College Accounting: A Practical Approach by Slater (13th edition)

College Accounting: A Practical Approach by Slater (13th edition) is the 13th edition of the college textbook that is titled College Accounting: A Practical Approach, has been written by Jeffrey Slater and published by Pearson Education, Inc. Vaughn College of Aeronautics and Technology utilizes this textbook for its Vaughn College MGT120 course.

Chapter 1. Accounting Concepts and Procedures

Chapter 1 definitions

• Accounting. A system that measures the business' activities in financial terms, provides written reports and financial statements about those activities, and communicates these reports to decision makers and others.
• Sole proprietorship. A type of business organization that has one owner. This owner is personally liable for paying the business' debt.
• Partnership. A form of business organization that has at least two owners. The partners usually are generally liable for the partnership's debts.
• Corporation. A form of business organization that is owned by stockholders. Stockholders usually are not personally liable for the corporation's debts.
• Limited Liability Company. A form of business organization that is owned by one or more members. Members are only liable to the extent of their investments.
• Service company. An enterprise that provides one or more services.
• Merchandise company. An enterprise that makes its own products or buys a product from a manufacturer to sell to customers.
• Manufacturer. An enterprise that makes a product and sells it to its customers.
• Generally Accepted Accounting Principles (GAAP). The procedures and guidelines that must be followed during the accounting process.
• International Financial Reporting Standards. A group of accounting standards and procedures that if adopted by the United States could replace GAAP.
• Bookkeeping. The recording function of the accounting process.
• Assets. Properties (resources) of value such as cash, sup;lies, equipment, or land owned by an organization.
• Equities. The rights of financial claims of creditors (liabilities) and owners (owner's equity) who supply the assets to an organization.
• Liabilities. Obligations that come due in the future. Liabilities are the financial rights or claims of creditors to assets.
• Creditor. Anyone who has a claim to assets.
• Owner's equity. Rights of financial claims to the assets of an organization. In the basic accounting equation, assets minus liabilities).
• Basic accounting equation. Assets = Liabilities + Owner's equity.
• Capital. The owner's investment of equity in the organization.
• Supplies. The type of assets acquired by an organization that has a much shorter life than equipment.
• Shift in assets. A shift that occurs when the composition of the assets has changed but the total of the assets remains the same.
• Accounts payable. Amounts owed to creditors that result from the purchase of goods or services on account -- a liability.
• Balance sheet (also known as statement of financial position). A financial statement, as of a particular date, that shows the amount of assets owned by an organization as well as the amount of claims (liabilities and owner's equity) against these assets.
• Cash basis. An accounting system that records revenue when cash is received and expenses when paid. This system does not match revenues and expenses like in the accrual basis of accounting.
• Accrual basis. An accounting system that matches revenues when earned with expenses that are incurred.
• Revenue. An amount earned by performing services for customers or selling goods to customers; it can be in the form of cash or accounts receivable. Revenue is a subdivision of owner's equity: As revenue increases, owner's equity increases.
• Accounts receivable. An asset that indicates the amount owed by customers.
• Expenses. A cost incurred in running a business by consuming goods or services in producing revenue. Expenses is a subdivision of owner's equity.
• Net income. The financial result of operations when revenue totals more than expenses.
• Net loss. The financial result of operations when expenses total more than revenue.
• Withdrawals. A subdivision of owner's equity that records money or other assets an owner withdraws from a business for personal use.
• Expanded accounting equation. Assets = Liabilities + Capital - Withdrawals + Revenue - Expenses.
• Income statement. An accounting statement that details the performance of an organization (revenue minus expenses) for a specific period of time.
• Statement of owner's equity. A financial statement that reveals the change in capital. The ending figure for capital is then placed on the balance sheet.
• Ending capital. Beginning Capital + Additional Investments + Net income - Withdrawals = Ending Capital. Or Beginning Capital + Additional Investments - Net loss - Withdrawals = Ending Capital

Chapter 1 problem

Data. Michael Brown opened his law office on June 1, 2018. During the first month of operation, Michael conducted the following transactions:

1. Invested $6,000 in cash in law practice.
2. Paid $600 for office equipment.
3. Purchased additional office equipment on account, $1,000.
4. Received cash for performing legal services for clients, $2,000.
5. Paid salaries, $800.
6. Performed legal services for clients on account, $1,000.
7. Paid rent, $1,200.
8. Withdrew $500 from his law practice for personal use.
9. Received $500 from customers in partial payment for legal services performed in transaction (6).

Requirements:

1. Record these transactions in the expanded accounting equation.
2. Prepare the financial statements at June 30 for Michael Brown, Attorney-at-Law.

Chapter 2. Debits and Credits: Analyzing and Recording Business Transactions

Chapter 2 definitions

• Account. An accounting device used in bookkeeping to record increases and decreases of business transactions relating to individual assets, liabilities, capital, withdrawals, revenue, expenses, and so on.
• Standard account. A formal account that includes columns for date, explanation, posting reference, debit, and credit.
• Ledger. A group of accounts that records data from business transactions.
• T account. A skeleton version of a standard account, used for demonstration purposes.
• Debit. The left-hand side of any account. A number entered on the left side of any account is said to be debited to an account.
• Credit. The right-hand side of any account. A number entered on the right side of any account is said to be credited to an account.
• Footings. The totals of each side of a T account.
• Ending balance. The difference between footings in a T account.
• Normal balance of an account. The side of an account that increases by the rules of debit and credit.
• Chart of accounts. A numbering system of accounts that lists the account titles and account numbers to be used by an organization.
• Compound entry. A transaction involving more than one debit or credit.
• Double-entry bookkeeping. An accounting system in which the recording of each transaction affects two or more accounts and the total of the debits is equal to the total of the credits.
• Trial balance. A list of the ending balances of all the accounts in a ledger. The total of the debits should equal the total of the credits. Alternatively, trial balance can be defined as an informal listing of the ledger accounts and their balances in the ledger to aid in providing the equality of debits and credits.

Chapter 2 problem

Data. The chart of accounts of mel's Delivery Service includes the following: Cash, 111; Accounts Receivable, 112; Office Equipment, 121; Delivery Trucks, 122; Accounts Payable, 211; Mel Free, Capital, 312; Mel Free, Withdrawals, 312; Delivery Fees earned, 411; Advertising Expense, 511; Gas Expense, 512; Salaries Expense, 513; and Telephone Expense, 514. The following transactions resulted for Mel's Delivery Service during the month of July of 2018:

Transaction	Description
A	Mel invested $10,000 in the business from his personal savings account
B	Bought delivery trucks on account, $17,000
C	Advertising bill received but unpaid, $700
D	Bought office equipment for cash, $1,200
E	Received cash for delivery services rendered, $15,000
F	Paid salaries expense, $3,000
G	Paid gas expense for company trucks, $1,250
H	Billed customers for delivery services rendered, $4,000
I	Paid telephone bill, $300
J	Received $3,000 as partial payment of transaction H
K	Mel paid home telephone bill from company checkbook, $150

Requirements:

As Mel's newly employed accountant, you must do the following:

1. Set up T accounts in a ledger.
2. Record transactions in the T accounts (please place the letter of the transaction next to the entry).
3. Foot and take the balance of each account where appropriate.
4. Prepare a trial balance at the end of July.
5. Prepare from the trial balance, in a proper form, (a) an income statement for the month of July, (b) a statement of owner's equity, and (c) balance sheet as of July 31st, 2018.

Chapter 3. Beginning the Accounting Cycle

Chapter 3 definitions

• Accounting cycle. For each accounting period, the process that begins with the recording of business transactions or procedures into a journal and ends with the completion of a post-closing trial balance.
• Accounting period. The period of time for which an income statement is prepared.
• Calendar year (alternatively known as natural business year or, sometimes, as fiscal year; however, fiscal year can be something other than a calendar year). The 12-month period an organization chooses for its accounting year.
• Interim report. A fiscal statement that is prepared for a month, quarter, or some other portion of the fiscal year.
• Journal (alternatively known as general ledger). A listing of business transactions in chronological order. The journal links on one page the debit and credit parts of transactions.
• Journal entry. The transaction (debits and credits) that is recorded into a journal once it is analyzed.
• Journalizing. The process of recording a transaction into the journal.
• Book of original entry. Book that records the first formal information about business transactions. A journal is an example of a book of original entry.
• Book of final entry. Book that records information about business transactions from a book of original entry such as a journal. A ledger is an example of a book of final entry.
• Compound journal entry. A journal entry that affects more than two accounts.
• Posting. The transferring, copying, or recording of information from a journal to a ledger.
• Four-column account. A running balance account that records debits and credits and has a column for an ending balance (debit or credit). It replaces the standard two-column account we used earlier.
• Cross-referencing. Adding to the PR column of the journal the account number of the ledger account that was upgraded from the journal.
• Slide. The error that results in adding or deleting zeros in the writing of a number such as 79,200 instead of 7,920.
• Transposition. The accidental rearrangement of digits of a number such as 152 instead of 125.

Chapter 4. The Accounting Cycle Continued

Chapter 4 definitions

• Worksheet. A columnar device used by accountants to aid them in completing the accounting cycle -- often just referred to as spreadsheet. It is not a formal report.
• Adjusting. The process of calculating the latest up-to-date balance of each account at the end of an accounting period.
• Historical cost. The actual cost of an asset at time of purchase.
• Depreciation. The allocation (spreading) of the cost of an asset such as an auto or equipment over its expected useful life.
• Residual value. Estimated value of an asset after all the allowable depreciation has been taken.
• Accumulated Depreciation. A contra-asset account that summarizes or accumulates the amount of depreciation that has been taken on an asset.
• Book value. Cost of equipment less accumulated depreciation.
• Accrued salaries payable. Salaries that are earned by employees but unpaid and unrecorded during the period (and thus need to be recorded by an adjustment) and will not come due for payment until the next accounting period.

Chapter 5. The Accounting Cycle Completed

Chapter 5 definitions

• Adjusting journal entries. Journal entries that are needed in order to update specific ledger accounts to reflect correct balances at the end of an accounting period.
• Permanent account (also known as real account). An account, such as Assets, Liabilities, and Capital, whose balances are carried over to the next accounting period.
• Temporary account (also known as nominal account). An account whose balances at the end of an accounting period are not carried over to the next accounting period.
• Closing journal entry. A journal entry that is prepared to (a) reset all temporary accounts to a zero balance and (b) update Capital to a new balance.
• Income Summary. A temporary account in the ledger that summarizes revenue and expenses and transfers the balance (either net income or net loss) to Capital. This account does not have a normal balance (i.e., it could have a debit or a credit balance.
• Post-closing trial balance. The final step in the accounting cycle that lists only permanent accounts

Chapter 6. Banking Procedures and Control of Cash

Chapter 6 definitions

• Internal control system.
• Signature card.
• Deposit slip.
• Endorsement.
• Check.
• Drawer.
• Drawee.
• Payee.
• Cancelled check.
• Bank reconciliation.
• Bank statement.
• Deposit in transit.
• Outstanding check.
• Nonsufficient funds (NSF).
• Debit memorandum.
• Credit memorandum.
• Electronic funds transfer.
• ATM (automatic teller machine).
• Phishing.
• Check truncation (check safekeeping).
• Petty cash fund.
• Petty cash voucher.
• Auxiliary petty cash.
• Cash Short and Over.