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HFT 2401

HFT 2401. Chapter 2 Accounting for Business Transactions. Basics of Double Entry Accounting. T- Accounts Debits and Credits Posting Trial Balance. Business Events of an Economic Nature are Identified These economic events are reflected in accounts. Account.

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HFT 2401

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  1. HFT 2401 Chapter 2 Accounting for Business Transactions

  2. Basics of Double Entry Accounting • T- Accounts • Debits and Credits • Posting • Trial Balance

  3. Business Events of an Economic Nature are IdentifiedThese economic events are reflected in accounts

  4. Account • The basic storage unit for accounting data • Accounts must be established for each separate classification • Cash • Revenue • Expenses • Assets • Liabilities • Equity

  5. T- Account • Has three basic parts • Title • Left Side • Right Side • Increases are recorded on one side of an account, while decreases are recorded on the opposite • Which side depends on what type of account it is

  6. Debits – Left Side Increase or Decrease Credits – Right Side Increase or Decrease Sample T- Account

  7. Types of Accounts • Asset Accounts – Normal Balance = Debit • Liability Accounts – Normal Balance = Credit • Equity Accounts • Permanent Equity – Normal Balance – Credit • Temporary Owners Equity • Revenue – Normal Balance = Credit • Expense – Normal Balance = Debit

  8. Asset Accounts • Cash • Receivables • Inventories • Prepaid Expenses • Investments • Property, Plant & Equipment (Fixed Assets)

  9. Liabilities • Payables • Accrued Expenses • Unearned Income • Mortgage Payable

  10. Equity • Capital Account – Permanent Equity • Temporary Owners Equity – Revenues & expenses • Retained Earnings

  11. Revenue • Room Sales • Food Sales • Beverage Sales • Gift Shop Sales • Greens Fees • Pro Shop Sales • Banquet Sales • Interest Income • Dividend Income

  12. Expenses • Beverage Expense • Food Expense • Wages Expense • Payroll Taxes • Office Supplies Expense • Electricity • Fuel • Insurance • Property Taxes • Advertising

  13. Debits and Credits • Debit – the left side of any account (dr) • Credit – the right side of any account (cr) • The difference between debits and credits is called the account balance • An account may have either a debit or a credit balance

  14. Double Entry Accounting • Uses T-Accounts • Basic Rules • Asset accounts-increased by debits and decreased by credits • Liability accounts are increased by credits and decreased by debits • Permanent Equity – Increased by credits and decreased by debits • Revenue – Increased by credits and decreased by debits • Expenses – Increased by debits and decreased by credits

  15. Normal Balances of Accounts • Asset Debit • Liability Credit • Owners Equity • Capital Credit • Revenue Credit • Expense Debit • Draw Debit

  16. Ledger / General Ledger • Ledger-A group of accounts • General Ledger – A group of general accounts including accounts for assets, liabilities, owners equity, revenues, expenses and owner draw • Chart of accounts – a complete listing of all accounts • Samples • Assets 100-199 • Liabilities 200-299 • Equity 300-399 • Revenue 400-499 • Expenses 500-599

  17. Journals & Journalizing • Where daily transactions are recorded • Income journal • Payables journal • Expense journal • Payroll journal

  18. Journals • Includes • Date of transaction • Titles of accounts used • Account number • Explanation • Page number / posting reference number • Debit and credit amounts

  19. Posting • Transferring amounts from the individual journals to the general journal • Can be done daily, but must be done at least once every accounting cycle

  20. Trial Balance • A listing of all accounts and their respective debit and credit balances • Sum of all debits must equal sum of all credits

  21. Preparing the Trial Balance • Determine the balance of each account in the ledger • List the accounts and show balances – debits in the left column and credits in the right column • Add the debits • Add the credit • Total must balance

  22. Homework Assignment • Problem 1 • Problem 4 • Problem 5 • Problem 7 • Problem 8 • Problem 9

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