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Learning Objectives
After studying this chapter, you should be able to
1. Use double-entry accounting
2. Analyze and journalize transactions
3. Post journal entries to the ledgers
4. Prepare and use a trial balance
5. Close revenue and expense accounts and update
retained earnings
6. Correct erroneous journal entries and describe how
errors affect accounts
7. Explain how computers have transformed
processing of accounting data
10,000 6,000
Balance 4,000
Trial Financial
Transactions Documentation Journal Ledger
Balance Statements
_______________________________________________________________
Account Account Account Account
Number Title Number Title
100 Cash 202 Note payable
120 Accounts receivable 203 Accounts payable
130 Merchandise inventory 300 Paid-in capital
140 Prepaid rent 400 Retained earnings
170 Store equipment 500 Sales revenues
170A Accumulated 600 Cost of goods sold
depreciation, 601 Rent expense
store equipment 602 Depreciation expense
_______________________________________________________________
20X2
1/2 3 Merchandise Inventory 130 150,000
Cash 100 150,000
Acquired inventory for cash
20X2
1/2 3 Merchandise Inventory 130 150,000
Cash 100 150,000
Acquired inventory for cash
+ - - + - + - +
Debit Credit Debit Credit Debit Credit Debit Credit
Expenses Revenues
+ +
Debit Credit
160,000 160,000
100,000 100,000
6,000 6,000
Accumulated Depreciation,
Store Equipment Depreciation Expense
100 100
Debits Credits
Cash $ 336,700
Accounts receivable 160,300
Merchandise Inventory 59,200
Prepaid Rent 4,000
Store equipment 14,000
Accumulated depreciation,
store equipment $ 100
Note payable 100,000
Accounts payable 16,200
Paid-in capital 400,000
Retained earnings 0*
Sales revenues 160,000
Cost of goods sold 100,000
Rent expense 2,000
Depreciation expense 100
Total $ 676,300 $ 676,300
*Retained earnings in the trial balance does not yet reflect the income for the period