Posts in the Financial Accounting category:

Financial Accounting

Partnership Comp Prob Purchase Insurance – Journal Entry to Purchase Insurance

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comprehensive problem purchase of insurance where we will enter the journal entry related to the purchase of insurance. We will journalize the journal entry to the general journal, post the accounting transaction to the general ledger, and create the trial balance from the general ledger. The journal entry will debit prepaid insurance, an asset, and credit cash. We do not debit insurance expense because we have not yet consumed the insurance and therefore should not record an expense according to the matching principle, one of the core accrual principles related to when to record expenses. We will record insurance expense at the end of the period with the use of adjusting entries, debiting insurance expense and crediting prepaid insurance, increasing the expense and decreasing the asset.
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Financial Accounting

Notes Payable Adjusting Entry – Adjusting Journal Entry for Notes Payable

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Adjusting journal entry for notes payable will discuss options for setting up a system for recording notes payable in an accounting system. Adjusting entries are entries made at the end of an accounting period, at the end of a month or year. Adjusting entries are planned entries. When entering payments for an installment not we have some options to make the system easier. To keep the loan balance correct at all times we should record interest and principal portions of each payment, but this requires a different journal entry each payment. If we want to standardize the payment we could allow the accounting department to credit cash and debit the loan payable, the result being that we allocate too much to loan payable and do not record interest expense at the time of payment. The adjusting entry can then be used to adjust the loan and the interest expense to the proper amount.
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Financial Accounting

Partnership Comp Prob Customer Payment Unearned Revenue – 60 Journal Entry for Unearned Revenue

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Comprehensive partnership problem recording journal entry related to unearned revenue. The journal entry will be journalized in the general journal, posted to the general ledger and be used to create the trial balance. Unearned revenue is a result of receiving cash that has not yet been earned. In other words, cash is received before work is done. We will enter the journal entry with a debit to cash and a credit to unearned revenue. Unearned revenue is a liability account representing they owing of work in the future.
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Financial Accounting

Amortization Schedule – Notes Payable Amortization Table Creation

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Putting together a notes payable amortization schedule so that we can break out loan payments between interest and principle. Many loans we are familiar with are installment loans which have equal payments to repay the loan. To make the loan payments equal the interest and principal reduction will differ from payment to payment, which can be confusing. In other words, each payment will have an interest expense component and a principal reduction component but the allocation between the two will change with each payment. The interest portion will go down with each payment and the principal portion will increase. We will start with a 100,000 loan 9% interest with 36 even monthly payments. It is common for a loan to include these terms but not provide an amortization schedule. Using this loan information we will create the amortization schedule. Whether we do the amortization calculation in Excel or by hand, setting up the column is often the most difficult part. We will include the columns of Payment, Interest, Principal Reduction, and Principal. The payment will be the same each period. Interest is calculated as principle times the interest rate divided by 12. The principal reduction is the payment less the interest portion and the remaining principal is the prior period principal less the current period deduction.
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Financial Accounting

Partnership Comp Prob Revenue on Account 50 – Journal Entry For Revenue and Accounts Receivable

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Sole partnership comprehensive problem recording the earning of revenue on account. In other words, we will record the journal entry for revenue earned for doing work, but for which cash has not yet been received. We will enter the accounting journal entry into the general journal, then post it to the general ledger, and create the trial balance from it. The journal entry will include a debit to accounts receivable and a credit to cash. If you would like to work this problem in Excel see our courses at the link below. http://accountinginstruction.info/cou…

 

Financial Accounting

Bonds & Notes Payable Introduction

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Bonds and notes payable will be forms of raising capital for a company. In other words a company that needs cash for operations can raise capital using different options. They may take a loan form the bank, issue stock, or issue bonds. each option has pros and cons. Issuing stock results in selling equity interest in the company but does not result in interest payments. Issuing bonds and notes result in interest expense. The interest expense is deductible. Loans or notes payable are often taken from a bank. Bonds could be used to issue to the public.
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Financial Accounting

Partnership Comp Prob Supplies Purchase – 40 Journal Entry Supplies Purchase on Account

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Supplies purchase on account for a partnership will record the purchase of supplies with no cash. We will enter the accounting journal entry for supplies in the general journal and then post the accounting transaction to the general ledger, that will be used to generate the trial balance. We will debit the asset supplies and credit the liability of accounts payable. There will be no effect on net income because we have not yet used the supplies and therefore will net expense it in accordance with the matching principle. We will reduce the asset of supplies and record the related expense during the adjusting process.
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Financial Accounting

Partnership Withdraws – Partners Draws Journal Entry

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Partners withdraws will record the journal entry for the partners in a partnership withdrawing cash for personal use. We will enter the partners draws journal entry in a general journal for three partners and then post the draws journal entry to a worksheet so we can see the effect on the accounting equations, accounts, and trial balance. We will debit withdraws account for each partner and credit cash. The draws accounting is a equity account that goes up with a debit but does not effect net income The draws account can be thought of as a contra equity account because most equity accounts have a credit balance and draws has a debit balance.
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Financial Accounting

Corporation Comp Prob Equipment Purchase – 30 – Accounting Comprehensive Problem

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Corporation accounting comprehensive problem will record a journal entry related to the purchase of equipment for cash. We will enter the accounting journal entry into the general journal, post it to the general ledger, and create the trial balance from the general ledger. We will debit equipment and credit cash.
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Financial Accounting

Preferred Stock Example – Preferred Stock Dividend

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Preferred stock dividend example problem will discuss the process for determining the amount of a dividend to be paid to the preferred stock holders as compared to the common stock holders. Preferred stock holder get paid before common stock holders but have a limit to the amount they will receive. In a corporation the board of directors can determine the amount of dividend to give but has less control over how it will be distributed. Any dividend decided on will generally need to be paid first to the preferred stock holders before going to the common stock holder. The preferred stock holder typically to not have voting writes in the company.
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