Source Documents

implement her plan. But with the help of a small group
of investors, Janice formed a corporation called Hobby
Shack, Inc. Each stockholder received a number of shares
of stock based on the amount invested.
Unlike a proprietorship, a corporation exists independent of its owners. Janice expects the Hobby Shack to
continue beyond her lifetime and plans to give her shares
of stock to her children. [CONCEPT: Going Concern]
: Engaging Features to Enhance the Learning Experience
Careers in Accounting
PHOTO: © DIGITAL VISION
“Well, maybe just this once.”
“No one will ever know.”
“It doesn’t matter how it gets done as long as it gets
done.”
“It sounds too good to be true.”
“Everyone does it.”
respond to the increasing importance of ethics and personal
character in accounting today. Ethical dilemmas within every
chapter assist students with decision-making and critical thinking
skills, while challenging their personal character development.
“Shred that document.”
“We can hide it.”
“No one will get hurt.”
“What’s in it for me?”
“This will destroy the
competition.”
“We didn’t have
this conversation.”
Source: www.lockheedmartin.com
CAREERS IN ACCOUNTING
Lesson 9-1
�
Liabilities
Debit
Credit
NORMAL BALANCE
Decrease
Financial Literacy
Increase
Credit
Decrease
Increase
presented
with each new
transaction in
the text provide
objective evidence
for journalizing
every transaction.
Source documents
are included within
Online and Printed
Working Papers
for select end-ofchapter problems.
7/31/07 3:12:28 PM
Owner’s Equity
�
Owner’s Capital Account
Debit
Credit
NORMAL BALANCE
Decrease
Increase
in feature boxes throughout the
text addresses both
business
Asset accounts have normal debit balances; therefore,
The sides of a T account are used to show increases and
asset accounts increase on the debit side and decrease on
decreases in account balances.
finance issues and
critical
the credit side. Liability accounts have normal credit balTwo basic accounting rules regulate increases and
therefore, liability accounts increase on the credit
decreases of account balances.
personal finance ances;
topics.
and decrease on the debit side. The owner’s capital
side
1. Account balances increase on the normal balance side
of an account.
2. Account balances decrease on the side opposite the
normal balance side of an account.
R i t a J . C o wa n s ,
Int e r n a l Au d i t or
Updated! Source Documents
235
Any Liability
Any Asset
Debit
NORMAL BALANCE
account has a normal credit balance; therefore, the capital
account increases on the credit side and decreases on the
debit side.
FINANCIAL LITERACY
OTHER SOURCE DOCUMENTS
No. 1
Date
From
For
$
August 1,
Kim Park
Investment
Receipt No. 1
20
--
August 1,
Rec’d
Kim Park
from
Investment
For
Five thousand and no/100
5,000 00
20
--
Dollars
5,000 00
Amount $
Kim Park
Received By
7549 Broadway
Portland, OR 97202-2531
Receipts
A business form giving written acknowledgement for cash
received is called a receipt. When cash is received from
sources other than sales, TechKnow Consulting prepares
a receipt. The receipts are prenumbered to help account
for all of the receipts. A receipt is the source document for
cash received from transactions other than sales. [CONCEPT: Objective Evidence]
MEMORANDUM
No. 1
7549 Broadway
Portland, OR 97202-2531
Bought supplies on account from
Supply Depot, $500.00
Signed:
Kim Park
Date:
30
Chapter 2
gil47052_c02_026-053.indd Sec1:30
Memorandums
A form on which a brief message is written describing
a transaction is called a memorandum. When no other
source document is prepared for a transaction, or when
an additional explanation is needed about a transaction,
TechKnow Consulting prepares a memorandum. [CONCEPT: Objective Evidence] TechKnow Consulting’s
memorandums are prenumbered to help account for all
memorandums. A brief note is written on the memorandum to describe the transaction.
a retirement plan such as a 401(k), but you need to decide
how much you can afford to contribute into the plan.
There may also be numerous forms to complete. For
tax purposes, you need to know how many dependents
you claim. You may need to fill out medical information,
provide picture identification and a social security number, and compile a list of emergency contacts and phone
numbers.
Calculator Tapes
TechKnow Consulting collects cash at the time services
are rendered to customers. At the end of each day, TechKnow Consulting uses a printing electronic calculator to
Activities
1. Set up an appointment with someone in the Human
Resources Department at a local company. Ask what
decisions must be made by a new employee. Summarize your findings in a written report.
total the amount of cash received from sales for that day.
By totaling all the individual sales, a single source document is produced for the total sales of the day. Thus, time
and space are saved by recording only one entry for all of a
day’s sales. The calculator tape is the source document for
daily sales. [CONCEPT: Objective Evidence] A calculator tape used as a source document is shown here.
TechKnow Consulting dates and numbers each calculator tape. For example, in
the illustration, the number
0.00 *
T12 indicates that the tape
0-- .00 �
is for the twelfth day of the
12, 2 150
35.00 �
Aug.
month.
.
T12
REINFORCEMENT
Activity 1—Part B
Journals, Source Documents, and Recording Entries in a Journal
Salary Range: $30,000–$130,000 and up. Can lead to
high-level careers at public accounting firms, private and
public corporations, and government agencies, such as
the Internal Revenue Service (IRS Auditor).
Qualifications: Bachelor’s degree in accounting, finance,
and information systems for entry-level position, plus
normally five years of auditing experience for senior
level or above. Professional Certifications preferred (CPA,
CIA, CISA, CFE, etc). Familiarity with business, informa-
110 00 �
295.00 *
gil47052_c03_054-087.indd 59
Lesson 3-1
8/17/07 10:21:48 AM
C21 BLUE CHAPTER 3 FIRST PAGES
uses Reinforcement Activities throughout the text
to help students refine their skills and prepare for
success at FBLA and BPA competitive events.
C21 BLUE CHAPTER 2
8/17/07 10:30:42 AM
Analysis of Best Buy’s
Financial Statements
An Accounting Cycle for a Proprietorship:
ACC
Many businesses need amounts of capital that cannot be easily provided by a
proprietorship. These businesses choose to
organize using another form of business. An
organization with the legal rights of a person and
which many persons may own is called a corporation.
A corporation is formed by receiving approval from a state
or federal agency. Each unit of ownership in a corporation
is called a share of stock. Total shares of ownership in a
corporation are called capital stock. An owner of one or
more shares of a corporation is called a stockholder.
A corporation is a business organization that has the
legal rights of a person. A corporation can own property,
incur liabilities, and enter into contracts in its own name.
A corporation may also sell ownership in itself. A person
becomes an owner of a corporation by purchasing shares
of stock.
The principal difference between the accounting
L
T H E isRin E
Ncorporations
T I N G Iand
UN
O
records
of proprietorships
theA
capi-
234
tal accounts. Proprietorships have a single capital and
drawing account for the owner. A corporation has separate capital accounts for the stock issued and for the earnings kept in the business, which will be explained in more
detail in Chapter 16. As in proprietorships, information in a
corporation’s accounting system is kept separate from the
personal records of its owners. [CONCEPT: Business Entity]
Periodic financial statements must be sent to the stockholders of the corporation to report the financial activities
of the business.
Critical Thinking
1. The names of many corporations include the words
Corporation, Incorporated, Corp., or Inc. in their
names. Based on their names, identify several corporations in your area.
2. Why do you think many very large companies are
organized as corporations?
WORLD
Chapter 9
Journalizing Purchases and Cash Payments
OfficeMax
C21_marketing.indd 234
7/31/07 3:12:22 PM
Purchasing Synergies Benefit OfficeMax
and Boise Office Solutions
Like the trees it manages, Boise Cascade Corporation has grown and evolved
from its roots as a wood products company in Boise, Idaho. Building on its
strength as a manufacturer of wood building products and paper, Boise
established Boise Office Solutions to provide office supplies and furniture
directly to businesses, government offices, and educational institutions.
In its 2002 annual report, Boise stated, “Boise Office Solutions’ primary
goal is profitable growth. This means winning new customers, selling more
products to existing customers, and controlling
AUDITING FOR ERRORS
operating costs.”
The bookkeeper for Lyons Company used T accounts to analyze three transactions as follows. Boise took a bold step to achieve
that goal through the 2003 acquiTransaction 1:
tion technology, and legal concepts and procedures are
Cash
Ruth Lyons, Capital
sition of OfficeMax, an office
beneficial.
200.00
200.00
products company with
Occupational Outlook: The Sarbanes-Oxley Act of 2002
requires public corporations to expand the documentanearly 1,000 retail outlets.
Transaction 2:
tion and testing of their accounting systems. Internal
The acquisition more than
Accounts Payable
Supplies
auditors are an integral part of corporations’ compliance
500.00
500.00
doubled sales in Boise’s
with this law. As a result, the demand for internal auditors
will be strong for years to come.
office products distribuTransaction 3:
tion business.
Accounts Receivable
Sales
Thecompanyexpects
100.00
100.00
to use its combined purReview
the
three
sets
of
T
accounts
and
answer
the
following
questions.
Lesson 2-3
43
chasing power to lower
1. Which T account analysis is incorrect? How did you determine it was incorrect?
2. What information would you need to determine the correct T account analysis for this transaction?
the cost of the office
8/17/07 10:22:08 AM
products purchased from
FIRST PAGES
other manufacturers and
A N A LY Z I N G B E S T B U Y ’S F I N A N C I A L S TAT E M E N T S
to eliminate duplicate disThe Best Buy financial statement on Appendix B page B-4 lists the assets, liabilities, and shareholder’s equity
facilities and martribution
of Best
Buy. Shareholder’s equity for a corporation is the same as capital for a proprietorship.
keting efforts. Boise expects the
Instructions: Find the total assets, total liabilities, and total equity for Best Buy for 2005 and 2006. Put your answer in
the form of an accounting equation. You will have to add the total current liabilities, long-term liabilities,
and long-companies to achieve
combined
term debt to find the total liabilities.
synergy benefits of $160 million a year.
Internet Research Activities
at the beginning of every chapter
encourage students to search the
Internet for answers related to
chapter content and provide
practice in technology and
research skills.
End-of-Fiscal-Period Work
WORK SHEET
ADJUSTING ENTRIES
INSTRUCTIONS:
12. Prepare a trial balance on the work sheet given in the
Working Papers. Use a one-month fiscal period ended
May 31 of the current year.
13. Analyze the following adjustment information into
debit and credit parts. Record the adjustments on the
work sheet.
Adjustment Information, May 31
Supplies on hand
$ 625.00
Value of prepaid insurance
1,100.00
14. Total and rule the Adjustments columns.
15. Extend the up-to-date account balances to the
Balance Sheet and Income Statement columns.
16. Complete the work sheet.
Critical Thinking
throughout this edition
allows students to apply
what they’ve learned as they
closely examine business
performance in all aspects of
Best Buy’s operations using
financial statements from this
familiar business.
The general ledger prepared in Reinforcement Activity 1—Part A is needed to complete Reinforcement
Activity 1—Part B.
Reinforcement Activity 1—Part B includes end-of-fiscal-period activities studied in Chapters 6 through
8.
Competitive Event Preparation
59
gil47052_c02_026-053.indd Sec1:43
Analyzing Transactions into Debit and Credit Parts
C21 BLUE CHAPTER 2 FIRST PAGES
assets of the corporation, complying with all laws and
regulations, and accomplishing the corporate strategic
objectives as established by senior management.”
While in high school, Rita developed a love for mathematics and accounting. “I became a very critical and
detail-oriented thinker and excelled at analyzing information and solving problems.” With her parents’ direction and strong support, she continued her education
and graduated with a bachelor’s degree in accounting.
In addition, she successfully earned her Certified Internal
Auditor (CIA) and Certified Information Systems Auditor
(CISA) professional designations. “Being certified in the
area of accounting in which you work is critical to your
professional success. Certifications demonstrate that
you are committed to your profession and communicate
to others that you are an expert in your field.”
Certifications also enable you to become active in
organizations that provide educational opportunities for
their members. Rita is a member of the Institute of Internal Auditors and Information Systems Audit and Control
Association.
As a member of the FedEx Services Diversity Council,
Rita works to ensure that individuals from every background have the opportunity to excel at FedEx. Ultimately, “having a passion for what you do and setting
high standards will determine your level of success.”
Analyzing How Transactions Affect Owner’s Equity Accounts
PHOTO: ©GETTY IMAGES
2. Give a list of typical benefits to 10 people. Have each
person identify the three benefits most important to
him/her. Summarize your findings in a chart or table.
As a highly respected employee at FedEx Corporation,
Rita J. Cowans is a Manager in the Internal
Audit Department.
During her tenure
at FedEx, Rita has
held various positions in financial,
operational, international, and information systems
audit. Presently she
is responsible for the
financial, information
systems, and international audit activities for FedEx
Worldwide operations.
Her audit team conducts business process reviews, integrated financial and
information system reviews, international entity reviews,
fraud examinations, and vendor audits. Rita has been a
leader in developing and promoting best practices as
an integral part of the Internal Audit Department. “It’s
my responsibility to ensure that the employees and
management of FedEx are effectively safeguarding the
August 7, 20--
Fi r s t D a y a t Wor k
It is your first day at a new job. You feel you
are totally prepared. But when you arrive,
you are directed to the Human Resources
Department, where you are asked many
questions for which you do not know the
answer. Which health plan do you want?
How many dependents will you claim?
Do you want to participate in the 401(k)
plan? Do you want to buy additional life
and/or disability insurance? These are just a
few of the questions you could be asked as you
begin a new job.
Many companies offer some form of health insurance.
You may need to decide your level of coverage and who
is to be covered by the insurance. Life insurance and disability insurance are sometimes provided by an employer,
but additional levels of coverage may be available for purchase. Your employer may match your contributions into
For mi n g a C or po r a t i o n
Think of statements you hear
that are warning
signs of unethical
behavior.
INCREASES AND DECREASES IN ACCOUNTS
Assets
BUSINESS STRUCTURES
Instructions
Journalizing Purchases Using a Purchases Journal
C21_marketing.indd 235
highlight the educational and experience
requirements for specific jobs within
accounting and related fields—now
and in the future—based on intriguing
one-on-one interviews with
various professionals.
INSTRUCTIONS:
19. Use page 3 of the journal. Journalize and post the
adjusting entries.
C LO S I N G E N T R I E S
INSTRUCTIONS:
20. Continue using page 3 of the journal. Journalize and
post the closing entries.
P O S T- C L O S I N G T R I A L B A L A N C E
©GE
TTY
IMA
GES
/PH
OT
OD
ISC
to
1. How can purchasing more units of an item enable a company
purchase that item at a reduced cost?
2. Can you think of any two other companies that could reduce their
operating costs by combining their businesses?
© GETTY IMAGES
Character Counts Features
Wa l k i n g o n E t h i c a l Ic e
PHOTO: © GETTY IMAGES
Recording transactions in a sales journal and a cash
receipts journal is described in Chapter 10.
CHARACTER COUNTS
Lockheed Martin is an international corporation engaged
in the production of advanced technology systems. The
company’s largest customers are the U.S. Department of
Defense and other U.S. federal government agencies.
Lockheed Martin is working to be a leader in ethical
conduct. In its code of conduct, “Setting the Standard,” the
company provides its employees with detailed guidance
on making ethical decisions. One method of assisting its
employees to make ethical decisions is to provide a list of
statements that are warning signs of unethical behavior,
such as the following:
focus on the business and legal issues
involved in forming and dissolving
business organizations such as
proprietorships, corporations,
and partnerships.
Cash payments journal—for all cash payments
Sales journal—for all sales of merchandise on account
Cash receipts journal—for all cash receipts
General journal—for all other transactions
© BLOOMBERG NEWS/LANDOV
1. Purchases journal—for all purchases of merchandise
on account
2.
3.
4.
5.
Business Structures
MERCHANDISING BUSINESSES
TechKnow Consulting, the business described in Part 1, is a
service business; it sells services for a fee. However, many other
businesses purchase goods to sell. Goods that a business purchases to sell are called merchandise. A business that purchases
and sells goods is called a merchandising business. A merchandising business that sells to those who use or consume the goods
is called a retail merchandising business. A business that buys
and resells merchandise to retail merchandising businesses
is called a wholesale merchandising business. Service and merchandising businesses use many of
the same accounts. A merchandising business
has additional accounts on the balance sheet
and income statement to account for the
purchase and sale of merchandise.
© BLEND IMAGES
USING SPECIAL JOURNALS
A business with a limited number of daily transactions
may record all entries in one journal. A business with many
daily transactions may choose to use a separate journal for
each kind of transaction. A journal used to record only
one kind of transaction is called a special journal. Hobby
Shack uses five journals to record daily transactions:
Journalizing Purchases
Using a Purchases Journal
9-1
COURTESY OF RITA J. COWANS
Janice Kellogg decided to quit her full-time job and turn
her ceramic hobby into a retail hobby business. She developed a plan to rent space in a shopping center and operate Hobby Shack six days a week. Hobby Shack would
sell a wide variety of art and hobby supplies to individuals, schools, and businesses. Janice planned to expand
the merchandise she offers, rent store and office equipment, and employ other individuals to work in the store.
However, Janice did not personally have the capital to
INTERNET
ACTIVITY
C Corporations,
S Corporations,
and LLCs
There are several factors to
consider when organizing a
corporation. One of these is
to determine what type of
corporation you want to organize. Search the Internet for an
explanation of each of the following types of corporations:
C Corporation, S Corporation,
and a Limited Liability Company (LLC).
Instructions
1. List the benefits and
disadvantages of a
C Corporation.
2. List the benefits and
disadvantages of an
S Corporation.
3. List the benefits and
disadvantages of a Limited
Liability Company.
Source: www.bc.com
INSTRUCTIONS:
21. Prepare a post-closing trial balance.
233
F I N A N C I A L S TAT E M E N T S
INSTRUCTIONS:
17. Prepare an income statement. Figure and record the
component percentages for sales, total expenses, and
net income. Round percentage calculations to the
nearest 0.1%.
18. Prepare a balance sheet.
Analyzing Transactions into Debit and Credit Parts
Chapter 2
51
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gil47052_c02_026-053.indd Sec1:51
C21 BLUE CHAPTER 2 FIRST PAGES
8/17/07 10:22:14 AM
Take Advantage of Accounting Success Today with Century 21 Accounting 9E.
7
228
Call to Order: 1-800-824-5179 or visit academic.cengage.com/community/c21accounting today
Reinforcement Activity 1—Part B
gil47052_c08_200-229.indd 228
An Accounting Cycle for a Proprietorship: End-of-Fiscal-Period Work
10/4/07 10:11:59 AM
8