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8/3/2019 LT3 Reviewer

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Accounting 10: Principles of AccountingFirst Semester 2011-2012

Sections E, F, K, M, QLT 3 Reviewer

CASH AND EQUIVALENTS Currency and deposits Checks (except NSF, post-dated, and stale checks) and money orders Money market instruments due to mature within 90 days after purchase

*In class, we said 90 days from the date of the financial statement. That is how they do itin the US. In RP, it is from the date of purchase.

BANK RECONCILIATION

BANK BOOK

Outstanding Checks -

D-I-T +

NSF Checks + Fee- A/R Check + Fee

Cash Check + Fee

Interest+ Cash Interest Amount

Interest Revenue Interest Amount

Collections - Fee

+ CashCollection Expense

N/RInterest Revenue

Errors +/- +/-

Charges

- Miscellaneous Expenses

Cash

BAD DEBT

DIRECT WRITE-OFF ALLOWANCE METHOD

Set-up allowance account asan adjusting entry at the endof the period

-BDE

ADA

Write-off BDE

A/RADA

A/R

Recovery

A/R

BDECash

A/R

A/R

ADACash

A/R

A/R, end = A/R, beg + Credit Sales – Collections – Write-offs*Recoveries do not affect A/RADA, end = ADA, beg + Recoveries – Write-offs + BDE (Additional ADA)NRV = A/R – ADA



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Percent-of-salesPercent-of-ReceivablesAging of Receivables

Step 1:

BDE = current period’s sales x %uncollectible

Target/Ending/Required/Desired ADA =% uncollectible x ending A/R (orgrouped by age bracket, for aging of

receivables)Step 2: Ending ADA = leftover ADA + BDE BDE = target ADA – leftover ADA

DISCOUNTING NOTES RECEIVABLESMAKER PAYEE/ENDORSER BANK/ENDORSEE

With recourse

Discounting thenote at an expense

-Cash Net Proceeds Int. Exp. P - NP

N/R-Disc. Principal

N/R Principal Int. Rev. P – NP Cash Net Proceeds

Honored Note

N/P Principal

Int. Exp. MV - P Cash Maturity Value

N/R-Disc. Principal N/R Principal

Cash Maturity Value

N/R Principal Int. Rev. MV - P

Dishonored Note -

N/R-Disc. Principal N/R Principal

A/R MV + Protest Fee Cash MV + Protest Fee

Cash MV + Protest Fee N/R Principal Int. Rev.Sve. Rev. Pro. Fee

Discounting thenote with revenue

-Cash Net Proceeds

N/R-Disc. Principal Int. Rev. NP - P

N/R Principal Int. Rev. NP – P

Cash Net Proceeds

Without recourse

Discounting thenote at an expense

- Cash Net Proceeds Int. Exp. P - NP N/R Principal

N/R Principal Int. Rev. P – NP Cash Net Proceeds

Honored NoteN/P Principal Int. Exp. MV - P

Cash Maturity Value -

Cash Maturity Value N/R Principal Int. Rev. MV - P

Dishonored Note - -

A/R MV + Protest Fee N/R Principal Int. Rev.Sve. Rev. Pro. Fee

Discounting thenote with revenue -

Cash Net Proceeds

N/R Principal Int. Rev. NP - P

N/R Principal

Int. Rev. NP –

P Cash Net Proceeds



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FIXED ASSET COSTS

Account Titles: Land, Building, Equipment, Machinery, Truck, Vehicles, Fixtures and Furniture,Leasehold Improvements, Land Improvements, Tools

LAND BUILDING, PURCHASED • Purchase price, options • Legal fees, registration • Commission and escrow fees • Cost of clearing, less salvage value • Unpaid mortgages and taxes • Surveying costs • Permanent land improvements • Cost of inducing tenants to vacate

land

• Purchase price • legal and government fees • Unpaid dues • Cost of inducing tenants to leave • Cost of renovation

BUILDING, CONSTRUCTED MACHINERY, EQUIPMENT, TOOLS • Materials, labor, overhead • Permits, licenses, relevant fees • Cost of excavation • Insurance, construction loan interest

• Purchase price less purchase discounts (regardlessof availing)

• Freight, freight insurance, handling, storage,installation

• Specific training and testing costs LOSS ON RETIREMENT OF BUILDING = BOOK VALUE OF OLD BUILDING + DEMOLITIONCOSTS

REPAIRS AND IMPROVEMENTS

ADDITIONS BETTERMENTS/IMPROVEMENTS EXTRAORDINARYREPAIRS ORDINARYREPAIRS

Expand, extend,enlarge, increase

capacity

Increase quality,efficiency, and

safetyIncrease useful life

Simply restorebroken assets to

their original stateBuilding

CashMachine

CashTruck

Cash*Debit to Accum.Dep’n is alsoallowed, but tostandardize, we

will all use thisentry

Repairs Exp.Cash

TRADE-IN ALLOWANCE = FAIR VALUE OF NEW ASSET – CASH GIVENGAIN(LOSS) SALE ON ASSET = FAIR VALUE OF NEW ASSET – BOOK VALUE OF OLD ASSET –

CASH PAID



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BALANCE SHEETCOMPANY NAMEBALANCE SHEET

As of Period

Current Assets Current Liabilities

Advances N/R-Discounted (can also be a contra-asset account)DepositsAccrued Income Receivables

A/RLess: ADA

N/R

Total

Long-term AssetsFixed Assets

Less: Accum. Dep’n Total

INCOME STATEMENTCOMPANY NAME

INCOME STATEMENTFor Period ended

RevenuesLess: COGS

Gross Profit

Less: Operating ExpensesGeneral and Administrative Expenses

Bad Debt Expense (unless sales manager is in charge of collections)Office Depreciation Expense

Selling ExpensesCredit Card Expense

Store Depreciation ExpenseOperating Income

Plus/less: Cash over and shortLess: Miscellaneous expenses, bank charges and fees

Plus/less: Interest revenues or expensesLess: taxesPlus/less: Gain/loss on sale/exchange/disposal/destruction of asset

Net Income

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