See how to analyze a common, yet difficult transaction: a compound journal entry with a note payable, or similar obligation, that requires an entry for payment of the principle, as well as the interest due. Note that interest is the amount charged for borrowing money.
- Sometimes you might sell services … and merchandise for cash. … At other times, you might sell them on credit, … and a receivable is established … for collection at a later date. … We will illustrate these possibilities … in the transactions that follow, … and note that the effect of revenues and expenses … on owner's equity is indicated in brackets … for each transaction. … So let's get started. … Now, recall in a previous transaction … that we showed the entry required … when cash was borrowed from the bank. … In that entry, you borrowed $2,000 … to be paid over 12 months. … Suppose you're required to make … a monthly loan payment of $178, … with a portion of each payment being attributed to interest … and a portion to reducing the liability, … just like a mortgage on a house. … As the following compound journal entry shows, … a note payable or similar obligation … requires an entry for payment of the principal, … as well as the interest due. … Note that interest is the amount charged …
- Reviewing financial statements
- Analyzing transactions
- Categorizing transactions
- Obtaining financing and buying equipment
- How revenue and expenses fit in the accounting equation
- Recording the sale of goods or services
- Posting journal entries to accounts
- The accounting cycle: step by step
Skill Level Beginner
1. Review of the Financial Statements
2. Fours Steps in the Bookkeeping Process
3. How Transactions Affect the Accounting Equation
4. The General Ledger
5. Illustration of the First Three Steps in the Accounting Cycle
The role of computers3m 44s
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