account Payable) decrease 30,000 Baht 9

10 3. TRANSACTION ANALYSIS Types of Transactions 1. External Transactions mean business transaction with outsiders e.g. sales to customer, purchase from suppliers 2. Internal Transactions mean business transaction within the entity e.g. salary to workers, bonus to management **Remark** Events which are not transaction and do not need to be recorded Have no effect on assets, liabilities, or equity E.g. get quotation price from suppliers, sign contract with new employees 10

11 3. TRANSACTION ANALYSIS Question: Are the following events recorded in the accounting records? Event Purchase Machines Discuss product design with customer Pay rent Criterion Is the financial position (assets, liabilities, or equity) of the company changed? Record/ Don t Record 11

12 3. TRANSACTION ANALYSIS Steps in the recording process Analyze each transaction Enter transaction in a journal Transfer journal information to ledger accounts Business documents, such as a sales slip, a check, a bill, or a cash register tape, provide evidence of the transaction. 12

13 3. TRANSACTION ANALYSIS Double-Entry Transaction Every transaction is recorded in at least two accounts Assets = Liabilities + Equity Debit and Credit Accounting System Balance! 13

14 Example of transaction analysis ACC Company Example 1 Ten shareholders pay 100,000 baht cash in total to buy 10,000 shares of ACC Company. Each share has 10 Baht value. Assets = Liabilities + Equity Cash = - + Share Capital +100,000 = ,000 14

15 Example of transaction analysis ACC Company Example 2 ACC Company purchases office supplies 7,000 Baht cash. Assets = Liabilities + Equity 15

16 Example of transaction analysis ACC Company Example 3 ACC Company buys equipment amount of 120,000 Baht from XXX Company. ACC Company pays cash 80,000 baht today and will pay the remaining amounts later. Assets = Liabilities + Equity 16

17 Example of transaction analysis ACC Company Example 4 ACC Company receives cash 60,000 Baht from consulting service to TTT Company Assets = Liabilities + Equity Revenue Profit RE Equity Expense Profit RE Equity 17

18 Example of transaction analysis ACC Company Example 5 ACC Company pays 40,000 remaining amount to XXX Company from Example 3. Assets = Liabilities + Equity 18

19 Example of transaction analysis ACC Company Example 6 ACC Company provides training service to BAA Company. ACC Company has not received cash from billing invoice to BAA Company amounting to 50,000 Baht. BAA Company will pay to ACC Company later. Assets = Liabilities + Equity Revenue Profit RE Equity Expense Profit RE Equity 19

20 Example of transaction analysis ACC Company Example 7 ACC Company pays 3,000 Baht cash for electricity, 6,000 Baht cash for rental expenses, and 11,000 Baht cash for workers salary. Assets = Liabilities + Equity Revenue Profit RE Equity Expense Profit RE Equity 20

21 Example of transaction analysis ACC Company Example 8 ACC Company receives cash 25,000 Baht from BAA Company (Example 6). BAA Company will pay the remaining amount to ACC Company next month. Assets = Liabilities + Equity Revenue Profit RE Equity Expense Profit RE Equity 21

22 Example of transaction analysis ACC Company Example 9 ACC Company receives cash 9,000 Baht from renting the company area to a coffee shop. Assets = Liabilities + Equity Revenue Profit RE Equity Expense Profit RE Equity 22

23 Example of transaction analysis ACC Company Example 10 ACC Company pays cash dividend to ten shareholders at 3 Baht per share. Total cash dividend of this year is 30,000 Baht Assets = Liabilities + Equity 23

24 Summary transaction analysis ACC Company Assets = Liabilities + Equity Cash Accounts Receivable Office Supplies Equipment Accounts Payable Share Capital (1) + 100, ,000 (2) = (3) = (4) = (5) = (6) = (7) = (8) = (9) = (10) = รวม = 169,000 = 169,000 Revenue Expenses Dividend 24