Anyone here good at accounting? I can't figure out this assignment...

Discussion in 'Random Ramblings' started by chicken_china_mom, Jul 1, 2010.

  1. chicken_china_mom

    chicken_china_mom Crazy for Cochins

    Apr 24, 2009
    Tab, Indiana
    Ok, so I've been working on this assignment for this week (each course is 5 weeks long, and this is week 4's assignment), and I am having a lot of trouble with this one, and probably next week's too, because I'm just NOT good in math, and the assets and liabilities really confuse me. I just can't seem to wrap my brain around the whole making both columns equal out. Guess I'm not destined for a career in accounting. [​IMG] Anyway, I've been working on the accounting sheet. Here is the actual assignment, so I'm not confusing anyone when I explain what I've already done:



    Les Fleurs, a boutique in Paris, France, had the following accounts in its accounting records at December 31, 20X2 (amounts in Euros, denoted as "E")


    Purchases………………...


    E250,000
    Freight In………………

    E8,000
    Sales discounts………….

    4,000
    Purchase returns……..

    7,000
    Inventory Sales………………….

    400,000
    December 31, 20X1…..

    20,000
    Purchase discounts….

    3,000
    December 31, 20X2…..

    30,000
    Sales returns………….

    8,000
    Administrative Expenses

    20,000




    Balance Sheet - December 31, 20X1
    Cash 10,000
    Inventory 20,000
    Owner's Equity 30,000

    Compute the following for Les Fleurs during 20X2: (Do not convert the figures to US dollars.)

    1. Net sales revenue
    2. Cost of goods sold
    3. Gross profit
    4. Net income
    5. Balance sheet, December 31, 20X2
    6. Statement of Owner's Equity, December 31, 20X2


    Ok, in the left hand column I have for assets (income) purchases, sales discounts (kinda unsure on this one though), Inventory, Freight in, sales, and purchase discounts. I first put the cash in this column, and I also put the owner's equity. For the Liabilities column I put Administrative expenses, purchase returns, and sales returns.

    So, I'm suppose to do the 6 things at the bottom of the assignment, but I know that if I mess up what goes in each column, I'll get the whole assignment wrong. What I'd like to know is, do I have everything in the right column so far? And if so, I'll check back in with each part as I do it to see if I have it right. I'm doing it in an Excel program, but I am not doing it the right way, cause basically, though I took the school's excel class, they only concentrated on excel for one lousy week, and I just don't remember most of what I learned, and I know I didn't learn nearly enough. I don't have enough hours in the week either to read up on it outside of my coursework. I'm doing another course too, always 2 at a time, and they take up a lot of my time. So, I'm kinda looking for a little guidance I suppose. So I can maybe learn to do the basics? Could someone tell me if I have this much right so far? Thanks!
     
  2. Rare Feathers Farm

    Rare Feathers Farm Overrun With Chickens

    Let me ask my accounting-teacher hubby....hold on...
     
  3. chicken_china_mom

    chicken_china_mom Crazy for Cochins

    Apr 24, 2009
    Tab, Indiana
    Quote:Oh thank you so much! Maybe he can put it in laymans terms for me, lol. Cause the textbook has me confused!
     
  4. flocker

    flocker New Egg

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    Jul 1, 2010
    For your trail balance (which is a list/summation of all accounts assets, liabilities, owners equity, income and expenses)all debit balance accounts are in the left column and credit balance accounts are in the right column.
    Debit balance accounts are Purchases, Freight In, Sales discounts, Inventory, Administrative Expenses, Cash, Inventory

    Credit Balance accounts are Purchase Returns, Sales, Purchase Discounts, Owners Equity

    The total of the debit balances have to equal the credit balances.

    For your Balance Sheet
    Your Asset or debit balance or left column accounts are Cash, and Inventory. The Liabilities or credit balance or right column accounts are Owners Equity. Remember Assets equals Liabilities + Owners Equity. For your Balance Sheet for X1: Assets of Cash 10K + Inventory 20K equals Liabilities 0 + Owners Equity 30k.


    Net Sales Revenue is Sales less Sales Returns.

    Cost of goods Sold is Beginning Inventory + Purchases + Freight In - Purchase Returns - Purchase Discounts - Ending Inventory.

    Gross profit is Net Sales Revenue - COGS

    Net Income is Net Sales Revenue - COGS - Administrative Expense

    Hope this helps
     
  5. chicken_china_mom

    chicken_china_mom Crazy for Cochins

    Apr 24, 2009
    Tab, Indiana
    Ok, I get the majority of what you are saying, but why wouldn't admin expenses be in the right hand column? Isn't that a credit, not a debit?
     
  6. flocker

    flocker New Egg

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    Jul 1, 2010
    No Expenses are Debit balance accounts.

    Think of it this way: You sell a widget for $100 for Cash. the entry would be
    Debit Cash 100
    Credit Sales 100

    Pay an employee $60
    Debit Payroll Expense 60
    Credit Cash 60

    Cash and expenses are debit balance accounts, although Cash is a balance sheet account and Payroll Expense is an income statement account.

    Debits increase debit accounts and decrease credit accounts
    Credits increase credit accounts and decrease debit accounts


    Sales an income account is a credit balance, so an increase in sales increases income and ultimately Owners Equity.

    Payroll an expense account is a debit balance, so an increase in Payroll decreases income and ultimately Owners Equity.
     
  7. Rare Feathers Farm

    Rare Feathers Farm Overrun With Chickens

    Oh good...someone else is helping...hubby has had about 8 beers too many (friend is over) and he's no help right now! LOL
     
  8. chicken_china_mom

    chicken_china_mom Crazy for Cochins

    Apr 24, 2009
    Tab, Indiana
    Quote:That's where it gets confusing for me. Either I'm dense (which I'd like to think I'm not, lol), or I am just mathematically challenged, because I'm trying to understand why, if it's put into the debits column as a debit (the $60 paid to an employee), then why would you ADD it in the first place? Doesn't it just get subtracted? I'm so confused. Why add something you are taking away? That's what I can't wrap my brain around. [​IMG]
     
  9. flocker

    flocker New Egg

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    Jul 1, 2010
    Sorry I am not doing a good job explaining this.


    Assets and Expenses are debit accounts and Income, Liabilities and Owners Equity are credit accounts.

    In a trail balance sheet which is a different statement from the Balance Sheet, the sum of all debit accounts are added together and all credit balance accounts are added together. the sum of these two columns should equal total debits equal total credits. Remember you are using a dual entry system. Every entry has a debit and a credit. The trail balance is just checking that the debits equal the credits.

    For the Balance Sheet and Income statement the accounts from the trail balance are seperated into two the two different statements.

    On a balance sheet only the asset, liability and Owners equity accounts are used.

    On the income statement only the income and expense accounts are used.

    The balance sheet is a snapshot of the finances of the company at a point in time. The income statement is the movie which explains how the the company got from the snapshot taken at the end of one year to the snapshot taken at the end of the next year.

    In response to your question why add it in the first place when it gets subtracted. To get net income you add all your income together and add all your expenses together, then you subtract your expenses from your income to get net income. At the end of the year all income and expense accounts are reset to zero and the difference between total income and total expenses or net income is added to owners equity.

    I would love to help some more but I need to get some sleep. I hope this helps. I will check this thread tomorrow should you have any other questions.

    Accounting is not hard, once you have the "light on" moment.

    One final thought for the night.

    Part of the problem for begining accounting students to understand debits and credits is the because most people are using debit and credits backwards due to their banking accounts. On your personal financial statement (PFS) your checking account is an asset account or a debit balance account. So a debit on your PFS would increase this account and a credit would decrease this account.

    For the bank, your account is a liability account. They owe you the money you have on deposit. When you deposit your paycheck into your bank account your entry on your personal financial statement would be to debit your checking account an asset account to you ( remember debits increase debit balance accounts) and credit your income or earnings account (credits increase credit balance accounts). The bank will debit an asset account and credit your checking account which is a liability account to them.

    Hope this did not confuse you more.
     
  10. chicken_china_mom

    chicken_china_mom Crazy for Cochins

    Apr 24, 2009
    Tab, Indiana
    Okay, I was busy busy all day today and this was the first opportunity I've had to work on this. What I have gotten for the debit column, and what I've gotten for the credit column, they aren't equaling the same amounts. Oh, and should I be adding the Euros the American dollar? I'm confused!!! If I add it all together, my credits outweight my debits. I got $294,000 for debits and $440,000 for credits. I know I must be adding wrong. Ugh, light bulb hasn't gone off yet...
     

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