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NOTE session-01

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Welcome. While people are still coming in, here is the trivia question on the screen. Which company built the first mobile phone you could actually buy? Have a guess before you look it up.

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This is ACC 300, Intermediate Financial Accounting One. Jillian Bommarito teaches this class in Room 136, Brody Hall.

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ACC 300 may differ from your earlier accounting classes. You will still prepare entries and calculate amounts. You will also explain accounting judgments and check whether recorded amounts follow the evidence.

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Accounting systems record many routine transactions. People still set the rules, handle exceptions, and check the output. This course develops the accounting knowledge needed to do that work.

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The course moves from knowledge to judgment. You first learn what an amount means and where it belongs. Then you trace it to records and accounting rules.

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Finally, you decide whether the accounting is correct and explain your conclusion.

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The table shows how the 500 course points are divided. The company project is worth 140 points and continues through the term. Attendance and engagement are worth 100 points.

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Attendance points are available in 24 meetings. Answer at least 75 percent of the questions in 20 meetings for full points.

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Each unit review begins with evidence and accounting. First, compare the two and check whether the accounting follows the evidence.

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Next, decide whether to accept the work or correct it.

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Then state the result and support your answer. Seven reviews are offered, and the best 5 scores count. The first is due Monday, September 14.

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You may use the listed materials, but you must report any use of artificial intelligence, or AI.

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Complete the first 2 D2L checks and register for iClicker by Wednesday at 11:59 PM. The syllabus and technology check uses Respondus LockDown Browser. Before Thursday, read Chapter 1 on the course site.

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Your private introduction slide is due Friday at 11:59 PM.

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Unit 1 follows transactions into the financial statements. It also asks who decides what those statements report.

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Today we follow transactions into the unadjusted trial balance. Unadjusted means that period-end adjustments have not yet been recorded. Then we test what equal debit and credit totals prove, and what they do not prove.

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By the end of class, you should be able to follow a transaction through the journal and ledger to the trial balance. You should also be able to explain which errors can remain hidden when the totals are equal.

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The accounting cycle has 9 steps and repeats each reporting period. Today covers the first 4: analyze transactions, record journal entries, post to the ledger, and prepare the unadjusted trial balance.

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Classes 2 and 3 continue from that trial balance.

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Start with a principles review. Equipment costs 10,000 dollars. The company pays 2,000 dollars in cash and signs a note for the other 8,000 dollars. What happens to total assets? Choose an answer before the next slide.

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The answer is D. Assets rise 8,000 dollars. Equipment goes up 10,000 dollars and cash goes down 2,000 dollars, so the net change in assets is 8,000 dollars.

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The note payable rises 8,000 dollars on the other side, and the equation stays balanced. Answer B ignores the cash payment.

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A customer pays 4,500 dollars before the company has done any work. What changes when the cash arrives?

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The answer is B. Cash rises 4,500 dollars, and a liability rises by the same amount. The company has the money and still owes the service. Revenue does not increase until the work is done.

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Red Cedar faces the same question later in class.

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Debit means the left side of an account. Credit means the right side. Those terms name positions, not increases or decreases. Which side records an increase depends on the type of account.

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The Cash account has a receipt of 12,000 dollars on the left, and payments of 2,000 dollars and 3,000 dollars on the right. The balance is the difference, and it goes on the larger side.

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So cash has a 7,000 dollar debit balance: 12,000 dollars less 5,000 dollars.

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The side that records increases is called the account's normal balance. Assets, expenses, and dividends increase on the debit side. Liabilities, equity, and revenue increase on the credit side.

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The memory cue is DEAD and COLOR: debits increase dividends, expenses, and assets; credits increase owners' equity, liabilities, and revenue.

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Businesses rarely record routine entries by hand. A business event produces source data. A configured rule turns that data into an entry, which posts to the ledger and reaches the trial balance.

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Accountants set the rules, handle exceptions, and check the output. They must know the correct entry before they can judge the system's work.

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Red Cedar Paddle Company rents paddling equipment and runs river tours in East Lansing. It begins operations on June 1. The owners invest 30,000 dollars in exchange for common stock.

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Analyze the transaction before recording it. Decide what happened, which accounts changed, and how each account changed.

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Red Cedar receives cash from its owners. Cash is an asset, so its increase is a debit. Common stock is equity, so its increase is a credit.

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Assets and equity each rise by 30,000 dollars, which keeps the equation balanced.

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Record the analysis as a journal entry. The journal keeps entries in date order.

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June 1. Debit cash 30,000 dollars. Credit common stock 30,000 dollars. The entry records the result of the analysis: assets rise 30,000 dollars, and equity rises 30,000 dollars.

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The journal puts that conclusion into debit and credit form.

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Post the entry to the ledger. The journal is organized by date; the ledger is organized by account. Posting moves each line to where the balance of that account lives.

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Each line of the entry goes to its own account. Cash now has a 30,000 dollar debit balance. Common stock has a 30,000 dollar credit balance.

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Those two balances are what will appear in the trial balance, in those same columns. Posting sorts the recorded amounts by account.

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Your turn. June 3. Red Cedar buys a transport trailer for 6,000 dollars and will pay later.

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Work through the same four questions: which accounts, which direction each one moves, the journal entry, and which trial balance column each resulting balance lands in.

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Debit equipment 6,000 dollars, credit accounts payable 6,000 dollars. Assets rise 6,000 dollars and liabilities rise 6,000 dollars.

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Nothing has been paid, and that is the point: the obligation is recorded when the trailer arrives, not when the cash leaves. Equipment lands in the debit column, accounts payable in the credit column.

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On June 4, Red Cedar pays 3,600 dollars for a twelve month policy that starts that day. Four candidate entries are on the screen. Which one should the system produce?

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The answer is A. Debit prepaid insurance 3,600 dollars and credit cash 3,600 dollars. Red Cedar now controls 12 months of unused coverage. That right is the asset. Paying cash alone does not create an asset.

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Answer B expenses the whole policy on day one. Answer C takes one month, which is next class's work, not today's.

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On June 20, a resort pays 4,500 dollars before Red Cedar has run any of the three tour days. Which accounts should go up on June 20?

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The answer is A. Cash and unearned service revenue both rise by 4,500 dollars. Unearned service revenue is a liability despite its name. Red Cedar has the money and owes 3 days of touring.

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Revenue arrives as the tours are run, not before.

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Prepare the unadjusted trial balance by listing every ledger balance in its debit or credit column.

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The system has posted Red Cedar's June entries. Cash is 20,800 dollars. Receivables 2,800 dollars. Prepaid insurance 3,600 dollars, the entry we just argued about. Equipment 30,000 dollars.

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On the credit side, notes payable, accounts payable, the unearned revenue from the resort, and common stock. The word to notice in the title is unadjusted.

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Both columns total 60,500 dollars. That equality proves one thing: the debit balances in the ledger equal the credit balances. It does not prove every event was recorded.

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It does not prove each amount went to the right account. It does not prove the balances are current.

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Compare Red Cedar's completed-tour records with its service revenue entries are two different lists, and comparing them is a separate act. A tour can be in the operating records and missing from the ledger.

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If both sides of the entry never happened, the trial balance still balances, and nothing on this page would tell you.

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Exam check. Red Cedar's trial balance is 60,500 dollars on each side. Now a processing error posts the June 4 insurance entry twice, 3,600 dollars. What are the new totals?

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The answer is C. Both columns rise to 64,100 dollars. The duplicate has a 3,600 dollar debit and a 3,600 dollar credit, so it moves both sides by the same amount.

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The trial balance is still equal, the insurance is recorded twice, and the equality tells you nothing about it.

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Four errors can remain hidden in an equal trial balance. An omitted entry leaves both sides out of the ledger. A duplicate records both sides twice. The correct amount can reach the wrong account on the correct side.

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Separate errors can also offset each other. Each error leaves the debit and credit totals equal.

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Which error on the screen would an equal trial balance fail to reveal?

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The answer is B. An omitted entry changes neither column. Check the other choices. A 500 dollar debit with no credit makes debits exceed credits by 500 dollars, so the trial balance shows it.

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A credit column added wrong makes the totals disagree. And a 300 dollar credit posted as a debit puts debits 300 dollars high and credits 300 dollars low, a 600 dollar gap. A trial balance tests equality.

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It does not test whether the records are complete.

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Thursday covers adjusting entries. Those entries update the unadjusted trial balance for period-end information. Before then, read Chapter 1 on the course site.

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By Wednesday night, register for iClicker and finish the 2 D2L checks. The private introduction slide is due Friday.