Unit3RecordingBusinessTransactions:Double-EntrySystem1.RecordingBusinessTransactions①SetupofAccount②T-account2.Double-EntrySystem①Theruleofdebitandcredit②ActivitiesⅠRecordingBusinessTransactions①SetupofAccount

Accountsarethefoundationofrecordingaccountingentriesandpreparingfinancialstatements.

Thereferencenumberofaccountisinordertofacilitateaccountingidentificationandtransactionentry.BalanceSheet1.Assets101Cash102AccountsReceivable103NotesReceivable104OfficeSupplies105Equipment106Inventory107PrepaidInsurance108Land109AccumulatedDepreciation110IntangibleAssets2.Liabilities201AccountsPayable202NotesPayable203SalariesPayable204UnearnedRevenue3.Owner’sEquity301Paid-inCapital302RetainedEarnings303WithdrawalsIncomeStatement4.Revenue401SalesRevenue402InterestRevenue5.Expense501SalaryExpense502TelephoneExpense503SuppliesExpense504AdvertisingExpense505RentExpense506GasExpense507InsuranceExpense508DepreciationExpenseBalanceSheet(Chinese)1.Assets1001Cash1002Cashinbank1121NotesReceivable1122AccountsReceivable1123Prepaidexpenses1221Otherreceivable1501Held-to-maturityinvestment1521InvestmentProperty1601Fixedassets1602AccumulatedDepreciation1701IntangibleAssets1702Amortization1711Goodwill2.Liabilities2001Short-termBorrowing2201AccountsPayable2202NotesPayable2211SalariesPayable2231InterestPayable2232DividendPayable2401DeferredIncome2901DeferredTaxLiability3.Owner’sEquity4001Paid-inCapital4103CurrentYearProfit4104ProfitDistributionIncomeStatement(Chinese)6.Profitandloss

6001SalesRevenue6011InterestRevenue6111InvestmentIncome6301Non-operatingIncome6401CostOfSales6601SellingExpense6602AdministrativeExpense6603FinancialExpense6711Non-operatingexpenditure6801IncomeTax②T-accountDRCRLeftsideRightsideTitleofAccountDebitbalanceCreditbalanceAccountTitleDebitsideCreditsideDifferencebetweenthedebitsideandthecreditsideExample1Cash$60,000

$50,0005002,000Bal.7,500

Dr.Cr.Example2AccountsPayable$60,000100,000$150,00040,0002,000Bal.32,000

Dr.Cr.ⅡDouble-entrySystemEachtransactionhasadualeffectontheequation.AssetsLiabilitiesEquityAssetAnotherassetLiabilityOwner’sequityDouble-entrysystemisfundamentaltorecordbusinesstransactionsinwhicheachtransactionisrecordedbyanequalamountintwoormoreconnectedaccounts.Itreflectsthecapitalactivitiesandthecauseandeffectofchangesofcapitalandoperatingresults.Ithelpsverifyentryrecordingandguaranteethevalidityofentries.①TheRuleofDebitandCreditAssetsLiabilitiesEquityDebitsCredits&ExampleOnNovember1,Chrisdeposits$100,000inabankaccount,theeffectofthistransactionisbothassetsandowner’sequityofbusinessincreasedby$100,000.Dr.Cash100,000

Cr.Paid-incapital100,000AssetsLiabilitiesEquityAssetsaccountsRuleofDebit/CreditinBalanceSheetAccountsLiabilityaccountsIncrease(+)

Decrease(-)

Decrease(-)Owner’sequityaccountsDecrease(-)

Increase(+)

Increase(+)DebitsCredits①TheRuleofDebitandCreditThefollowingtransactionshappenedforCaryBeverageInc.:(1)Invested$100,000toopenabusiness.(2)Purchasedlandworth$40,000onaccount.Example(1)Dr:Cash100,000Cr.Capital100,000(2)Dr:Land40,000Cr:AccountsPayable40,000Cash(1)Dr.Cash$100,000(2)Dr.Land$40,000Cr.Capital$100,000Cr.AccountsPayable$40,000$100,000Capital$100,000Land$40,000AccountsPayable$40,000RuleofDebit/CreditinIncomeStatementAccountsOwner’sequityaccountsRevenuesDecrease(-)

Decrease(-)

Increase(+)ExpensesIncrease(+)

Increase(+)

Decrease(-)DebitsCredits①TheRuleofDebitandCreditExampleThefollowingtransactionshappenedforCaryBeverageInc.:(1)Enter$100,000(thedepreciationamountofPPEforthisyear)intotheaccountsonDecember31,2009.(2)Receive$80,000incashforgoodssoldtoacustomer.(1)Dr:Depreciationexpense100,000

Cr:Accumulateddepreciation100,000

(2)Dr:Cash80,000

Cr:Salesrevenue80,000Accumulateddepreciation$100,000(1)Dr:Depreciationexpense$100,000

Cr:Accumulateddepreciation$100,000

(2)Dr:Cash$80,000

Cr:Salesrevenue$80,000Cash$80,000Salesrevenue$80,000Depreciationexpense$40,000②ActivitiesMakethreequestionsclearwhenyoupreparetheentryofatransaction.(1)Whataccountsareinvolvedintheaccountingequation?Capitalorshort-termloan?(2)Shouldtheaccountsinvolvedbedebitedorcredited?DebitorCredit?(3)Howmuchisshouldberecorded?

10,000or50,000?ThefollowingtransactionsareaboutBeckyMusicalStore.Pleaseanalyzethemandpreparetheirentries.(1)Beganoperationsbydepositing$22,000inabusiness.(2)Purchasedmusicalequipmentfor$10,000,paying$4,000incashandthebalancebeingowed.(3)Purchasedlandforbuildingsite$70,000.(4)Cashincomereceivedforsellingapieceofmusicalequipment,$3,000(5)Paidsalariesforthemonth$1,200.(6)Paidtelephonebill$600.(7)Paid$1,000onaccount.(8)Acheckofinventorysayssuppliesareconsumedattheendofthemonth:$200.(9)Withdrew$400forpersonaluse.(1)Beganoperationsbydepositing$22,000inabusiness.Analysis:Initialinvestmentinbusiness.AssetsLiabilitiesEquityDr:Cash22,000Cr:Paid-inCapital22,000

(2)Purchasedmusicalequipmentfor$10,000,paying$4,000incashandthebalancebeingowed.Analysis:PurchaseofequipmentincashandonaccountAssetsLiabilitiesEquityDr:Equipment10,000Cr:Cash4,000Accountspayable6,000

(3)Purchasedlandforbuildingsite$70,000.Analysis:Purchaseofland.AssetsLiabilitiesEquityDr:Land$70,000Cr:Cash$70,000

(4)Cashincomereceivedforsellingapieceofmusicalequipment,$3,000.Analysis:Collectionofcash.AssetsLiabilitiesEquityDr:Cash3,000Cr:Salesrevenue3,000

(5)Paidsalariesforthemonth$1,200.Analysis:Paymentofsalaries.AssetsLiabilitiesEquityDr:Salariesexpense1,200Cr:Cash1,200

(6)Paidtelephonebill$600.Analysis:Telephoneexpense.AssetsLiabilitiesEquityDr:Telephoneexpense600Cr:Cash600

(7)Paid$1,000onaccount.Analysis:Paymentonaccountspayable.AssetsLiabilitiesEquityDr:Accountspayable1,000Cr:Cash1,000

(8)Acheckofinventorysayssuppliesareconsumedattheendofthemonth:$200.Analysis:Suppliesexpense.AssetsLiabilitiesEquityDr:Suppliesexpense200Cr:Cash200

(9)Withdrew$400forpersonal