Recording Balance Sheet Transactions - Spreadsheet

Practice As You Learn

Financial Accounting

Recording Balance Sheet Transactions – Spreadsheet

Key Things To Know

Self Test

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Medium Practice Test

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The “Spreadsheet” should start out like this:

1)

2)

3)

…….

General rules to follow when recording on the spreadsheet:   

If the account name is not there, you must write it on a line at the top and put the amount only in the column below

Once the account name is there, when another transaction happens that impacts that account, write only the amount in the column.  Do not write the account name again, each account gets only one column.

Write all amounts for each transaction on one row only

Make sure that for each row the amounts stay in balance:  

        Assets = Liabilities + Owner’s Equity

As you read the transaction ask yourself –

What is the company receiving?

What is the company giving up to get it?  

Does the company owe for it?

Then, identify the account name that goes with what the company received and what was given up by the company or the liability.  

Follow this thought process:

1)  Did the company pay or receive cash?  Record any change to cash first

If yes, write “cash” on the first line (if it is not already there)

Received – increase the cash account
Paid – decrease the cash account

2)  Did the company get an asset that is different than cash?

If yes – write the account name of what they received on the line on the asset side and put a positive amount in the column to show the increase

3)  Did the company get something it has not yet paid for?

If yes – they have incurred a liability and they will pay later

Write the account name of the liability it owes on a line on the liability side and write a positive number to increase the liability

4)  Did the company pay and reduce what it owes?

If yes – find the account name of the liability it used to owe for on the liability side and write a negative number in the column – to reduce the liability

5)  When the asset was received, was another asset given up in exchange?

If yes –  the account name for that asset given up will already be there.

Put a negative amount in the column to reduce it 

You will have columns with each account name at the top

In the column will only be amounts related to the transaction, positive or negative

Each transaction will have its own row

At the end of the period, total each column.  

The total amount in each asset account is the amount the company has of that asset

The total amount in each liability account is the amount the company owes for that liability.

Stockholder’s Equity (for now, until we discuss the income statement transactions) will only be cash received from owners in the capital / common stock / contributed capital account and treasury stock purchases

Practice Problem 1 – Record Balance Sheet Transactions on a Spreadsheet

A company had the following transactions during the first week of operations:

  1. Received $150,000 cash from investors for ownership in the company.
  2. Purchased inventory at a cost of $45,000 on account.
  3. Paid $5,000 for liability insurance for the entire year.
  4. Purchased office furniture for $13,800 cash
  5. Purchased manufacturing equipment that cost $39,000. Paid $7,000 cash and agreed to pay the balance in 6 months.
  6. Hired employees.  
  7. Paid for the inventory purchased in 2. above
  8. Purchased office supplies for $250.
  9. Paid for a trademark for the company at a cost of $1,300
  10. Invested $50,000 in a short term certificate of deposit (CD) 

A.  Record the above transactions on a spreadsheet

B.  Balance each account.  Total the assets, liabilities and owner’s equity and make sure the spreadsheet is in balance.

Check Your Answers
Answers to Practice Problem 1 –
Record Balance Sheet Transactions on a Spreadsheet

First – Set up the spreadsheet. 

You will need space for several asset and several liabilities and owner’s equity accounts.  There are 10 transactions and each transaction will get its own row to put the numbers in

Second – ask yourself –

What is the company receiving?
What is the company giving up to get it?
Does the company owe for it?

The answers to these questions will be the account name you write on a line.   

Make sure you write the account name in the correct area –
assets in the asset section, liabilities ….. etc. 

Once you write an account name, do not write it again.  Each account name gets one column.

Third – Write the account name on the spreadsheet and the number in the column.

If the company now has more, use a positive amount.
If the company now has less, use a negative amount.

Think through what happened in the transactions

  1. Received $150,000 cash from investors for ownership in the company.

Received – Cash

Gave up – Ownership – use the common stock account

Traded owner’s equity for an asset

  1. Purchased inventory at a cost of $45,000 on account.

Received – Inventory

On account means they will pay later
Gave up – a liability – accounts payable

Received an asset and will pay later

  1. Paid $5,000 for liability insurance for the entire year.

Received – Insurance coverage – Prepaid Insurance – paid ahead of using
Gave up – Cash

Traded one asset for another asset

  1. Purchased office furniture for $13,800 cash

Received – Furniture
Gave up – Cash

Traded one asset for another asset

  1. Purchased manufacturing equipment that cost $39,000.   Paid $7,000 cash and agreed to pay the balance in 6 months.

Received – Equipment $39,000
Gave up – Cash $7,000
Gave up – you will pay later – a liability  – S/T Notes Payable $32,000 

Gave an asset and a liability to get an asset

  1. Hired employees.  

Received – nothing yet
Gave up – nothing yet

There is nothing to put on the spreadsheet until an exchange takes place.
This exchange will occur when they work and you pay or owe them.

  1. Paid for the inventory purchased in 2. above

Received – you owe less when you paid them – reduce the accounts payable
Gave up – Cash  $45,000

You paid for what you owed.  You do not get more inventory when you make the payment, you only reduce what you owe.

  1. Purchased office supplies for $250.

Received – Office Supplies
Gave up – Cash

Traded one asset for another asset

  1. Paid for a trademark for the company at a cost of $1,300

Received – Trademark
Gave up – Cash

Traded one asset for another asset

  1. Invested $50,000 in a short-term certificate of deposit (CD) 

Received – S/T Investment
Gave up – Cash

Traded one asset for another asset

Notice that cash is involved a lot.  In the cash column – write a positive number if cash was received and a negative number if the cash was paid.

Record the transactions on the spreadsheet:

Write the account name and the amounts – positive for increases and negative for decreases – to represent what was received or what you gave up for each transaction.

Practice Problem 2 – Record Balance Sheet Transactions on a Spreadsheet

A company had the following transactions for this period:

  1. Borrowed $100,000 from the bank to be repaid in 3 years.
  2. Purchased inventory at a cost of $5,000 on account.
  3. Paid $5,000 for rent for the first year.
  4. Purchased computer equipment for $8,200 cash
  5. Paid cash for furniture costing $11,000.   
  6. Purchased furniture for $2,280, agreeing to pay monthly payments for 1 year
  7. Purchased office supplies for $150 in cash.
  8. Received cash of $1,250 from a customer for services to be done next month 
  9. Issued stock to investors for $200,000
  10. Purchased stock back from one investor for $15,000
Answer
Answers to Practice Problem 2 –  

Record Balance Sheet Transactions on a Spreadsheet

Go through the same steps as you did in problem 1.  See the steps listed in Key Things to Know.

Write the account name and the amounts – positive for increases and negative for decreases – to represent what was received or what you gave up for each transaction.

  1. Borrowed $100,000 from the bank to be repaid in 3 years.

Get – cash
Give up – you owe – Note Payable – L/T

  1. Purchased inventory at a cost of $5,000 on account.

Get – Inventory
Give up – you owe – a liability – accounts payable

  1. Paid $5,000 for rent for the first year.

Get – Rent paid ahead of time, prepaid rent
Give up – cash

  1. Purchased computer equipment for $8,200 cash

Get – computer equipment
Give up – cash

  1. Paid cash for furniture costing $11,000.   

Get – furniture
Give up – Cash

  1. Purchased furniture for $2,280 agreeing to pay monthly payments for 1 year

Get – furniture
Give up – you owe – S/T Notes Payable

  1. Purchased office supplies for $150 in cash.

Get – office supplies
Give up – cash

  1. Received cash of $1,250 from a customer for services to be done next month 

Get – cash
Give up – you owe them – liability – unearned revenue

  1. Issued stock to investors for $200,000

Get – cash
Give up – ownership – common stock

  1. Purchased stock back from one investor for $15,000

Get – stock in your company – treasury stock
Give up – cash