Alright here we are back again, Okay if you by chance didn't watch the last lecture then
why didn't you? You shouldn't be skipping any of these. You might even want to watch
the last lecture twice even because it was so important and this one is an important
one as well. Last time just to review real quickly, we talked about, going to the screen,
debit is the left side of the T account, credit is the right side of the T account. And we
talked about how an account that is called a debit balance account increases when you
debit it. And credit decreases when you credit it. We talked about a credit balance account
that increases when you credit it and decreases when you debit it. All accounts are both debited
and credited, we just need to know if they are increasing or decreasing. Which accounts
are debit balance accounts, which accounts are credit balance accounts. Now there was
a document I was fishing around for last lecture that I didn't have and I was mad at myself.
But for you folks at home it is in Angel under the handouts for chapter two. But it looks
like this, it looks like this. Does everybody here have one of those? Ok I have got a few
so why don't you pass those around. Now this is how you should do your; these are what
you should put on your flashcards. I'm giving this to you so that you can make your flash
cards. But don't let this replace the flashcards; don't try to learn this by going ok let's
see. Cash is a debit balance account; accounts receivable is a debit ok good I'm doing great.
Inventory... debit... No they are all together. Okay. What I want you to do is make your flashcards.
Okay. Again there is so much of this that is analogous with learning your multiplication
tables. You need to know this stuff real quick. Build this foundation of accounting. You know
some people say this is an online media class. Why don't I do tests where you can take them
online? For the folks who do the online media classes they actually have to come to campus
to take the tests in the testing center. And I don't let them take their tests online and
at home. And some people don't like this. And the reason I do this is because if you
allow people to take their tests online and at home you are basically saying it's an open
book test. Aren't you? Yeah it's an open book test. Now think about if you were a kid and
you were trying to learn the multiplication tables and you had a test that said 6 times
9 equals blank. 4 times 3 equals blank. 2 times 9 equals blank. But you had sitting
to the side, your multiplication grid. How much learning actually takes place by you
just saying ok 2 times 9 equals 18. 6 times 9 equals 54. Is there any learning that is
going on? You are a good copier right? So I just in good conscience just cannot do open
book tests that you take in front of your computer. Now I could ask please don't use
your book but I don't know how you would monitor that. So that is why you folks at home; I
had you come to campus. Because I feel like I am doing you a major disservice in this
class if you don't leave with a strong foundation of accounting. Accounting two, managerial,
your other classes in accounting will be bad. Just like I would be sending you into the
world for geometry and calculus and statistics or advanced algebra if you didn't know your
multiplication tables. And I can't do that, I couldn't live with myself. Ok so do your
flashcards, Kim you did a great job on your flashcards. Okay I'll give you an example.
Equipment on one side is a debit balance account, it's an asset, and it's on the balance sheet.
Okay. Notes receivable, debit balance account, okay, Income tax receivable, it's a credit
balance account, and it's on the liabilities sheet, great job, great job. How many people
have as we speak, and be honest, how many people have done their flashcards? Raise your
hands high. How many people haven't done them but they are going to do them eventually?
For those who have done their flashcards, you get a Hershey's Kiss, okay. For those
of you who have done your flashcards you get a Hershey's chocolate kiss. For those of you
who haven't, not only do you not get a Hershey chocolate kiss, I want you to pick up the
wrappers of the people who have them done. Okay, remember the difference is not between
those who want to do flashcards and those who don't want to do them. The difference
is between those who do them immediately and those who... "I can wait until tomorrow morning".
Hopefully Kim you already have a day or two of learning these balances, cool. Okay I also
recognize that we are going to go over the homework here in a second and I realize it's
going to be a lot of "credit, debit, credit, credit" okay and it's kind of boring. I mean
this is the very basics of the basics. However once again, I want to develop that foundation.
Mr. Royal, did you make your flashcards? Yeah they are right here. Okay because I saw you
eat the kiss I was going to tell the cameras to come off while I struck... Ok you play
soccer correct? I do. Do you remember when you were a little kid and people were teaching
you the very basics of soccer? Maybe you had a coach, your dad or your mom or something?
Don't toe kick, remember when you were a kid you wanted to kick it with your toe. Well
theoretically no you aren't supposed to but there are times you can use it. Or where you
head the ball right? And there are those basics of sports that you learn as a kid; How do
you hold the bat, how do you throw the ball in. And those aren't very fun right? Kids
just want to play soccer. Let's not learn the basics, let's go play soccer. But you
have a lot more fun playing soccer in life if you have a good understanding of the foundational
principal's right? Have you ever played with somebody even at your age that does not have
a good understanding of the principals? Yes. And it's frustrating isn't it. So that is
what we are trying to do in accounting, I know it is kind of tedious. "Debit, credit,
credit, debit" But I want to get that foundation. Sot ah way you will enjoy your classes and
enjoy your business career even more. Alright so let's go over the homework, alright. The
first one I assigned was quick study 2-1 so let's go through that. Alright quick study
2-1 I guarantee you will have one like this on the test. I guarantee! Alright identify
the following income statements where the following items appear. Use I for income statement
of equity and B for balance sheet. Ok accounts payable is on the balance sheet right? Cash
is also on the balance sheet; rent is on the income statement. Office supplies is an asset,
it is on the balance sheet. Prepaid insurance is a prepaid asset; it is on the balance sheet.
Revenue is on the income statement. Office equipment is on the balance sheet. Cash withdraw
by owner is on the what; statement of equity. And unearned rent revenue, where is that one;
balance sheet. That is a liability correct? "Unearned." Alright let's hop down to quick
study 2-4. Okay, identify the normal balance for the following accounts. Now once again,
when I ask you the normal balance of accounts it's the same thing as asking you, how do
you make that account increase; with a debit or credit. Okay, what is the normal balance
of equipment; debit. Wages expense is debit. Repair service revenue, credit. Office supplies;
debit, owners supplies; debit. Accounts receivable, debit. Prepaid insurance, debit. Wages payable,
credit. Owner capitol, credit. Very good. Okay now we are going to ask in quick study
2-5, indicate whether a debit or credit decreases the following of the normal accounts. So how
do you decrease land, you credit it. How do you decrease service revenue, you debit it.
How do you decrease interests payable, you debit it. How do you decrease accounts receivable,
you credit it. How do you decrease salaries expense, you credit it. How do you decrease
owners capital, you debit it. How do you decrease prepaid insurance, you credit it.
How do you decrease buildings, you credit it. How do you decrease interest revenue,
you debit it. How do you decrease owners withdraws, you credit it. How do you decrease unearned
revenue, you debit it. How do you decrease accounts payable, you debit it. Questions?
Okay. Now let's hop over to quick study 2-3. Now I guarantee that you will have a test
question like this as well. This is a great way to understand what is going on. Identify
whether a debit or credit will indicate a change in the following accounts. Ok how do
we increase store equipment, we debit it. How do we increase land, we debit it. How
do we decrease cash, credit it. How do you increase utilities expense, debit it. How
do you increase fees earned, credit it. How do you decrease unearned revenue, you debit
it. How do you decrease prepaid insurance, you credit it. How do you increase notes payable,
credit it. How do you decrease accounts receivable, credit it. How do you increase owner's capitol,
credit it. Okay, that's it for the homework right now. Let me go ahead especially for
the folks at home, put the answers up there. Just leave it on the, just while I'm talking
just leave it on the answers here. Don't show me. Once again, foundational stuff. All four
of these quick studies. If in a week you can cover up your answers and answer these and
get them like at least 90 percent or better. Then you are way behind, okay. You are going
to be way behind. These quick studies are going to be a good assessment of if you know
what you are doing. As a matter of fact, when a student comes into my office and says I'm
really having trouble with accounting, I will sometimes get out a piece of paper with this
on it and say do this real quick right here. And if they don't do it well, if they don't
get at least %80 or better of them I'd tell them here is the reason you are doing bad.
You don't know your very foundational debit and credit balances system. You don't know
these things, okay. You don't know how to do these, here let me movie it up. If you
dot know these things in a week, if you don't know them well, well I'd just go drop the
class. I know that sounds dramatic but again you just have to know these principles. I'm
going to assume at some point that you know these and that you know them well. Alright,
any questions on that homework? Okay. Let's go ahead now and talk about some important
stuff now. We'll do a little review here, okay. The chapter one way, going to the LMO
okay. The chapter one way of recording transactions. Let's say we used $250 cash to buy office
supplies, okay do you remember how we did that in chapter one? Cash decreases by 250.
And office supplies increases by 250. Correct, are you with me? Now imagine that this was quick study 2-3
and I was going to ask you how do we decrease cash. Do we debit it or credit it. What do
we do, we credit it, how do we increase office supplies, we debit it. And we also learned
last period about T accounts didn't we. And we learned that; let's do two T accounts,
we learned that the left side is always the debit side and the right side is always the
credit side correct? And you are going to notice when I do T accounts I'm not going
to keep doing debit, credit, debit, credit. Just because of space and time I'm not going
to keep doing that. Just understand that left side is always debit and right side is always
credit. So let's do a T account for cash and lets do a T account for office. We learned
that the way you record this is you credit cash so you write this on the credit side
so more appropriately you credit cash for 250 correct? And you debit office supplies
for 250. Are you with me? Okay good now I want to actually point out something here
that is real important. There is actually a step that comes before this step. And what
that step is called is "making the journal entry". Or sometimes we call it "making the
JE". And here is how that looks. I'm going to write it out. Here is how this transaction
of journal entry would look. Okay that is how that journal entry would look. What I
am doing is, a journal entry is a notation that we make that says that we need to go
to the office supplies T account and debit it for 250. We need to go to the cash T account
and credit it for 250. Are you with me? And that is what we do, we go to office supplies
and debit it for 250 and we go to cash and credit for 250. Are you with me? That is called
making the journal entry. Have you guys heard of making the journal entry in accounting?
This is what we are going to be doing. We are going to be making a lot of journal entries.
Now when you make a journal entry, you list the accounts that are being debited first
and then you list the accounts that are being credited. Now I didn't say you list the debit
balance accounts first and then the credit balance accounts because actually both of
these are debit balance accounts. No you list the accounts that are being debited first
and then you list the accounts that are being credited. But the journal entry is our way
of saying that the next thing you need to do is go to the office supplies account and
debit it for 250, go to the cash T account and credit it for 250. Now I want to be real
clear here. This is called the journal entry. Down here what we call this is posting to
the T account. Or the ledger, we talked about the ledger last week. This is posting to the
T accounts ledger; this is making the journal entry. Now lest I forget, on the test I guarantee
you I'm going to ask you to make journal entries. And what I'm going to want to see is things
that look like this. But what happens is on the test I'm going to ask you make journal
entries and I get a bunch of this. Folks, this you see right here, that is not making
journal entries. Make yourself a note of that. These are not journal entries. This is posting
to the T accounts ledger. This is a journal entry. A couple things more about T accounts,
oh I'm sorry about making journal entries. The total that you debit always has to equal
the total that you credit it. Now that's pretty obvious in this case because there is only
one item being credited and there is only one item being debited. But we are doing an
exercise today where more than one item is being debited and more than one item is being
credited. Well the total of your debits always has to equal the total of your credits. Are
you with me? And you will never ever see a plus or a minus sign in a journal entry just
like you will never see a plus or minus sign in a T account. Never ever, ever, are you
with me? Let me show you some incorrect ways that people do journal entries, okay. The
correct one is up top. Let me show you some incorrect way that people will do these. We'll
do this. No. No we don't do that. You list the accounts that are being debited first
and then you list the accounts that are being credited next. Are you with me? The other
way that I don't like you to do it, or that's not proper, I want you to avoid doing this.
No, I don't like that. The proper way is you scoot in; you indent the accounts that are
being credited, are you with me? They didn't scoot this one over did they? They did do
it right over here, but you list the accounts that are being debited, then you indent the
accounts that are being credited. Are you with me? Every now and then I'll get something
really wacky. And it'll be something like this. I don't know what's going on there.
Okay. I don't know what's going on there. That is incorrect, yes? You said list all
accounts debited first, do you mean we list the two that correspond with each other and
then do the other ones or all of the debits? You mean if you are like analyzing several
different transactions? That's a great question. No you analyze and do a journal entry for
each journal entry, each transaction separately. Not summing up the whole - no. you list just
that one and then the next transaction, and then the next transaction. Unless it's a very
unique transaction where one transaction had that many debits or credits. You probably
will not ever see that in this class. The worksheet we are going to do here in class
I think is going to be a big help too. Alright going back over to the PowerPoint's here,
this is another example of a journal entry. A couple things about here, there is the date.
Usually you like to put the date out there. The journal entry that I did didn't have a
date. Then you list the accounts that are being affected, you can see that I scooted
over that capital for C. Taylor. You can see how they indented it because it's being credited.
Then you list the dollar amounts for the accounts being debited or credited. Never a dollar
sign, never a plus or minus in a journal entry. And then they do this journal entry description
or explanation. I usually don't do those and I don't really require you to do them. Once
again going back to the LMO though. This is kind of more of a simplified approach of doing
things. And a lot of times I won't even put that D and C there. Okay are you with me?
I'm going to put the date here. I'm going t5o say this one more time because it's very
important and students get it messed up. This is making the journal entry; this is posting
to the T account or the ledger. You do this actually before you do this, because this
is telling you how you do this. Alright let me give you an example of what we are going
to do. Let's say that we are going to, let's say that one of the transactions that we analyze
is we get a loan of five thousand dollars cash, notes payable. Well how is the chapter
one way that we would show that? Well we would say cash goes up by five thousand dollars.
And notes payable goes up by five thousand dollars, correct? Now to help you transition
from that chapter one way to the chapter two and beyond way, kind of think of this like
it was quick study two three. How do you increase cash, what do you do? You debit it. How do
you increase notes payable? You credit it. So now you do your journal entry. Cash is
debit for five thousand dollars. Notes payable is credited for five thousand dollars. This
is chapter one and this is chapter two and beyond. Okay are you with me? But when you
analyze a transaction, maybe you can't go straight to that. So just do this way first,
do it the chapter one way and then ask yourself how do I increase cash, you debit it, how
do I increase notes payable, you credit it. And then use that to do this right here. Okay,
I'm going to give you, for you folks at home I want you to work on this too, this is a
little hand out we are going to do, this is called Mary's garden services. Again folks
at home everything should always be under the handout section under the appropriate
chapter. But what I'm going to ask you to do is to analyze an account and then make
the journal entry, not the T account but the journal entry. And in this particular case
you can see that there are three debits and one credit. The total of the debits will have
to equal the total of the credits. And then here is where you put your date, okay. Now
go ahead and work on that in class, if you have to do the chapter one way first and then
transition like I showed you, go ahead and do that okay. So we are going to take about
eight or nine minutes, play some JCCC snazzy music for you and lets just work on that in
class. Okay you might not be done with this but the nice thing about being at home is
that you can just pause this and start us back up when you are complete. We want to
have some time to go over the answers. Now let's take a look at this, mine looks a little
different than yours because I left this space to do some extra work. I really always encourage
people to do that chapter one way and then transition to that chapter two way. But they
always seem to kind of resist doing that. But that is the way I'm going to show the
answers, okay. On May first Mary contributes four thousand cash and an automobile that
is worth sixty five hundred and equipment valued at seven hundred into her business.
If this were the chapter one way what I would say is this. Cash goes up by four thousand;
we are going to set up an account called automobile. That goes up by sixty five hundred. And then
we have another account called equipment. That goes up by seven hundred. And then what
else is affected here folks? Capitol, yeah and were just going to say capitol. This is
part of owners' equity. This is one of those situations that increases owners' equity right
so capitol goes up by what is that eleven two? How do you increase cash? You debit it.
How do you increase an asset such as an automobile? How do you increase equipment, how do you
increase capitol? You credit it. Okay now let that, see now we're done aren't we? We
debit cash for four thousand, we debit automobile for sixty five hundred, we debit equipment
for seven hundred, and we credit capitol form eleven two hundred. And then of course here
we put the date right? Do the total debits equal the total credits? Yes they do. But
do you see how I transitioned from that to this. And some people might say well could
you put these both in an account called equipment? Yeah you could. I probably would set up a
specific asset account called automobiles but, any questions on that? On May the fourth
Mary buys some office supplies at Office Depot for one hundred and eighty cash. Okay, just
ignore the journal entry now; let's do the chapter one way. Well cash goes down by one
eight, correct? And office supplies goes up by one eighty, correct? How do you decrease
cash? You credit it, how do you increase office supplies? Okay, we should be done now right?
We debit office supplies for one eighty again never a plus sign, never a minus sign, never
a dollar sign in a journal entry. And we credit cash for one eighty. And we put the date.
Now make sure you are not saying things like cash contributed. There is not an account
called cash contributed, or cash spent. No no, no no, no, just cash. Okay just cash;
don't write sentences in your journal entries. Alright any question on this? Let's go to
the next one. On May the eleventh Mary provides services to a client, Bob Jones, the client
immediately pays one twenty five dollars in cash to Mary but bob will pay the remainder
at a later time. So cash goes up by one twenty five correct? We also have an account called
accounts receivable. That's an asset because we are going to receive the cash in the future
correct? Accounts receivable goes up by seventy five. And then what else is affected? Revenue,
we can book the entire revenue because we have provided the services. So revenue goes
up by two hundred correct? Alright how do you make cash increase? Good debit. How do
you make accounts receivable increase? How do you make revenue increase? Credit. Okay,
now don't be thinking that this all has to equal zero as you add it up or anything. No
that's not the self-checking mechanism or anything. What the self-checking mechanism
is I'll show you in a second. Cash is debited for one twenty five. Accounts receivable is
debited for seventy five and revenue is credited for two hundred. The self-checking mechanism
is always do the total numbers in the debit column equal the total numbers in the credit
column, and it does right? If it doesn't then you have messed up, okay? Learning to do what
we are doing here is so important. I guarantee everyone you will have to make journal entries
on your first test; you will have to make at least eight or nine journal entries. They
will probably be worth two points each; if you can't do them you are going to miss twenty
points right there. Eighteen twenty points, okay. Because I'm kind of all or nothing on
JE's. You either do it completely right or it's wrong, okay. Alright let's go to the
next one. On May the twelfth Mary purchases some more equipment for five thousand by making
a down payment of five hundred cash and setting up a note payable for the remainder. So what
is affected here? Well cash goes down by five hundred, equipment goes up by five thousand
right? And notes payable goes up by forty five hundred, is that correct? How do you
make cash decrease? Credit it. How do you make equipment increase? How do you make notes
payable increase? Credit it right? So now we have our journal entry right? We list the
accounts being debited first. And then we list the accounts being credited, and you
can do those in either order. It doesn't matter. Not minus five hundred, just five hundred.
And notes payable, forty five hundred and this happened on May the twelfth. On here?
Between cash and notes payable no. but on accounts that are being debited first. And
see how I'm indenting these? No you could put notes payable before cash if you wanted
to. One more! On May twenty second Bob Jones from the earlier transaction pays the remainder
of the money that he owes to us. How much did he owe us? So cash goes up by seventy
five and account receivable goes down by seventy five. How do you make cash increase? Debit
it. How do you make accounts receivable decrease? Credit it. Debit cash, for seventy five, credit
AR for seventy five. Total debits equal total credits. This occurred on May twenty second.
Don't resist folks to do the chapter one way first, I saw a lot of people not wanting to
do the chapter one way. Don't take the short cut, okay. When I'm driving and I say to my
wife I'm going to take a shortcut, you know what my wife knows from that point on? That
we are going to be later than if I had gone the way that was best, right. It always ends
up taking us longer, whenever you try to take a short cut it always ends up taking longer.
So do it the right way. Do it the chapter one way until you are one hundred percent
confident. This is a skill that you need to have. For those folks who didn't make your
flashcards, are you going to make your flashcards? Okay, good. Alright let me give you your homework
and for you face to facers after the cameras stop rolling I have a couple of things to
say to you real quick. But here is the homework for everybody. There is the homework, quick
study two six and two eight. Exercise two four and two seven. That was a good class
period I felt like we learned a lot. I felt like we did a really good job there, did you
guys? Okay, alright hey we will see you next time, bye-bye.