I wanted to show you how the general ledger
problems work on Connect This is Chapter Two, Problem One, and it tells
you that it’s based on the transactions for Fast Forward in your text. It tells you to prepare journal entries for
each of the transactions and then identify the financial statement
impact of each entry The financial statements are automatically
generated based on the journal entries recorded. So what you’ll see is up here, all of the
(I scroll too fast) all of your transactions and then here you’ll see your general journal your general ledger, all these different tabs
that will be filled in as you go along and down here it explains to you for each transaction
prepare the required journal entry. List debits before credits. And then what’s going to happen
is that you’re gonna see, if you click to the other tabs, that each one of them is being
updated as you go along, except for the last one. That one you have to do yourself. So let’s click “next.” And what will happen
is you will see each one of the transactions here in this part. This is the same as the
other problems that you’ll do in Connect. It just will update all of the other pages
as well. So let’s go through and do them. I’m gonna
do all of them and I will probably make a mistake or two so that you can see how it
will affect the trial balance, the income statement, etc . But I’ll tell you which ones
I’m making the mistake on. So on December first, Chas Taylor forms a
consulting business named Fast Forward, the business receives thirty thousand dollars
from Chas Taylor as an owner contribution. So you can either type it in
or you can use the drop down boxes – it tends to mess with me when I just type it in so
I will use the drop down boxes. Cash is the first thing – cash is your asset,
it’s increasing, and so we will record that on the debit side – I didn’t have my num lock
button clicked so it got cranky with me. The credit then is going to be, it should be C.
Taylor Capital and it’s again thirty thousand dollars.
Record your entry. The next one, number 2, on December 2nd, Fast Forward pays $2500 cash
for supplies. The company’s policy is to record all prepaid expenses in asset accounts. They’re
buying supplies so “Supplies” will increase by $2500, it’s an asset so it increases on
the debit side and they’re paying cash, your cash – cash is also an asset but it is decreasing,
because you’re paying it so it gets recorded on the credit side.
And record your entry. On December 3rd, Fast Forward pays $26,000
cash for equipment. Equipment is, again, an asset., $26,000 and paid cash for it, $26,000
credited. Record your entry. On December 4th, Fast Forward purchased $7,100
of supplies on credit from a supplier called CalTech company. When you see the words “on
credit” that should be a key to you, a signal that you’re either going to use accounts receivable
or accounts payable. Since they’re buying the stuff and they will pay for it later,
it will be accounts payable. But the first thing we’ll do is the debit which is Supplies,
because Supplies are increasing and the liability will be Accounts Payable, $7,100 – also increasing.
Record your entry On December 5th, Fast Forward provides consulting
services and immediately collects $4200 cash. So cash went up, they got it, they collected
it, 4200, and I think it’s consulting revenue 4200. Revenue is what we call the money they
earned by doing the work that they do. Record the entry.
ON December 6th, Fast Forward pays cash for December rent. So let’s do this one wrong.
Let’s debit cash for $1000 and credit
Rental Expense. And record it. And now before we do anything else, let’s
go back here and look at our General Ledger and you will see that under Cash, we’d debited
Cash for $1000. And we have Rent Expense as a negative – that’s incorrect, you can’t have
a negative expense. Well, it would be very weird to have a negative expense. Let’s go
back to the General Journal and these are all of the entries that we’ve done. View the
transactions list – which one was this? The 6th
And let’s fix this. Debit our Rental Expense and credit the Cash. And record that entry.
Now if we go back to the General Ledger, we see the $1000 deducted and the Rent has a
balance of $1000. I’m gonna click “previous” and “previous” again and “next.”
And we want the 7th. Excuse me
On December 7th, Fast Forward pays cash for employee salaries. So again, it’s an expense,
Salary Expense. If you’re not sure what the account is, one of the good things about Connect
is you can scroll until you find it. And credit Cash, $700, because they’re paying
it. And record the entry
On December 9th, provide consulting services and rents the test facility and bills the
customer. Now if you see that, that means we didn’t get the money yet. So it’s going
to be a receivable, $1900. Separate your two revenues – Consulting revenue is $1600 – remember
that we increase revenue on the credit side – and would that be some sort of revenue – Rental
revenue – for $300. Received cash from the client billed. So you
know cash goes up by $1900 and the other side of it is going to be Accounts Receivable.
The company sent a bill, and got paid. And again, if you go to your General Ledger
tab, you can see Accounts Receivable had a debit balance of $1900, we just got the money,
so it’s got a zero balance now And let’s go back to our General Journal,
view the transactions. On the 10th, pays cash as partial payment
for the purchase of supplies. That was Accounts Payable. Accounts Payable will be debited
$900 to reduce that amount that they owe, credit cash for $900 and record the entry.
On December 11th, Chas Taylor withdraws $200. That would be C.Taylor, Withdrawals, $200,
credit cash $200. Record your entry, Don’t forget to record your entries!
On December 12th, Fast Forward receives $3000 cash in advance of providing consulting services
to a customer. They have NOT done the work yet, so it isn’t earned yet, it is UNearned
consulting revenue. However, they got the cash, and so I just did this backwards. And
I didn’t do it backwards on purpose. I did it backwards because I wasn’t thinking, so
what I’m gonna do is go back
and fix it. Unearned Revenue is a liability. What was I thinking?
Pays cash for insurance premium for a 24 month policy. Prepaid Insurance $2400 and credit
cash $2400. Record the entry
Pays cash for supplies Again, increase supplies $120
Credit cash $120 Pays cash for utilities
Utilities expense $305 Credit cash $305
If you’re not sure what your debit should be, you know that cash is being paid out and
that will be a credit, so the other side has to be the debit.
Again, pays employees salaries Salaries expense $700
Credit cash $700 One more
Nope, we’re all done We’re all done!
Okay Click “done”
And then we see all of our journal entries here
Next These are the ledger accounts
You can click on any one of them to go to the journal entry, so if you go there it’ll
show you that’s where that came from. And then just x out.
The next tab is your trial balance And again if you click on any one of them,
it will take you to the underlying journal entry, and the ledger it came from which I
think you can see here. And you can see that it balances
Next is the Income Statement We have our two revenues, we have expenses,
and we have net income It asks you to fill this in. Net income or
loss is transferred
to Statement of Owner’s Equity. Next
Ending capital is transferred to the Balance Sheet
And here we will see the Balance Sheet and see if it balances
Balance in the Capital account comes from Statement of Owner’s Equity
And this one I’m not terribly concerned that you actually do these. It asks you what would
be the effect of each transaction on the financial statements
Each transaction is listed These parts I’m going to leave as optional
for you to do . If you do them, it will be good, if you don’t I will make sure your points
are adjusted accordingly. And this is really what the General Ledger
problems look like. So hopefully you can do them and they will help you to understand
how everything works together.