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5- Why is accounting often referred to as the "language of business"?
7- What are generally accepted accounting principles (GAAP)? Who currently develops and issues GAAP? What is the purpose of GAAP?
3-1 and 3-2
3-1 The company borrowed $125,000 in cash from Far West Bank.
3-2 The company used $45,000 in cash to purchase land on the west side of Hatu Lake.
1. List the accounts impacted by the transaction.
2. For each account, indicate whether the transaction increased or decreased the account.
3. For each account, indicate how much the transaction increased or decreased the account.
4. Compute the impact of the transaction on total assets, total liabilities, and total owners' equity.
Refer to practice 3-1. Make the journal entry necessary to record the transaction.
Refer to Practice 3-2. Make the journal entry necessary to record the transaction.
Refer to the journal entries made in Practice 3-11. Construct a T-account representing each account impacted by those five transactions. Post all of the journal entries to these T-accounts. Compute the ending balance in each account. Assume that the beginning balance in each T-account is zero.
Refer to the T-accounts constructed in Practice 3-16 . Using the ending balances in those T-accounts, construct a trial balance. Note: The only account that is common to these two sets of T-accounts is the cash account; add the two cash account balances together to get the total balance.
The following journal entries are from the books of Kara Elizabeth Company:
a. Buildings 90,000
Mortgage Payable 55,000
b. Cash 25,000
Capital Stock 25,000
c. Cash 40,000
Loan Payable 40,000
Salary Expense 12,000
e. Inventory 12,500
Accounts Payable 12,500
f. Accounts Receivable 84,000
Cost of Goods Sold 51,000
g. Cash 62,000
Accounts Receivable 62,000
h. Accounts Payable 38,000
For each of the journal entries, prepare an explanation of the business event that is being represented.
· Why are adjusting entries necessary?
· The analysis process for preparing adjusting entries involves two basic steps. Identify the two steps and explain why both are necessary.
· What is the purpose of closing entries?
· What is the purpose of the post-closing trial balance? Explain where the information for the post-closing trial balance comes from.
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