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 U.S. GAAP Codification Accounting Topics

 Accounting Journal Entries Review and Practice Materials

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What is a journal entry in Accounting?

Journal entry is an entry to the journal.
Journal is a record that keeps accounting transactions in chronological order, i.e. as they occur.

Ledger is a record that keeps accounting transactions by accounts.

Account is a unit to record and summarize accounting transactions.

All accounting transactions are recorded through journal entries that show account names, amounts, and whether those accounts are recorded in debit or credit side of accounts.

Double-Entry Recording of Accounting Transactions

To record transactions, accounting system uses double-entry accounting.
Double-entry implies that transactions are always recorded using two sides, debit and credit.
Debit refers to the left-hand side and credit refers to the right-hand side of the journal entry or account.

The sum of debit side amounts should equal to the sum of credit side amounts.
A journal entry is called "balanced" when the sum of debit side amounts equals to the sum of credit side amounts.

T-Account

This form looks like a letter "T", so it is called a T-account.

T-account is a convenient form to analyze accounts, because it shows both debit and credit sides of the account.

 Account Debit Credit

Examples of Journal Entries

Transaction 1: Company A sold its products at \$120 and received the full amount in cash.

 Steps Self-Questions Answers 1 What did Company A receive? Cash. 2 If Company A received cash, how would this affect the cash balance? Receiving cash increases the cash balance of the company. 3 Which side of cash account represents the increase in cash? Debit side (Left side). 4 What is the account name to record the sales of products. Sales. 5 Which side of sales account represents the increase in sales? Credit side (Right side). 6 Does the sum of debit side amounts equal to the sum of credit side amounts? In other words, does this journal entry balance? Yes. \$120 = \$120

[Journal entry to record transaction 1]

 Debit Credit Cash 120 Sales 120

Examples of Journal Entries

Transaction 2: Company A purchased supplies and paid \$50 in cash.

 Steps Self-Questions Answers 1 What did Company A receive? Supplies. 2 If Company A received supplies, how would this affect the supplies balance? It increases supplies balance. 3 Which side of supplies account represents the increase in cash? Debit side (Left side). 4 What did Company A pay? Cash. 5 Which side of cash account represents the decrease in cash? Credit side (Right side). 6 Does the sum of debit side amounts equal to the sum of credit side amounts? In other words, does this journal entry balance? Yes. \$50 = \$50

[Journal entry to record transaction 2]

 Debit Credit Supplies 50 Cash 50

Debits and Credits of Accounts

 Debit Credit Increase in asset accounts Decrease in asset accounts Increase in expense accounts Decrease in expense accounts Decrease in liability accounts Increase in liability accounts Decrease in equity accounts Increase in equity accounts Decrease in revenue accounts Increase in revenue accounts

Normal Balances of Accounts

Accounts have normal balances on the side where the increases in such accounts are recorded.

Asset accounts have normal balances on debit side.

Expense accounts have normal balances on debit side.

Liability accounts have normal balances on credit side.
Equity accounts have normal balances on credit side.
Revenue accounts have normal balances on credit side.

In the financial statements, accounts are reported on the sides where they have normal balances.

 Balance Sheet Assets Liabilities Owners' Equity

 Income Statement Expenses Revenues

 More Examples of Accounting Journal Entries Adjusting Journal Entries: Review and Examples

 Principles of Accounting:   This section provides study guides for students in the principles of accounting courses or introduction to financial accounting courses. U.S. GAAP Codification of Accounting Standards GAAP Codification Updates     Sources of U.S. GAAP U.S. GAAP by Topic Hierarchy of U.S. GAAP  Principles of Accounting Course Review Intermediate Accounting Course Review Advanced Accounting Course Review Liquidity Analysis Ratios Profitability Analysis Ratios Activity Analysis Ratios Cash Flow Analysis Ratios Capital Structure Analysis Ratios Capital Market Analysis Ratios   Balance Sheet Income Statement Statement of Cash Flows Journals and Ledgers Trial Balance Cash Basis Accounting Accrual Basis Accounting Revenue recognition Expense recognition    Bank Reconciliation  Accounts Receivable Inventory Accounting  Depreciation Methods

 Accounting for General Users:     A guide to accounting for users who are interested in understanding accounting reports.  This section explains what users need to know to understand and analyze accounting information provided in the financial statements.  No prerequisite is required to read this section. CPA and Accounting Profession Accounting is an information system. Users of accounting information Financial accounting for external users Managerial accounting for internal users Statement of Stockholders' Equity Annual Report Project Resources Balance Sheet provides information about financial position of a company. Income Statement provides information about the performance of a company. Earnings Per Share (EPS) Revenue Recognition Principle Examples of Revenue and Gain Accounts Examples of Expense and Loss Accounts Statement of Cash Flows provides information about the cash flow of a company. Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities

 Intermediate Accounting:   This section provides study guides for students in the intermediate accounting courses.  Following topics are discussed in this section. Accounting Courses Online   Accounting for Cash and Receivables Cash and bank deposits Accounts receivable Allowance for doubtful accounts Impairment of a Loan Retail Inventory Method Gross Profit Method Investments in Debt and Equity SecuritiesTrading securitiesAvailable for sale securitiesDebt securities Property, Plant, and Equipment (PP&E)Acquisition costs of noncurrent operating assetsRetirement of noncurrent operating assets Capitalization of interest cost Impairment of Long-Lived Assets Goodwill and Other Intangible Assets Loss and Gain Contingencies Extraordinary Gains and Losses Discontinued Operations Earnings per Share (Basic and Diluted EPS) Straight Line Depreciation Declining Balance Method Sum-of-the-years-digits Method Price of bonds payable Discount on bonds payable Premium on bonds payable Amortization of discount and premium Early extinguishment of debts Common stock Preferred stock Par value Additional paid-in capital Retained earnings Treasury stock (Cost method, par value method) Dividends (Cash dividend, Stock dividend) Stock split Initial Public Offering (IPO) Subsequent Events Code of Professional Conduct for Accountants

 Advanced Accounting:   This section provides study guides for students in the advanced accounting courses.  Following topics are discussed in this section.

 U.S. GAAP by Codification Topic 105  GAAP Hierarchy   105  GAAP History   205  Presentation of Financial Statements   205-20 Discontinued Operations   210  Balance Sheet   210-20 Offsetting   220  Comprehensive Income   225  Income Statement   225-20 Extraordinary and Unusual Items   230  Statement of Cash Flows   250  Accounting Changes and Error Corrections   260  Earnings per Share   270  Interim Reporting    310  Impairment of a Loan  320  Investment Securities   320  Other-Than-Temporary Impairments, FSP FAS 115-2   320-10-05 Overview of Investments in Other Entities   320-10-35 Reclassification of Investments in Securities  323-10 Equity Method Investments  323-30 Investments in Partnerships and Joint Ventures   325-20 Cost Method Investments   330  Inventory  340-20 Capitalized Advertising Costs   350-20 Goodwill   350-30 Intangibles Other than Goodwill   350-40 Internal-Use Software   350-50 Website Development Costs   360  Property, Plant and Equipment  360-20 Real Estate Sales     410  Asset Retirement and Environmental Obligations   420  Exit or Disposal Cost Obligations   450  Contingencies   450-20 Loss Contingencies   450-30 Gain Contingencies  480  Redeemable Financial Instruments   505-20 Stock Dividends, Stock Splits   505-30 Treasury Stock   605  SEC Staff Accounting Bulletin, Topic 13   605-25 Revenue Recognition - Multiple Element Arrangements     715-30 Defined Benefit Plans - Pension  718  Share-Based Payment   730  Research and Development   730-20 Research and Development Arrangements   805  Business Combinations    810  Consolidation   810  Noncontrolling Interests   810  Consolidation of Variable Interest Entities, SFAS 167     815  Derivatives and Hedging Overview   820  Fair Value Measurements    820  Fair value when the markets are not active, FSP FAS 157-4  825  Fair Value Option   830  Foreign Currency Matters   830-20 Foreign Currency Transactions   830-30 Translation of Financial Statements   835  Interest   835-20 Capitalization of Interest   835-30 Imputation of Interest   840  Leases   840-20 Operating Leases   840-30 Capital Leases   840-40 Sale-Leaseback Transactions  845  Nonmonetary Transactions   855  Subsequent Events   860-20 Sale of Financial Assets, SFAS 166   860-50 Servicing Assets and Liabilities, SFAS 156   985-20 Costs of software to be sold