Posts with the Debits tag

QuickBooks

Premium Amortization & Interest

Written by Bob Steele CPA - Accounting Instruction, Help & How To on . Leave a comment

 

In this presentation, we will discuss the amortization of a bond premium and the recording of interest expense on bonds. This is going to be our starting point. This is the initial transaction in order to get the bonds on the books. Here’s our data down here we’ve got the number of years we’ve got the face amount of the bonds, we’ve got the issue price 270, we see that the interest on the market rate is different than the contract rate. The result then is that cash is going to be increased by the 217. The bonds payable went on the books for the face amount of the bond, the amount that’s on the bonds of the 240, which is a liability. And then we have the premium being the difference increasing the premium here by the 30. The 240 plus 230 is going to be equal to the 270,000 carrying amount book value of the bonds. Now we’re going to go through the process of recording the interest we can see that this is going to have 15 years bonds, we’re going to pay the bonds semi annually. So we’re going to have to record the interest on them. And we’re gonna have to reduce this premium in some way as well. Remember, at the end of the bonds, we’re not going to pay back the 270. We’re only going to pay back 240. So how are we going to get rid of that the premium on the bond and why are we going to do it in the way we will. We’ll start off by amortize in the premium using a straight line the method. Note that the effective method is the preferred method for amortize in a premium for generally accepted accounting principles, but the straight line method will be appropriate in some cases, if the difference is going to be a non material. And the straight line method is a simplified method and it’s easy for us to see what is going on. So we’ll start off with the straight line method.

(more…)

QuickBooks

Bond Issued at Premium

Written by Bob Steele CPA - Accounting Instruction, Help & How To on . Leave a comment

In this presentation, we will take a look at the journal entries related to issuing a bond at a premium. When considering the journal entry for a bond, remember what can change and what is the same for a bond. When we think about a bond, it’s already been printed, we know the amount of the bond, the interest on the bond, the maturity date of the bond, these are already set. So if we’re making a negotiation with the bond after it had already been printed, then we can’t change the face amount. We can’t change the interest due dates. What can we change in order to negotiate and make a sales price on the bond, we can change the amount that we issue it for. So keep that in mind. Whenever you think about these bond problems. That’s the thing that’s going to differ from a bond to a note. The thing that changes when we want to loan is the interest rate. The thing that changes when we want to issue a bond that’s already been made is going to be the amount we receive For the bond being different than the face amount of the bond if there’s a difference in the market rate and the contract rate. So in this example, we’re saying that we issued a bond. Now note that when we think about the issuance of the bond, just like a note, we often have more information than we really need. And that can be a little bit confusing for us.

(more…)

QuickBooks

Statement of Equity From Trial Balance 17

Written by Bob Steele CPA - Accounting Instruction, Help & How To on . Leave a comment

More in this presentation we will take a look at the statement of owner’s equity and see how to construct the statement of owner’s equity from the trial balance. When looking at the trial balance, we can see the accounts will be in order with the assets and then the liabilities, then the equity and then the revenue and expenses. The equity accounts being broken out here of owner capital and draws. But it’s a little deceiving to break out this equity section. Because the trial balance really is showing both a point in time the balance sheet account permanent accounts up top and timing accounts which are going to be the revenue accounts down below. When we think about the point in time for total equity as a whole. We’re really considering the entire blue area here. This is one of the most confusing concepts to really know when you’re looking at these financial statements.

(more…)

QuickBooks

Balance Sheet Liability Section Creation From Trial Balance 14

Written by Bob Steele CPA - Accounting Instruction, Help & How To on . Leave a comment

Hello in this lecture we’re going to create the liability section of the balance sheet. In prior lectures, we have taken a look at the assets in terms of first current assets and then property, plant and equipment and given us the total assets at that time, then we are now going to move on to liabilities, and that will be part of the second part of the balance sheet meaning it’ll then sum up to total liabilities and owner’s equity. We are going to be taking this information of course from the adjusted trial balance the adjusted trial balance in the format of debits and credits, we are now formatting it in the format of the accounting equation. Still the double entry accounting system just in two different formats, just reshuffling the puzzles so that different readers can understand the financial statements even though they don’t understand debits and credits.

(more…)

QuickBooks

Balance Sheet Current Assets from Trial Balance 12

Written by Bob Steele CPA - Accounting Instruction, Help & How To on . Leave a comment

Hello in this lecture, we’re going to create the current asset section of the balance sheet, we’re going to create this current asset section from a trial balance, we’re going to piece together the financial statements piece by piece as we go through a series of lectures, the trial balance being here at this is going to be the adjusted trial balance. And what will happen is we will then find a home for all of the accounts on the financial statements. Once we then do that, that means that we have then converted this from the double entry accounting system being in the format of debits minus credits equaling zero or debits equaling the credits to the assets equals liabilities plus the owner’s equity, basically the accounting equation, which is reflected on the balance sheet. So we’re going to start off by doing the current assets section, which will just be this part we’re going to find a home for these first few accounts.

(more…)

QuickBooks

Why Use a Worksheet in Adjusting Process 3.5

Written by Bob Steele CPA - Accounting Instruction, Help & How To on . Leave a comment

Hello in this presentation we will discuss the reasoning for using a worksheet within the adjusting entry process, a worksheet like the one on the right where we have an unadjusted trial balance adjustments and then an adjusted trial balance. We typically think of this worksheet as outside of the normal journal entry process, meaning the normal journal entries that we are going to input will be in the general journal posted to the general ledger giving us more detail and then posted to the trial balance. And this case, we’re going to use a worksheet which will go straight to this adjusted column, and then show us the unadjusted balance the change and then the adjusted balance. If we were using accounting software like QuickBooks, then we would have the normal data input in the system we would produce then the unadjusted trial balance and put that into a worksheet such as this, and then work through this process to have our worksheet show the balances here. idea being that the worksheet in the adjusting process is going to be outside of the normal system.

(more…)

QuickBooks

Trial Balance 220

Written by Bob Steele CPA - Accounting Instruction, Help & How To on . Leave a comment

Hello in this presentation we will be discussing a trial balance objectives at the end of this, we will be able to define a trial balance list components of a trial balance and explain how a trial balance is used. When considering the trial balance, we first want to think about where the trial balance falls within the construction of the financial statements. In other words, what processes go before the trial balance, what goes after the trial balance, where’s the trial balance fit into our process? Remember, the ending goal, the ending process of the accounting been to compile the data in such a way to create the finance financial statements. Those financial statements have been the end product. Typically if we’re thinking about a linear process, then we’re thinking about all the transactions that would happen during the month.

(more…)

QuickBooks

Cash Transaction – Accounting Equation 165

Written by Bob Steele CPA - Accounting Instruction, Help & How To on . Leave a comment

Hello, in this presentation we will be taking a look at business transactions involving cash we will be recording these normal business transactions in the format of the accounting equation and later be using the same or similar transactions to record with regard to debits and credits. Objectives. At the end of this we will be able to list transactions involving cash record transactions involving cash using the accounting equation. first transaction, we’re going to list through these transactions and we’re going to record these transactions with the accounting equation, learning these accounting equations and these transactions using our normal rules and thought process. So remember that this is our accounting equation, we’re going to have assets liabilities and equity.

(more…)