會計英語課件：The Balance Sheet and Double-entry

TheBalanceSheetandDouble-entry.Aims:1.Toconstructabalancesheetinaformatusedbybusiness.2.Toidentifytheessentialfeaturesofarecordbookkeepingsystem.3.Toapplythedoubleentryruletosimpletransactionsofasoletrader.4.Tounderstandtheaimofthetrialbalanceinthebookkeepingsystem.5.Toexaminetheinter-relationshipbetweenthedailybusinessrecordsandthefinalaccounts.2.1

IntroductionfMcDonald’sCorporationMcDonald’sCorporationistheworld’sleadingglobalfoodserviceretailerwithmorethan37,000locations.AccordingtotherecentannualreportofMcDonald’s,thisbigCorporationcontrolsabout$32billionintotalassetsandearnsmorethan$21billioninannualrevenue.McDonald’sCorporationmustsomehowconductthenumeroustransactionsofitsworldwideoperations.Sohowthesetransactionswererecordedbythecorporationforusebytheinterestedparties?Review:Allorganizationsmustpreparefinancialstatementsperiodically,usuallyatleastonceayear.Thesenormallycomprisethreemainfinancialstatements:FinancialstatementsBalanceSheetIncomeStatementStatementofCashFlow2.2

TheEffectofTransactionsontheBalanceSheetJohnstartsabusiness,sellingdenimclothes,tradingas“JohnClothingCo.”.JohnClothingCo.BalanceSheetAsatJanuary1stAssetsCash&Bank$60000

60000

EquityJohn’sCapital60000

$60000

Transaction:OnJanuary1st,Johnopensabusinessbankaccountwith$60000ofhisownmoney.2.3

TheTwoSectionsofaBalanceSheetABalanceSheetisdividedintotwosections.EverytransactionofthebusinesswillaffectTWOitemsontheBalanceSheet.Inthisexamplethetwoitemsare:(1)Asset:cashatbank;(2)Equity:John’scapital.BalanceSheetAssetsCash&Bank$60000

60000

EquityJohn’sCapital60000

$60000

2.4

BusinessEntityForaccountingpurposes,theownerandthebusinessaretreatedastwoseparate.AssetsCash&Bank$44000MotorVehicles16000

60000

EquityJohn’sCapital60000

$60000

Transaction:OnJanuary2nd,Johnbuysasecondhanddeliveryvanfor$16000payingwithabusinesscheque.JohnClothingCo.BalanceSheetAsatJanuary1st2.5

BuyJeansNotYettoPayOnJanuary5ththebusinessbuysdenimjeansfromthemanufacturertoselltocustomers.Thejeanscost$12000.JohnClothingCo.willpaythesuppliernextmonth.AssetsCash&Bank$44000Stock12000MotorVehicles16000

72000

AccountPayable12000EquityJohn’sCapital60000

72000

2.6

TheOrderingandClassificationofAssetsandLiabilitiesIntheaboveexample,theassetswerelistedinarandomorder.Thisisclearlyanunsatisfactorymethodofcommunication;thereforetheitemsontheBalanceSheetareorderedandclassified.2.7

TheClassificationofAssetsAssetsarelistedontheBalanceSheetintermsofliquidity,whichmeansthemosttemporaryassets(cash)listedfirst.TheassetsontheBalanceSheetareclassifiedintotwocategories:(1)CurrentAssetsareacquiredbyabusinesstobeconvertedintootherassetsorconsumed,inthenormalcourseofbusiness,withinoneyear.(2)FixedAssetsarelonglifeassetsnormallyacquiredbyabusinesstobeusedovermorethanoneyearintheproductionofgoodsandservices.2.8

TheClassificationofLiabilitiesThecreditorsontheBalanceSheetareclassifiedintotwocategories:(1)Creditors:amountsfallingduewithinoneyear.ThesearesometimescalledCurrentLiabilities.(2)Creditors:amountsfallingdueaftermorethanoneyear.ThesearesometimescalledLongTermLiabilities.Task1

任務(wù)一

ABCcompany

balancesheet

31-Dec-19

AssetsLiabilities

currentassetscurrentliabilities

Cash1,920AccountsPayable2,800AccountsReceivable160SalariesPayable600totalcurrentassets2,080NotesPayable5,800non-currentassetstotalcurrentliabilities9,200Machinery&Equipment13,000non-currentliabilities

Land13,600totalliabilities9,200Buildings10,400sharehoder'sequtiy

totalNON-currentassets37,000CapitalStock20,000

RetainedEarnings9,880

totalsharehoder'sequtiy

TOTALASSETS

39,080

totalLiabilitiesandsharehoder'sequtiy39,080Answer:RetainedEarnings=39080-20000-9200=9880ListedbelowinrandomorderaretheitemstobeincludedinthebalancesheetofDeepRiverLodgeatDecember31,2019：Equipment..............$9,000Buildngs..............$430,000Land..................140,000CapitalStock............?AccountsPayable.........27,400Cash.................9,100AccountsReceivabe.......3,300Furnishings.............22,600SalariesPayable.........13,200NotesPayable...........217,000InterestPayable..........4,000RetanedEarnings........202,400Instructions：a.computetheamounttobeshownforCapitalStock.b.PrepareabalancesheetatDecember31,2019.Includeaproperheadingandorganizeyourbalancesheet.

DeepRiverLodgecompany

balancesheet

31-Dec-19

AssetsLiabilities

currentassetscurrentliabilities

Cash9,100AccountsPayable27,400AccountsReceivable3300SalariesPayable13200totalcurrentassets12,400NotesPayable217,000non-currentassetsInterestPayable4,000Equipment9,000totalcurrentliabilities261,600Land140000non-currentliabilities

Buildings430,000totalliabilities

Furnishings22,600sharehoder'sequtiy

totalNON-currentassets601,600CapitalStock150,000

RetainedEarnings202,400

totalsharehoder'sequtiy

TOTALASSETS

614,000

totalLiabilitiesandsharehoder'sequtiy614,000Answer:CapitalStock.=614000-261600-202400=1500002.9

WorkingCapitalNetCurrentAssets(WorkingCapital)isthedifferencebetweencurrentassetsandcurrentliabilities.2.10

Jane’sBusinessOnthebusinessbalancesheet,theassetsownedbythebusinesslesstheliabilities(creditors)owedbythebusinessequalthecapital,theownersstakeinthebusiness.

Arealbalancesheetwillbeshowninthevideoforyourunderstanding.YoucanfindthevideobyscanningtheQRcode.Activities:ArealbalancesheetActivities:Arealbalancesheet觀看上述視頻，回答以下問題：1、WhenisthefiscalyearenddateforStarbucks?2、Whatarethecomponentsofbalancesheet?3、DoestheBalanceSheetbalance?4、Whatarethesub-categoriesofAssets?5、Whatarethesub-categoriesofLiabilities?2.11

RecordingBusinessTransactions

TheBalanceSheetandotherfinalaccountsofabusinessaredrawnupattheendoftheaccountingperiod.Allorganizationswill,however,needtorecordtheirtransactionsonaregularbasisduringtheaccountingperiod.Foreachtransactionitwillbenecessarytorecordthefollowing:(1)theamount($);(2)thedate;(3)adescriptionofthetransaction.2.12

BasicRulesforRecordingBusinessTransactions

Therulesforrecordingbusinesstransactionsarethateverytransactionwillatleastaffecttwoitems.Thedualaspectconceptstatesthateverybusinesstransactionrequiresrecordationintwodifferentaccounts.Thisconceptisthebasisofdoubleentryaccounting,whichisrequiredbyallaccountingframeworksinordertoproducereliablefinancialstatements.2.13

AnExampleofDualAspectConceptAmotorvehicleisboughtforcashof$16000.Thetwoitemsaffectedare:(1)MotorVehicle(+$16000);(2)Cash(-$16000).Eachitemmusthaveitsownrecordi.e.“account”inthebooks(ledgers)ofthebusiness.2.14

DoubleEntryRuleASSETSe.g.andEXPENSESe.g.DebitCreditINCREASES(+)DECREASES(-)EQUITY,CREDITORS,INCOMEandPROVISIONSDebitCreditDECREASES(-)INCREASES(+)2.15

T-accountAccountTitleDecreases&IncreasesIncreases&Decreases

TheleftsideoftheT-accountiscalledDebit,andtherightsideiscalledCredit.2.16

TwoImportantRulesaboutDouble-entryRecordingSystem

(1)Debitsincreaseassetsanddecreaseliabilitiesandequity;(2)Creditsincreaseliabilitiesandequityanddecreaseassets.2.17

ApplicationoftheDoubleEntryRule

1.Identifythetwoitemsinvolvedinthetransaction(e.g.CashandCapital).2.Ensurethereisanaccountforeachitem(e.g.CashA/c).3.Takingeachitemindependently:4.Repeattheprocessin3withtheotheriteminvolvedinthetransaction.5.Checkthatoneaccounthasbeendebitedandtheotherhasbeencredited.2.18

AnExampleoftheDoubleEntryRule

OnJanuary1stJohnstartsinbusiness,tradingas“JohnClothingCo.”.Heputs$60000ofhisownmoneyintoabusinessbankaccount.Cash&BankAccountDebit(=+)$Credit(=-)$Jan1Capital60000Jan2MotorVehicles16000CapitalAccount

Debit(=-)$

Credit(=+)$

Jan1Cash60000

MotorVehiclesAccount

Debit(=+)$

Credit(=-)$Jan2Cash16000

2.19

AnotherExampleoftheDoubleEntryAcompany,calledHike’sConsultants,starteditsoperationsonJanuary31st,2019whentheowner,Mr.Hike,contributedcashinit.Alltheaccountshadzerobalances,andwewillseehoweachtransactionaffectT-accountsandtheaccountingequation.Alltransactionstookplacein2019.2.20

TransactionNo.1:StartingtheOperationsHike’sConsultantsstarteditsoperationsonJanuary31stwhentheownermade$20000cashcontribution.Assets=Liabilities+EquityCashContributedCapitalDebitCredit++(1)20000(1)200002.21

TransactionNo.2:PurchasingOfficeSuppliesOnMay15th,Hike’sConsultantspurchased$800ofofficesuppliesfromalocalsupplycompanyonaccount.Assets=Liabilities+EquitySuppliesAccountsPayableDebitCredit++(2)800(2)800OnMay20th,thecompanyprovidedservicesonaccount(i.e.,itwillcollectcashlater,eventhoughithadalreadyprovidedservices)toMercyFoodStore.Mr.Mercy’sbusinesswasbilledfor$3200.Assets=Liabilities+EquityAccountsReceivableConsultingRevenueDebitCredit++(3)3200(3)32002.22

TransactionNo.3:ProvidingServicesonAccount2.23

TransactionNo.4:

PayingCashforOperatingExpensesOnApril5th,thecompanypaid$1200cashforoperatingexpenses.Assets=Liabilities+EquityCashOperatingExpenseCreditDebit-+Expense-Equity

(4)1200(4)12002.24

TransactionNo.5:BorrowingMoneyfromBankOnMay31st,duetocashlimitsHike’sConsultantsdecidedtoborrow$8000fromtheLocalBusinessBank.Thecompanyissuedanotethathadaone-yeartermandcarried7%annualinterestrate.Assets=Liabilities+EquityCashNotesPayableDebitCredit++(5)8000(5)80002.25

TransactionNo.6:PayingRentOnJune1st,Mr.Hikesawthatthebusinesswasgrowingandinthisconnectionmadeadecisiontorentalargeroffice.$4800cashwaspaidinadvanceforaone-yearrentofanewoffice.Assets=ClaimsPrepaidRent+CashDebit+(6)4800Credit-(6)48002.26

TransactionNo.7:

ReceivingCashfortheProvidedServicesOnJune15th,Hike’sConsultantsreceived$3000cashfromMercyFoodStorefortheprovidedservices(seeTransactionNo.3).Assets=ClaimsCash+AccountsReceivableDebit+(7)3000Credit-(7)30002.27

TransactionNo.8:

ReceivinganAdvancedCashPaymentOnJune31st,Mr.HikesignedupacontractwithMikeCompanytoperformconsultingservices.Hike’sConsultantsreceivedanadvancedcashpaymentintheamountof$7200andthetermofthecontractwasoneyear.Assets=Liabilities+EquityCashUnearnedRevenueDebit+(8)7200Credit+(8)72002.28

TransactionNo.9:

ReceivingCashforOperatingActivityOnJune31st,Hike’sConsultantsrepresentedMr.Ebert(aclient)inthecourt,forwhatthecompanyreceived$1400cash.Assets=Liabilities+EquityCashConsultingRevenueDebit+(9)1400Credit+(9)14002.29

TransactionNo.10:LoaningtootherCompanyOnJune31st,Hike’sConsultantsloanedJamBuildingCompany(InvestmentActivity)$6000.JamBuildingCompanyissuedaone-year,8%note.Assets=ClaimsNotesReceivable+CashDebit+(10)6000Credit-(10)60002.30

TransactionNo.11:

PayingCashtoPurchaseOfficeEquipmentOnJune31st,Mr.Hikepaid$4000cashtopurchaseanewtableandseveralchairs.Theofficeequipmentisexpectedtohaveausefullifeof2yearsandasalvagevalueof$800.Assets=ClaimsOfficeEquipment+CashDebit+(11)4000Credit-(11)40002.31

TransactionNo.12:

PayingCashtoAccountsPayableOnAugust14th,Hike’sConsultantspaid$800ofaccountspayablefromalocalsupplycompany.Assets=Liabilities+EquityCashAccountsPayableCredit-(12)800Debit-(12)8002.32

TransactionNo.13:

ReceivingaBillforOfficeCleaningServicesOnSeptember18th,Hike’sConsultantsreceiveda$1600billfromSulkCleanersforofficecleaningservices.Mr.Hikeplanstopaythebilllater.Assets=Liabilities+EquityAccountsPayableOfficeMaintenanceExpenseCredit+(13)1600Debit+Expense-Equity(13)1600

2.33

TransactionNo.14:

PayingCashDistributiontotheOwnerOnNovember31st,Hike’sConsultantspaid$600cashdistributiontoitsowner.Assets=Liabilities+EquityCashCashDistributionCredit-(14)600Debit+Dist.-Equity(14)6002.34

MakingAdjustingEntriesWhenwehaveseenallthetransactionspertainingtotheaccountingperiod,weneedtomakeadjustingentries.Adjustingentriesaremadeattheendofayear(oranyotherfiscalperiod)torecognizerevenueorexpenses(accrualsordeferrals).2.35

AdjustmentNo.1:RecognizingInterestExpenseOnMay31st,Hike’sConsultantsborrowed$8000cashfromabankandagreedtoreturnthemoneyinayearandpay7%annualinterest(seeTransactionNo.5).Fortheaccountingperiodinterestexpenseonthenoteamountedto$327(i.e.,$8000×7%×(7months/12months)).Assets=Liabilities+EquityInterestPayableInterestExpenseCredit+(A1)327Debit+Expense-Equity-(A1)3272.36

AdjustmentNo.2:RecognizingRentExpenseOnJune1st,Hike’sConsultantspaid$4800cashinadvanceforanew1-yearofficerent(seeTransactionNo.6).Therentexpensetoberecognizedattheendoftheperiodiscalculatedasfollows:$4800×(7months/12months)=$2800.Assets=Liabilities+EquityPrepaidRentRentExpenseCredit-(A2)2800Debit+Expense-Equity(A2)28002.37

AdjustmentNo.3:

RecordingaRevenuefortheProvidedServicesOnJune31st,Hike’sConsultantsreceivedinadvancecashpaymentof$7200forservicestobeperformedduringayearaftersigningupthecontract(seeTransactionNo.8).ByDecember31stthecompanyhadprovidedservicesfor6months,sotheamounttoberecordedasarevenueis$7200×(6months/12months)=$3600.Thisamountshouldberemovedfromliabilities(UnearnedRevenue)andplacedintoequity(ConsultingRevenue).Assets=Liabilities+EquityUnearnedRevenueConsultingRevenueDebit-(A3)3600Credit+(A3)36002.38

AdjustmentNo.4:RecordingInterestRevenueOnJuly31st,Hike’sConsultantsloaned$6000toJamBuildingCompanyandreceivedforitanotecarryinga1-yeartermandobligationtopay8%annually(seeTransactionNo.10).Inthisconnection,HikesConsultantshavetorecord$200(i.e.,$6000×8%×(5months/12months))asinterestrevenue.Assets=Liabilities+EquityInterestReceivableInterestRevenueDebit+(A4)200Credit+(A4)2002.39

AdjustmentNo.5:

RecognizingDepreciationExpenseOnJune31st,officeequipmentof$4000wasbought.Theusefullifeofthisassetswasexpectedtobe2yearswithasalvagevalueof$800.Hike’sConsultantshavetorecognizetheamountofofficeequipmentusedduringayearasadepreciationexpense.Theamounttoberecordedis$1600(i.e.,($4000-$800)/2years*6months/12months).Assets=Liabilities+EquityAccumulatedDepreciationDepreciationExpenseCredit+Acc.Depr.-Assets(A5)800Debit+Expense-Equity(A5)8002.40

AdjustmentNo.6:RecognizingSalariesExpenseAttheendoftheperiod,Hike’sConsultantsaccrued$300salariesthatwillbepaidoffinthenextaccountingperiod(2020).Assets=Liabilities+EquitySalariesPayableSalariesExpenseCredit+(A6)300Debit+Expense-Equity-(A6)300

2.41

AdjustmentNo.7:ExpensingtheSuppliesOnMay15th,Hike’sConsultantsbought$800ofsupplies.Attheendoftheaccountingperiod$200ofsuppliesremainedonhand.Others($600=$800-$200)wereusedduringtheyear,and,therefore,mustbeexpensed.Theadjustmentdecreasesassetsandequity.Assets=Liabilities+EquitySuppliesSuppliesExpenseCredit-(A7)600Debit+Expense-Equity(A7)6002.42

ASummaryofthePrinciplesofAccountsAccountDebitCreditAssetsIncreaseDecreaseContraAssetsDecreaseIncreaseLiabilitiesDecreaseIncreaseEquityDecreaseIncreaseContributedCapitalDecreaseIncreaseRevenueDecreaseIncreaseExpensesIncreaseDecreaseDistributionsIncreaseDecrease2.43

TheAccountingCycleActivities:請同學們翻譯講解上述會計循環(huán)。2.44

TheJournalDateAccountTitlesDebitCreditJan.31Cash

ContributedCapital2000020000May15Supplies

AccountsPayable800800May20AccountsReceivable

ConsultingRevenue32003200April5OperatingExpense

Cash12001200May31Cash

NotesPayable80008000June1PrepaidRent

Cash48004800June15Cash

AccountsReceivable30003000June31Cash

UnearnedRevenue72007200June31Cash

ConsultingRevenue14001400June31NotesReceivable

Cash60006000June31OfficeEquipment

Cash40004000Aug.14AccountsPayable

Cash800800Sept.18OfficeMaintenanceExpense

AccountsPayable16001600Nov.31Distributions

Cash600600AdjustingEntriesDec.31InterestExpense

InterestPayable327327Dec.31RentExpense

PrepaidRent28002800Dec.31UnearnedRevenue

ConsultingRevenue36003600Dec.31InterestReceivable

Int