Financial accounting chapter 2 homework

In Chapter 1, we defined Accounting as an information system that measures, processes, and communicates financial information. For the next few chapters, we focus on the measurement and processing pieces of this definition, and focus our attention primarily on how we process accounting information system.

Chart of Accounts -- The chart of accounts essentially represents the table of contents for a business and shows the accounts used in that business. We referenced page 91 in the text as a good starting point for a generic chart of accounts in a business. We noted that all charts of accounts follow the following order: Assets, Liabilities, Stockholders' Equity, Revenues, and Expenses see account order and descriptions on page General Journal -- The general journal is referred to as the "book of original entry" and represents a day-by-day chronological summary of the business transactions.

The general journal is the daily journal of what happened in the business. We referenced the bottom of page as an example of journal entries in the general journal also see the review problem journal entries on page General Ledger -- The general ledger shows account detail for each account in our business.

In class, we analogize the general ledger as a filing cabinet that represents the entire set of accounts for our business and we analogize each ledger account cash, accounts receivable, equipment, accounts payable, common stock, revenues, rent expense, etc.

We note that each file account has two sides, the debit left side, and the credit right side. Entries from the general journal are posting individually to the general ledger.

If the postings to the general ledger are up to date, we can go to any account in our bookkeeping system and see the activity. We noted page in the text as a good example of two general ledger accounts accounts payable and utilities expense.

Also note the general ledger for the Review Problem on page In our discussion of the above three elements of a record keeping system we should further discuss several key ideas.

The Theory of Debits and Credits -- Debits and Credits become necessary because we use a two-sided bookkeeping system called the double-entry system of accounting.

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This system is derived from our demonstration of "financial position" in Chapter 1 and from our expanded accounting equation shown on page 93 in Chapter 2. The expanded accounting equation provides the rationale and logic for the theory of debits and credits and allows us to test the impact of any business transaction on financial position:.

The Expanded Accounting Equation. The basic rule is that all journal entries must balance - debits left must equal credits rightand the sum total of all ledger balances must balance - debits left must equal credits right. We call the increase side of the account the normal balance see Exhibit 3 on page T-Accounts -- We use a T to represent each individual account in the ledger. This is our simplistic way of showing left and right and the corresponding effects of business transactions on financial position as a whole.

The Trial Balance follows the order of the chart of accounts and the general ledger assets, liabilities, stockholders' equity, revenues, expenses. We must note that just because the Trial Balance is in balance does not necessarily mean that our bookkeeping system is correct. Things like omissions of transactions, posting numbers to wrong accounts, posting wrong numbers to accounts, etc.

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See Exhibit 7 on page as an example of a Trial Balance. If you understand these, you will be able to think through all of the transactions presented in your homework and on the test. Recognition -- The key idea here is when do we recognize a transaction?

The answer is "when it impacts financial position. Receivables get recorded when we have the right to receive payment, and payables get recorded when we have the obligation for payment. We will discuss this more later. Valuation -- The key idea here relates to which costs get included in a transaction and which costs do not.

For us right now, this is easy because we are given the dollar value of the transaction, which is the one we will use. Later Chapter 9 we will discuss valuation in more detail.What is a non-current asset…. Relate your explanation to the audit functions in your organization, or an organization with which you are familiar. Glover and Douglas F. As we proceed, we will adopt several different points of view. Preparers include accountants who work for companies that must produce….

Essays Essays FlashCards. Browse Essays. Show More. Generally, a dollar sign is shown only for the first item in the column and for the total of that column. A single line a totaling rule is placed under the column of figures to be added or subtracted. Total amounts are double-underlined to indicate they are final sums. Class Exercise — 1 For each of the following accounts indicate the effect of a debit or a credit on the account and the normal balance.

Salary expense. Accounts receivable.

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Service revenue. Smith, Capital. Smith, Drawing. Identify each transaction by number. You may omit explanations of the transaction. Purchased month insurance policy for cash. Paid weekly payroll. Read More.

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Words: - Pages: 5. Ifrs Paper comprehensive analysis of financial accounting topics involved in preparing financial statements and in external reporting. Words: - Pages: 8. Words: - Pages: Words: - Pages: 3. Words: - Pages: 6. Popular Essays. Ready To Get Started? Create Flashcards. Discover Create Flashcards Mobile apps.Each excel link will download the file containing a spreadsheet for the problem and a template worksheet on which you can prepare the solution electronically.

If you see a light bulb icon on a worksheet, just mouse over above the icon and a comment box will appear. The comments include useful suggestions for improving your spreadsheet skills. You may not post or redistribute, electronically or otherwise, any such solution material. Violation of this policy constitutes a copyright violation. Alternative problems, with solutions, may be found at our partner website Bookboon.

financial accounting chapter 2 homework

Video solutions to selected problems are available to students enrolling in the online course. The pdf version of the solutions manual also includes links to the video solutions.

You can purchase the solutions manual in the bookstore. Problems - Chapter 2. The nature of an action to an account to indicate an increase assets, expenses, and dividends or decrease liabilities, equity, and revenue ; usually left-justified in an entry. The nature of an action to an account to indicate an increase liabilities, equity, and revenue or decrease assets, expenses, and dividends ; usually right-justified in an entry.

Problems - Chapter 2

The process of transferring journal entry effects into the respective general ledger accounts. A record that is kept for each asset, liability, equity, revenue, expense, and dividend component of an entity. An abstract representation of an account, with the left side of the "T" representing debits and the right side credits.

Visit the Bookstore. Trial balance preparation. The value of a chart of accounts. Constructing a Trial Balance from the Ledger.Can you conceive of other possible methods for recording changes in accounts? What does journalizing mean? Give an example of a compound entry in the general journal. How do these two compare with a book and its table of contents? What are the purposes of this trial balance? What are some possible causes of this difference?

If the difference between the columns is divisible by 9, what types of errors are possible? Instead of debiting the Store Equipment account, the debit was made to Delivery Equipment. Of what help will the trial balance be in locating this error?

Financial Accounting Chapter 2 Assignment Essay

The student took an examination in a room where the windows were on the other side of the room and became confused and consistently reversed debits and credits. If there were no existing balances in any of the accounts to begin with, would the error prevent the student from preparing correct financial statements? Exercise C Prepare the journal entry required for each of the following transactions:.

Then show how the journal entry would be posted to T-accounts. You need not include explanations or account numbers. Use the letter of the transaction in place of the date. Include an explanation for each entry. Write the letter of the transaction in the account before the dollar amount. Determine a balance for each account. Prepare the journal entries required to record these transactions in the general journal of the company.

The following account numbers and titles constitute the chart of accounts for the company:.In what respects would you agree with this description? How might you argue that this description is deficient?

On what aspect of a business does the balance sheet provide information? On what aspect of a business does this statement provide information? At the first meeting you attend, mention is made of building a new church. What accounting information would the board need in deciding whether or not to go ahead? At what amount should the equipment be recorded? How is the cost to acquire an asset determined? Royals Palm, Inc. Dan and Den, Inc.

Exercise 3. Complete missing amounts in fundamental accounting equation for several businesses:. Prepare a transaction analysis for the January transactions.

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Remember to prove the accounting equation at the end. Exercise 5. Exercise 6. Exercise 7. Using the information from Exercises 5 and 6, prepare the Balance Sheet for December Skip to main content.

Chapter 2: Accounting Principles and Practices. Search for:.

financial accounting chapter 2 homework

How are they similar? How are revenues measured? How are expenses measured? What use does the accountant make of transactions? Why must it always balance? Increase both an asset and a liability. Increase one asset and decrease another asset. Decrease both a liability and an asset. Increase both an asset and retained earnings.

Decrease both an asset and retained earnings.

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Increase a liability and decrease retained earnings. Perez Company had the following transactions during January: 1. Prepare income statement at the end of December Prepare statement of retained earnings equity at the end of December Prepare balance sheet at the end of December Licenses and Attributions.The Company uses a perpetual inventory system. For specific identification, ending inventory consists of units, where are from the January 30 purchase, 5 are from the January 20 purchase, and 30 are from beginning inventory.

Complete the table to determine the cost assigned to ending inventory and cost of goods sold using specific identification. Determine the cost assigned to ending inventory and to cost of goods sold using weighted average. Acceptable methods of assigning specific costs to inventory and cost of goods sold include all of the following except :. The beginning inventory balance is correct. Given this information, the correct gross profit would be:. Monarch Company uses a weighted-average perpetual inventory system, and has the following purchases and sales:.

What is the value of ending inventory? Round average cost per unit to 2 decimal places. Using the FIFO perpetual inventory method, what amount will be reported as cost of goods sold for the 12 units that were sold?

financial accounting chapter 2 homework

On December 31, there were 26 units remaining in ending inventory. Assume all sales were made on the last day of the month.

financial accounting chapter 2 homework

If a period-end inventory amount is reported in error, it can cause a misstatement in all of the following except:. Salmone Company reported the following purchases and sales of its only product. Salmone uses a perpetual inventory system. Determine the cost assigned to cost of goods sold using FIFO. Determine the cost of the inventory acquired from the estate. Laker Company reported the following January purchases and sales data for its only product.

Determine the cost assigned to ending inventory and to cost of goods sold using FIFO. Determine the cost assigned to ending inventory and to cost of goods sold using LIFO.

Hemming Co. Determine the costs assigned to ending inventory and to cost of goods sold using FIFO. Determine the costs assigned to ending inventory and to cost of goods sold using LIFO. Compute the gross margin for each method. Use the following information for Davis Company to compute inventory turnover for Year 2.

Year 2 Year 1 Cost of goods sold, Ending inventory 47, 49, 5.

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January 17 units were sold. January 29 units were sold. Acceptable methods of assigning specific costs to inventory and cost of goods sold include all of the following except : LIFO method. FIFO method. Specific identification method. Weighted average method. Retail method. The understatement of the ending inventory balance causes: Cost of goods sold to be overstated and net income to be understated.

Cost of goods sold to be overstated and net income to be overstated. Cost of goods sold to be understated and net income to be understated. Cost of goods sold to be understated and net income to be overstated. Cost of goods sold to be overstated and net income to be correct. January 12 12 units were sold.Chapter 2 — Measuring Business Transactions. The reality check to use is if you didn't have a computer pre-formatting things and guiding you, could you still solve the problem.

Another good reality check would be to review the homework with pencil and paper. Accounting Equation Problems. Following are the total assets and liabilities at the beginning and the end of the year for Guitar Corporation. You may be trying to access this site from a secured browser on the server.

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Skip to main content. To navigate through the Ribbon, use standard browser navigation keys. To activate a command, use Enter. Site Actions This page location is:. Sign In. Identify and define profitability and liquidity as important business goals.

Furthermore, be able to justify which financial statement s is most useful for each goal. Identify and define financing, investing, and operating activities as key business activities. Be able to give examples of each. Explain the difference between Financial and Management accounting and give examples of the types of information each provides. Identify the key users of accounting information and explain the specific types of information each group needs.

Define business transaction and the separate entity and explain the importance of each of these concepts as they relate to accounting. Explain the difference between a sole proprietorship, partnership, and corporation.

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