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Ok here we are again lecture number eight last lecture we started to introduce the journal
entry and today we are going to continue talking about journal entries and talk about some
new concepts as well. What we did here for the face to facers just a minute or so ago
is we took a quiz over the account balances go ahead and show that on the Elmo if you
would for you folks that are watching this at home what I would do if I were you is I
would simply pause this and get a piece of paper out and even though I cannot give you
the quiz for point see how you would do if this were a quiz for you. So just pause it
and then press play when you're done taking this I want you to list if it's a debit balance
account or if it's a credit balance account and of course if I say it's a debit balance
account it increases with the debit and decreases with the credit and if I say it's a credit
balance account it increases with the credit and decreases with the debit. Alright let's
go over the quiz and y'all can keep track of how you did. Alright I'm just going to
put debit and credit in the columns for it's a debit or credit balance consulting revenue
is what? Credit notes payable? Also a credit land is? Debit prepaid insurance? Debit notes
receivable? Another asset it's a debit account receivable? Also a debit accounts payable?
Credit salary expense? All expenses are debit balance accounts. Unearned revenue is a liability
with a what? Credit balance account owner's withdrawal sometimes that tricks people out.
It's a debit balance account cash is? Debit capital? Credit inventory? Is an asset with
a debit balance account what about rent expense? Like I said all expenses are debit balance
accounts income tax payable? Credit earned revenue? Credit what about prepaid rent? Debit
wages payable? Credit advertising expense? All expenses are debit and equipment? Debit
awesome so there's your answers. How many people got eighteen or more correct. Did anybody
get perfect? Alright if you got eighteen or more you could take a Hershey's kiss and if
you folks at home got a eighteen or more when you were doing it if you send me a self-addressed
stamped envelope I will put a Hershey's kiss and send it to your house. Ok alright I want
you to know these now the way that I grade these for you face to facers is this quiz
as all quizzes are worth ten points ok I take minus one for everyone that you missed so
if you got let's say fourteen right you only got a four on the quiz does that make sense?
And the reason I do that is if you just flipped a coin how many should you have got right
on this? Half so you should have got ten right? So I don't want people getting fourteen and
thinking ah I did pretty good no you didn't you did four better than if you flipped a
coin. So I won't give you a negative score, but you missed one point for every one so
if you got eighteen out of twenty you got an eight out of ten Kara? Do you have a question?
"So fifteen would be five" fifteen would be five, eleven would be one and ten would be
zero so people think ten should be five ten means you did as good as the coin flip so
I want you to really, really know these ok I do these things because I love you just
remember this. Alright know those know those well. Ok we got some homework we got to go
over, but before that I want to talk about homework connect let's go to the screen and
this goes for you folks at home as well as the face to facers now again I want to call
the connect, connect assignments I don't want to use the word homework so the connect assignments
so you should have registered whether you're a face to facer, or at home person you should
have registered by now for this. And then you get to the point and bookmark this page
once you get to it and log in correctly as I'm not doing. And then once you've logged
in you're going to see your class ok now again there's different classes here depending on
the semester go down to accounting one let me just click on this one of course yours
will be different. And then you get to a point like this right? Now I want to point out a
couple things to you now right now this isn't fully populated with assignments right? You're
going to see chapter one assignment and when it is worth points you see this little icon
over here looks like a piece of paper ok. Those are worth points , those have due dates
ok you have to do those if you want to get those points ok. Now for you face to facers
I'm telling you your due dates in class and I usually do it off camera so I don't foul
up people watching this at home. For you people at home I will be emailing you your connect
assignment due dates ok that will be an important email and I will say connect assignment due
dates so please be following that. Now this other thing if you go back to the screen this
thing that looks like a barbell on its side that is something that you can do if you want
to it's not worth points it's not required its sort of a walkthrough for practice tool.
Has anybody done that by chance? Raise your hand what did you guys think that went through
it? It was pretty good ok what they kind of did is they kind of narrated slides, and every
now and then they'll have something for you to do like an exercise and you could get feedback
right there ok so this is a great thing. So if you're just swimmingly going along in this
class doing wonderful you may not need to do this, but I always say if you're having
a little bit more practice I would encourage you do these. Now it's not worth point now
I can tell who's done it I'm not trying to be big brother here but if somebody comes
into my class and they're flunking the class and they're saying I'm completely lost well
I hope I can see that you've gone through those at least, cause that's a helpful resource,
but the little dumbbell thing is for practice only and it is not worth point the other one's
are keep track of those assignment due dates ok. Alright ok let's go to our homework the
homework I assigned was this on the screen this is the homework I assigned were going
to go through all four of those but we're not going through the order that they're listed.
The first one I want to go through I believe is quick study two eight so let's go through
quick study two eight alright. Quick study two eight we had one of these before we got
another one. Indicate the financial statement on which each of the following items appears
use I for income statement, E for the statement of owner's equity, and B for balance sheet
ok. Buildings is on what? Balance sheet interest expense? Income statement owner's withdrawals?
Statements of owner's equity office supplies? Balance supplies lentil revenue? Income statement
insurance expense? Income statement service revenue? Income statement interest payable?
Balance sheet accounts receivable? Balance sheet salaries expense? Income statement equipment?
Balance sheet pre-paid insurance? Balance sheet I promise you will have one like this
on the test ok speaking of the test we have this lecture which is lecture number eight
lecture number nine lecture number ten and after lecture number ten you that's when you're
good to take the test. So I told you all when that test is going to be if you're late whisper
and ask your neighbor, because I don't want to say it here it will mix up the people at
home. So we have this lecture and two more and then we consider ourselves ready to take
that test over chapters one and two ok. Let's go to I want to go to exercise two four, exercise
two four ok for each of the following identify the type of account as an asset, liability,
equity, revenue, or expense, and then identify the normal balance of the account enter debit
or credit to identify the kind of entry that would increase the account balance ok so this
is kind of similar to our quiz that we took. And I'm just going to put the answers up there
I'm not going to read each one. Let me just put the answers up there. Now right here they
are asking you what the normal balance of the account is right? And right here how do
you increase that account right? Well the answer for each column are the same correct?
And that's what they're trying to emphasize here is when we say something like fees earned
which is another type of revenue account when we say that that is a credit normal balance
what we're saying that is how you increase it with a credit. Ok so that's just what they're
trying to get across here. Is that the normal balance of account and how you increase it
is just asking for the same thing alright. Any questions on that? Alright I want to show
you something here ok. I'm going o show you something here let me put this on the screen
ok alright does anybody know what that is? I'll give you a extra Hershey kiss if you
do. Does anybody know what that is? Ok that is I have a Bulgarian student and she wrote for
this illustration I asked her to write my name David in Bulgarian ok. Now I'm assuming
that's David may be it means jerk or something and she's at home having a great laugh right
now, but I think it means David in Bulgarian now let me ask you this if my goal was by
the end of the day to learn how to write my name in Bulgarian do you think I could do
that? I think I could go back to it I don't know this looks like what a building with
a roof on it that must be the D's the A's are the same the V just has a little thing
here looks like a backwards N, that looks like a B but it must be V it's Bulgarian I
don't know, but if I wanted to I could memorize how to write this is that correct would you
agree with that? Now let's say I did memorize how to write my name in Bulgarian for my wife
and children so they can be so proud of me. And then my wife said that's cool ok can you
write my name and the kids name in Bulgarian do you think I'll be able to do it? No I could
not I would not be able to do it why do I say this I say this because let's go back to making the journal entry ok that
was the journal entry for when we purchased office supplies for cash correct? Now there
will be students who the thought process they have is I don't know really know what he's
doing here, but by golly if that's the journal entry for when you purchase office supplies
with cash I can memorize this right? And if I asked my fifteen year old to just memorize
this I'm going to say I want you to memorize this this is a journal entry for purchasing
office supplies with cash tomorrow I'm going to ask you to write this down he can write
this down can't he? And there are students who will memorize this just like I would memorize
that name David in Bulgarian, but what's the problem with that? It doesn't transfer to
other things right? I can't write other names in Bulgarian right? Or if someone asked me
to write my whole name all three names in Bulgarian I can't do it. Well I don't want
you to get by, by just memorizing these things I want you to understand what's going on here
I want you to understand that if we purchase office supplies with cash that cash is going
down by two fifty and office supplies is going up by two fifty then with your knowledge I
want you to realize that the way you make cash decrease is you credit it the way you
make office supplies increase is you debit it and that's helps you do the journal entry
you can talk through and explain to somebody you can say well we debit office supplies,
because office supplies is increasing and it's a debit balance account thus we have
to debit it and we credit cash because cash is also a debit balance account thus if we
want to decrease it we must credit it. Does that make sense? That's a lot different than
just memorizing it right? I want you to explain it and understand so that you can transfer
it to other things cool. Now we also talked last period last period was the one when we
really start talking about journal entries. We went further and not only did we show the
journal entry this is called making the journal entry this is called posting to the T-account
or to the journal ledger correct? Now remember different shade between this is what it looks
like if you're making a journal entry right here this is what looks like if you're posting
a t-account or a ledger I guarantee on the test I'm going to ask you to make about nine
or ten journal entries, please, please do not have me turn the page and see a lot of
t accounts this is not making the journal entry you with me? But this step comes before
this step this is our notation to tell us that we have to go office supplies t account
and debit it two fifty, we have to go to the cash t account on the credit side and put
two fifty in credit it for two fifty. Alirght lets go let's take a look then at quick study
two six. Quick study two six asked us to do some journal entries did it not? Ok let's
take a look at that I'm just going to show them all here and well talk through tem a
little bit. Now I'm not going to keep doing what I'm going to do right now let me get
this on here first, but there is an understood debit column and understood credit column
headings right here correct? But I'm not going to keep doing that. But let's take a look
at these journal entries in the first one the owner invest cash and equipment so cash
and equipment are debited capital is credited, in the January twenty first journal entry
we purchased office supplies on credit we debit office supplies and we debit AP or accounts
payable. The third situation on January twenty fifth is we received cash performed so we
can credit modeling services revenue its ok if you put revenue and we debit cash, and
on January thirtieth we received cash in advance for remodeling services that we are going
to perform in the future we debit cash and we credit unearned remodeling services revenue
if you said unearned revenue that's ok make sure it says unearned though and that's pretty
much exactly what you're journal entries should look like. You with me? Do we have to put
that owner invest cash or equipment. No you don't have to do the descriptions ok you do
not have to do the description but I will tell you one thing I want you to do on the
test. And this is all typed up and easy so it's easy to understand let me move this up
a little bite I really want you when you do these on the test its really nice if you draw
a line between these or at least whoops I think I just wrote on that see how I drew
a line between those or at least leave some space there, cause some students they'll just
cram them all together and it looks like a big mess and I can't tell where one journal
entry stops and another begins. So draw a line through those or leave a couple extra
blanks or something makes sense? Now we had one more and that is exercise two seven is
that correct? Exercise two seven I will just put those up there for you to look at. Now
remember if you're having trouble with this what my advice is if you're having trouble
with these my advice is going to be to do it the chapter one way first and then ask yourself how do
you make that account decrease how do you make that account increase and use that to
help you build the journal entry ok let me give you a second to look at these and then
I'll start talking about them. Do you want us to like indent the credits? Yes debits
go first you are right but then I want you to on the accounts being credited bump them
in a little bit I want you to credit them ok I want you to bump those in a little bit
and credit them and of course I want you to list your accounts being debited first your
accounts being credited second, and then of course your total for the debits have to equal
your total for the credits for every separate journal entry so does that equal forty thousand
yes ok. Kara? Do you want us to write like the owner investment in business do we have
to have that? No you do not have to do this little explanation here ok and also on our
little working papers it says PR what's that? Let me back up a little bit I hope you're
using your working papers the work papers that you purchased let me grab an example
one can I grab this? This is Matts the working papers like for instance this is what he used
for exercised two four which we did a little earlier those are in the back of your book
right, and it tells you which one. So use those work papers, and PR Kara stands for
posting reference and don't worry about that just don't even worry about it that is a in
the real world it something we use as far as where we go post this sometimes we put
account numbers in there something like that good question though thank you for asking
that. Any questions on these journal entries? Ok now after we do these journal entries and
this is called making the journal entries what would be the next step I just went through
this posting to the t account posting to the ledger when you post to the t accounts or
post to the ledger you want to go line by line go to cash and debit it for seventy five
hundred go to photography equipment for thirty two five go to Madison capital and credit
it for forty thousand and somebody might say well how else would you do it? Well some people
like try to do all the cashes at once you know what I'm saying jump around you'll always
miss one you'll always miss one so just go line by line ok. So you are right the next
step would be to take these journal entries that we've made and post them to the t accounts
right. And then of course we can figure out the ending balance of the t account correct?
Or of the ledger ok and that's why I want to transition to what were going to talk about
today. We're going to talk about something that is new that you don't know yet, but that
is called the trial balance let's get that up on the screen. Now this is an example of
a trial balance now a trial balance is not the same thing as a balance sheet ok the trial
balance is something that we prepare it is not part of the financial statements what
we do though is we prepare it before we do the financial statements, because it helps
us prepare the financial statements. Are you with me? The trial balance is something that
we prepare that will help us create the financial statements. And what it does is it lists each
account and what the balance is. What the balance is okay? Now there is an order that
we put things in a trial balance. We put the assets first then we put the liabilities,
then we put the equity accounts, then we put revenue, then we put expense. Okay, there
will never ever, ever, ever be a plus or minus sign in the trial balance. Okay, whatever
balance it has that is which column you put it in. and then the key thing is that the
total debits have to equal the total credits. They must, they must, they must. Okay, the
total debits have to equal the total credits. But what if they don't equal? What if they
don't equal? Then you did something wrong. Now when I was in public accounting back in
ninety two, the first thing they ask for is the trial balance. And a lot of times they
would give me a trial balance that would not balance. Total debits do not equal total credits,
and I would have to give it back to my client and say "I need one that balances" okay. Now
when I consult, I hardly ever get a trial balance that doesn't balance. Why do you think,
what's the change since ninety two? Did people just get smarter? Why do all of my trial balances
- they do everything on a computer. In the old days when people were doing everything
on paper like you are now, people would and sometimes would make credit sheets that didn't
balance. Where the total debits didn't equal the total credits. Now when you are on a computer,
it will not let you enter the journal entry if it does not balance. It will just say no.
now just because they are trial balance, going back to this trial balance; I told you that
if this doesn't balance, I guaranteed that it's wrong. If it does balance is it a guarantee
that everything is right? No unfortunately it doesn't work that way. But you know if
it doesn't balance its wrong. Okay, so that is a trial balance that helps us prepares
the financial statement. And of course what order do we prepare the financial statements?
The income statement, then statement of equity, and then balance sheet and all the balances
that you see on here would just be the ending balance on December thirty one of two thousand
eleven the ending balance of those accounts does that make sense? Questions on that? Now
what I want to do now is I want to go back over to exercise two seven, and we are going
to do in class and for you folks at home I want you to do it at home we are going to
do exercise two point eight and what does exercise two point eight tell us? Exercise
tells us to use the information of exercise two point seven to prepare an august thirty
one trial balance for this company. Begin by opening these accounts cash, office supplies,
prepaid insurance, and so on. Then posts the general entries to these t accounts and that
will serve as a ledger and then prepare a trail balance are you with me? Now if you
go to exercise two eight in your work papers it should look like this they've given you
the t accounts right? So use those it says exercise two eight right there and then they
even give you a spot below to do your balance sheet. Now I'm not going to point that out
on every work paper I'm just trying to get you in the habit of working in your work papers.
So let's work on exercise two point eight right now open up your t accounts post your
journal entries to the t account or to the ledger and then prepare a trial balance as
that snazzy JCCC music plays. (music 30:45-41:15) ok we are back if you're not done folks at
home just pause it push paly when your done now we started with these journal entries
that are shown on the screen. What I want you to do now as I asked is we went down and
we went to cash and we debit it for seventy five hundred went to photography equipment
debit it for thirty two five and so on we went line by line. Well when you're done with
that you should have some t accounts that look like this now what I did was I had to figure out the ending
balance for each account. Now for most of these accounts it was pretty easy there was
only one journal entry right? So yes office supplies the ending balance was fourteen hundred
prepaid insurance the ending balance was three thousand and so on. I highlighted in yellow
the ending balance. Now normally that's not going to be the case normally there going
to have during a period multiple journal entries to it, and we're going to have to figure out
the ending balance wont we? Now you can see I calculated the ending balance of cash now
I want to make sure the you know how to calculate the ending balance of a t account all I did
here was add the debit subtract the credits and add equal to forty eight seventy five.
So seventy five hundred plus twenty six fifty minus three thousand minus fourteen hundred
minus eight seventy five equal four eight seven five. Could cash now cash is a normal
balance account could it ever be a credit balance account? It could that would be abnormal
but that would be like if you were overdrawn in your cash account wouldn't it? If that
were the case you would have the number written over here and you would have that number in
the credit column on a trial balance, but that's not normally going to be the case.
We have a normal debit balance in this case a forty eight seventy five. What were going
to in these ending balances then is where going to put them in your trial balance. Post
for picks trial balance this is not a financial statement it's what we're preparing to help
us do the financial statements. Putting your date we list our assets I don't think we have
any liabilities but they would have gone there we have capital or equity accounts revenues
or expenses this is a very simplified one right? Never any plus or minus signs here
don't put plus or minuses, because they're all going to be plus. And of course we add
our total debits we add our total credits correct, and those numbers better be equal
correct? Oh I don't really care I don't care about the dollar signs but put these in the
debit column and put these in your credit column, but what I was saying about cash if
you were overdrawn let's say you were overdrawn by one hundred dollars in your cash account
so it had a credit balance an abnormal credit balance you would put one hundred right here
you wouldn't put negative one hundred right here, you'd put positive one hundred right
here there's no minus signs on here but in this example that's what that looks like.
Kara? What order do you put them in again assets? Assets, liabilities, equity, revenues,
expenses ok. Now I want to make sure that you all know how to figure out the ending
balance of your t accounts. Is there any questions about that? If it's a normal credit balance
account then would you add up the credits and subtract the debit. Yes that's great thank
you for asking that what Allie asked if it's a credit balance account do you add the credits
and subtract the debits yes if it's a debit balance account you'd add up the debits subtract
out the credits very good. Let me give you your homework and here is the homework I want
you to do Marlin did you get one of these? Ok copy that homework down real quick exercise
two nine, exercise two ten, and you also say ok don't leave yet. I want you to do the t
account hand out and that looks like this did everyone here get one of those? For you
folks at home you should have one of those look in your lessons tab. Under the hand outs
for chapter two but this will give you some practice in figuring out the ending balance
of t accounts. So I want you to do this hand out for next period and do exercise two nine
and exercise two ten. Are we all good to go? Start studying for that test alright, well
see you next time.