Recording Balance Sheet Transactions - Spreadsheet

Key Things To Know

Introduction to Accounting

Key Things To Know

Transaction:  An exchange of something for something else. 

Common Transactions:

You get something and you give something to get it.

You get an asset now and give up an asset now
You get an asset now and give up a liability (pay later)

Repay a liability – pay cash for what you owe so you don’t owe any more

When recording transactions: 

1) determine what you received and the account name used for that

2) determine what you gave up and the account name used for that

Common account names used:

Assets are – what you have Liabilities are –  what you owe
Assets Liabilities
Cash Accounts Payable
Accounts Receivable Accrued Expenses
Inventory Accrued Liabilities
Prepaid Expense – insurance, rent Short term Notes Payable
Short term investments Rent Payable
Short term notes receivable Unearned revenues
Land Long term debt
Buildings Long term notes payable
Autos Owner’s Equity
Computer equipment
Goodwill Common stock
Trademarks Contributed capital
Copyrights Retained Earnings
Patents Treasury Stock

There are 5 general transactions that occur over and over that impact the balance sheet – what you have, what you owe and owner’s equity.  

5 common things that happen repeatedly:

1)  Receive cash from investors
2)  Trade an asset for another asset
3)  Buy an asset and pay cash
4)  Buy an asset and incur a liability – you will pay later
5)  Pay cash to reduce what is owed – reduce a liability

Once you have identified the kind of transaction that has occurred you must
name the account’s that are changed by the transaction .  

As you determine what happened in the transactions, write the account name that is involved in the transaction at the top of a column and put a  positive number if it increases and a negative number if it decreases in the column below the account name:

Example:  3 transactions occurred:

1)  The company issued stock to investors for $100,000
2)  The company purchased inventory on account in the amount of $12,000
3)  The company purchased furniture for cash in the amount of $10,000.

Accounts Common
Cash Inventory Furniture = Payable + Stock
1) $100,000 = $100,000
2) $12,000 = $12,000
3) ($10,000) $10,000 =
_____ _____ _____ _____ _____
$90,000 $12,000 $10,000 = $12,000 $100,000

As you record transactions you must keep the accounting equation balanced

Assets = Liabilities + Owner’s Equity

If you put an amount on the asset side, you must put the same  amount on the liability + owner’s equity side or you must reduce another asset by the same amount.

You will have columns with each account name across the top

In the columns will be the amount of the transaction, positive or negative

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 or purchase of your own stock called treasury stock