Class Notes for College Accounting: A Practical Approach, 14th Edition

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College Accounting
Fourteenth Edition
Jeffrey Slater
Mike Deschamps
Instructor's Resource Manual
for
College Accounting:
A practical Approach
By Carolyn Strauch

1-1
Chapter 1
Accounting Concepts and Procedures
Chapter Overview
The chapter begins with an introduction to accounting and the organizational forms of business: sole
proprietorships, partnerships, corporations, and limited liability companies. Learning Unit 1-1 has assets,
liabilities, and equities defined and explained through examples and the accounting equation. Learning
Unit 1-2 illustrates the steps necessary to prepare a balance sheet. Learning Unit 1-3 expands the
accounting equation to include revenues, expenses, and withdrawals. Each element of the equation is
further defined. A variety of transactions are analyzed along with their impact on the accounting
equation. Learning Unit 1-4 discusses the income statement, the statement of owner’s equity, and the
balance sheet. The accounting equation is used to illustrate how the income statement, statement of
owner’s equity, balance sheet are developed and interrelated. The net income from the income statement
is carried to the statement of owner’s equity, and the ending capital is carried from the statement of
owner’s equity to the balance sheet. The demonstration problem and the solution tips help students
record the effect of transactions on the accounting equation and to ultimately prepare financial statements.
Learning Objectives
After studying Chapter 1, your students should gain proficiency in the following:
1. Explain Accounting, Business, and the Accounting Equation.
2. Prepare a Balance Sheet.
3. Record Transactions into the Expanded Accounting Equation.
4. Prepare the Three Financial Statements.

1-2
Chapter 1 Assignment Grid
Estimated Level
Learning Time in of
Assignment Topic(s) Unit(s) Minutes Difficulty
Discussion Questions and Critical Thinking/Ethical Case
1 Functions of Accounting 1 5 Easy
2 Types of Businesses 1 5 Medium
3 Business Classifications 1 5 Medium
4 Bookkeeping and technology 1 5 Easy
5 Accounting equation 1 5 Easy
6 Capital 1 5 Easy
7 Accounting equation 1 5 Easy
8 Balance sheet 2 10 Medium
9 Account categories 3 5 Easy
10 Account categories 3 5 Easy
11 Account categories 3 5 Easy
12 Expenses 3 5 Medium
13 Income statement 4 5 Easy
14 Statement of owner’s equity 4 5 Easy
15 Ethical case 4 5 Medium
Concept Checks
1 Classifying Accounts 1 5 Easy
2 The Accounting Equation 1 5 Medium
3 Shift versus Increase in Assets 1 5 Medium
4 The Balance Sheet 2 5 Easy
5 The Accounting Equation Expanded 3 5 Easy
6 Identifying Assets 2 5 Easy
7 The Accounting Equation Expanded 3 5 Medium
8 Preparing Financial Statements 4 5 Easy
9 Preparing Financial Statements 4 5 Easy
Exercises (Set A)
1A-1 Accounting Equation 1 5 Easy
1A-2 Accounting Equation 1 5 Easy
1A-3 Balance Sheet 2 10 Easy
1A-4 Accounting Equation – Expanded 3 15 Medium
1A-5 Financial Statements 4 20 Medium
Exercises (Set B)
1B-1 Accounting Equation 1 5 Easy
1B-2 Accounting Equation 1 5 Easy
1B-3 Balance Sheet 2 10 Easy
1B-4 Accounting Equation – Expanded 3 15 Medium
1B-5 Financial Statements 4 20 Medium
Problems (Set A)
1A-1 Accounting Equation 1 15 Easy
1A-2 Balance Sheet 2 15 Medium
1A-3 Accounting Equation Expanded 3 20 Medium
1A-4 Financial Statements 4 30 Medium
1A-5 Financial Statements 3, 4 45 Hard

1-3
Estimated Level
Learning Time in of
Assignment Topic(s) Objective(s) Minutes Difficulty
Problems (Set B)
1B-1 Accounting Equation 1 15 Easy
1B-2 Balance Sheet 2 15 Medium
1B-3 Accounting Equation Expanded 3 20 Medium
1B-4 Financial Statements 4 30 Medium
1B-5 Financial Statements 3, 4 45 Hard
Financial Report Problem
Reading Amazon’s Annual Report 2 5 Easy
Keeping It Real
Suarez Computer Center 3, 4 45 Medium
Learning Unit 1-1: Accounting, Business, and the Accounting
Equation
Summary: Accounting is the language of business. It provides financial information to users and helps
the decision making process. The accounting process analyzes, records, classifies, summarizes, reports,
and interprets financial information for decision makers. The four main categories of business
organizations are (1) sole proprietorships, (2) partnerships, (3) corporations, and limited liability
companies. Business organizations can also be classified into service, merchandise, or manufacturing
businesses according to the need that they fulfill. Generally accepted accounting principles are the set of
procedures and guidelines developed to assure the consistent preparation and interpretation of the
accounting reports. The main difference between bookkeeping and accounting is the level of analysis and
scope of duties.
The basic accounting equation is presented as: Assets = Liabilities + Owner’s Equities. The assets are
properties (resources) of value that the firm or business owns. Examples are cash, land, supplies, office
equipment, buildings, and other properties of value. Liabilities are obligations that come due in the future
or claims of the creditors to assets. An example is accounts payable. The owner’s equity is the rights or
financial claims to the assets of a business. The owner’s investment of equity is called capital.
A shift in assets indicates that the makeup of the assets has changed, but the sum total of the assets
remains the same. An increase of assets reflects an increase in the total amount of assets owned.
Remember that the left-hand-side total of assets must always equal the right-hand-side total of liabilities
and owner’s equity.
Key Concepts: Accounting, sole proprietorship, partnership, corporation, limited liability company,
service company, merchandise company, manufacturer, generally accepted accounting principles,
International Financial Reporting Standards (IFRS), bookkeeping, assets, equities, liabilities, creditor,
owner’s equity, basic accounting equation, capital, supplies, shift in assets, accounts payable
Lecture Outline:
1) Accounting is the language of business. It provides information to managers, owners, investors,
government agencies, and others inside and outside the organization.

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2) Businesses can be classified into one of four types of organizations:
a) Sole Proprietorships are businesses that have one owner.
i) Easy to form
ii) Owner can lose personal assets to meet obligations of business
iii) Ends with death of owner or closing of business
b) Partnerships are businesses that have at least two owners.
i) Easy to form
ii) Partners could lose personal assets to meet obligations of partnership
iii) Ends with death of partner or closing of business
c) Corporations are businesses owned by stockholders.
i) More difficult to form
ii) Limited limited personal risk – stockholders’ loss is usually limited to their stock investment
iii) Continues indefinitely
d) Limited Liability Company (LLC)
i) More difficult to form
ii) Limited liability or limited personal risk – members’ loss is limited to their investment in the
company
iii) May end with death of member
3) Businesses can be classified into service, merchandise, and manufacturing businesses.
a) Service company – Business that provides a service
b) Merchandise company –

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Teaching Tips/Strategy: The instructor may begin by discussing the accounting goals and the
relationship with the business activities. In addition, the instructor can present the accounting function and
how it helps business organizations identify key activities and help on the decision making process. To
aid students in understanding accounting, provide an example of how accounting can help in the decision
making process. To explain business classification concepts, the instructor may use a group-based activity
that consists of listing familiar business names and indicate classification, category, and type of each
business organization. This group-based interaction will aid in evaluating the level of understanding of
this topic. Utilize as reference Tables 1.1 and 1.2 for the students as examples of categories and
classifications. Table 1.1 illustrates the business organizations and characteristics of each organization,
and Table 1.2 illustrates examples of Service, Merchandise, and Manufacturing Businesses.
Teaching Tips/Strategy: Utilize a group-based activity to aid in explaining the accounting equation
elements. Present familiar business organizations and identify what assets and liabilities

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their understanding of the basic elements of an accounting equation and help develop critical thinking and
analytical skills.
Exercise 1B-3 is a good assignment to evaluate the student’s basic knowledge of the balance sheet
statement and its proper presentation.
Use the “Ten-Minute Quiz” questions #7 and #10 to reinforce Learning Unit 1-2 Concepts.
Learning Unit 1-3: The Accounting Equation Expanded: Revenue,
Expenses, and Withdrawals
Summary: As a part of doing business, all organizations earn revenue and incur expenses.
A service company earns revenue when it provides services to its clients. When revenue is earned, the
owner’s equity is increased. In effect, revenue is a subdivision

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Learning Unit 1-4: The Three Financial Statements
Summary: The financial statements present how well the business has performed over a specific period
of time. An income statement is an accounting statement that shows business results in terms of revenue
and expenses. If revenues are greater than expenses, the report shows net income. If expenses are greater
than revenues, the report shows net loss. An income statement typically covers 1, 3, 6, or 12 months. The
statement shows the result of all revenues and expenses throughout the entire period and not just as of a
specific date. An example income statement for Jess Bora’s Computer Consulting business is shown in
Figure 1.4. The second statement, the statement of owner’s equity, shows for a certain period of time
what changes occurred in the capital account. Examples of the statement of owner’s equity are shown in
Figure 1.5 and Figure 1.6. The third statement, the balance sheet, utilizes the expanded accounting

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1-9
Name Date Section
CHAPTER 1
TEN-MINUTE QUIZ
Circle the letter of the best response.
1. Select the accounts affected by the following transaction: TJ Rex invests $50,000 to open a music
store.
a. Assets and Owner’s Equity
b. Assets and Liabilities
c. Liabilities and Owner’s Equity
d. Capital and Owner’s Equity
2. Select the accounts affected by the following transaction: TJ Rex uses credit to buy musical
instruments to sell in the store.
a. Assets and Owner’s Equity
b. Assets and Liabilities
c. Liabilities and Owner’s Equity
d. Capital and Owner’s Equity
3. Select the accounts affected by the following transaction: TJ Rex provides guitar lessons for $25
cash.
a. Cash and Accounts Payable
b. Cash and Revenue
c. Accounts Receivable and Revenue
d. Cash and Expenses
4. Select the accounts affected by the following transaction: TJ Rex receives $100 for previous
lessons provided on account.
a. Cash and Accounts Receivable
b. Cash and Revenue
c. Accounts Receivable and Revenue
d. Cash and Expenses

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1-10
7. Which of the following is reported on the balance sheet?
a. Accounts Payable
b. Fees Earned
c. Depreciation Expense
d. Withdrawals
8. Which of the following is represented on the income statement?
a. Cash received from sale of equipment
b. Accounts Payable
c. Office Equipment
d. Net loss
9. Which of the following will not appear on the statement of owner’s equity?
a. Net income
b. Withdrawals
c. Capital
d. Fees Earned
10. Which financial statement illustrates the accounting equation?
a. Statement of Owner’s Equity
b. Income Statement
c. Balance Sheet
d. Statement of Cash Flows
Answer Key to Chapter 1 Quiz
1. a
2. b
3. b
4. a
5. d
6. c
7.

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2-1
Chapter 2
Debits and Credits: Analyzing and Recording Business Transactions
Chapter Overview
This chapter transitions from analyzing transactions and listing each account in a potentially long
accounting equation to double entry accounting. There are five steps used to analyze a transaction: 1)
determining which accounts are affected; 2) determining which categories the accounts belong to (assets,
liabilities, capital, withdrawals, revenue, or expenses); 3) determining whether the accounts increase or
decrease; 4) using the debit and credit rules to determine if the result of steps 2 and 3 results in a journal
entry debit or credit; and 5) computing the balance in the T account. T accounts are used to illustrate debits
and credits and how to evaluate each account’s balance. A T account is a simpler way to illustrate an
account. It has a debit and credit side and can be used to compute the balance in that account. Several
examples are used to illustrate transaction analysis and the resulting journal entry and T account balance.
Next, how to use the balances in the T accounts to prepare a trial balance is illustrated. A trial balance is a
listing of a company’s accounts and its resulting debit or credit balance in the proper debit or credit column.
The information from the trial balance is used to prepare financial statements. Finally, the interrelationship
between the financial statements is emphasized. The income or loss from the income statement is carried to
the statement of owner’s’ equity. The ending balance in the statement of owner’s equity is carried to the
balance sheet.
Learning Objectives
After studying Chapter 2, your students should gain proficiency in the following:
1. Explain T Accounts and How to Foot and Balance.
2. Use a Chart of Accounts to Record Transactions in T Accounts According to the Rules of Debits and
Credits.
3. Prepare a Trial Balance and the Financial Statements.

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2-3
Estimated Level
Learning Time in of
Assignment Topic(s) Objective(s) Minutes Difficulty
Financial Report Problem
Reading Amazon’s Annual Report 2 5 Easy
Keeping It Real
Suarez Computer Center 1, 2, 3 60 Medium
Learning Unit 2-1: The T Account and How to Foot and Balance
Summary: The T account is a tool to demonstrate the increases and decreases in each account. The T
account is a skeleton version of a standard account. A standard account form is the formal structure
required for each account. All T

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2-4
f) and total columns.
5) The ledger has all the individual accounts, and all transactions affecting an account are recorded on the
form.
a) A ledger is a book of accounts that records data from business transactions.
b) Prepared manually in a traditional accounting format.
c) Ledger accounts in a computerized system are updated automatically by software.
6) For simplicity sake, use the T account form for demonstration purposes. T account simple form
includes:
a) the title, which expresses the name of the account
b) debit (left) side or Dr.
c) credit (right) side or Cr.
7) Footing: (the totals for each column)
a) process of adding all items on the debit side,
b) adding all items on the credit side

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2-5
The debit and credit rules are: all assets increase by debit side (left) and decrease by credit side (right),
liabilities increase by credit side (right) and decrease by debit side (left), and equity accounts increase by
credit side (right) and decrease by debit side (left). The equity subdivisions or categories will use the debit
and credit rules to present the effect on the organization’s equity. The equity subdivision rules are:
1. Revenues increase the organization’s equity in the business. Revenue accounts increase by credit
and decrease by debit (same as the equity).
2. The expenses decrease the organization’s equity. Therefore, all expense accounts will increase by
debit and decrease by credit. (Note that any item that decreases the equity, the behavior is opposite
to the main equity account.)
3. Capital accounts increase the organization’s equity. Therefore, any capital transaction will increase
by credit and decrease by debit. Withdrawals by owner decrease the organization’s equity.
Therefore, any withdrawal increases are recorded on the debit side.
Key Concepts: normal balance of an account, chart of accounts, compound entry, double-entry
bookkeeping
Lecture Outline:
1) Refer to Table 2.1 for the rules of debit and credit using T accounts affecting the accounting equation.
a) For assets increases are on the debit (left) side.
b)

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2-6
Learning Unit 2-3: The Trial Balance and Preparation of Financial
Statements
Summary: The trial balance is a list of all accounts with their balances in the same order as they appear in
the chart of accounts. A trial balance is not a financial statement although it is used to prepare financial
statements. A trial balance is a listing of each account with each account balance listed in its proper debit or
credit column. Balances on the trial balance are taken directly from footings and ending balances on the T
accounts. The total of the debit column should equal the total of the credit column.
The financial statements include: income statement, statement of owner’s equity, and the balance sheet. All
financial statements have two columns. The columns are used for subtotals and NOT for debit and credit
format. There are no debits and credits on the financial statements. The income statement summarizes the
revenues and expenses to calculate the net income or net loss. The statement of owner’s equity updates the
ending capital balance for the period. It includes the beginning and ending balances of capital accounts, the
net income or net loss, and the withdrawals account. The balance sheet is the representation of the
accounting equation as the last day of the period or as a “snapshot”. The balance sheet includes all assets,
liabilities, and the ending balance of equity.
Key Concepts: Trial balance
Lecture

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a) Lists all assets, liabilities and the new equity or capital account balance.
b) The total of assets = total of liabilities and equity.
Teaching Tips/Strategy: Use the “Success Coach” LU 2-3 to review trial balance and financial statement
concepts. After reviewing the concepts, complete the Concept Checks #4 to illustrate the process needed to
build a trial balance.
The instructor can use the Concept Check #5 as a demonstration exercise to explain the importance of
accounts and the proper classification within the financial statements. Exercises 2A-5 and 2B-5 are
excellent classroom practice to reinforce the objective #3 concepts.
Use the “Ten-Minute Quiz” questions #7, #8, #9 and #10 to reinforce the Learning Unit 2-3 concepts.
Teaching Tips/Strategy: Each chapter contains a Try It! at the end of each Learning Unit. The Try its! are
intended as practice for students and/or as checking of student understanding. There is also a Demonstration
Summary Problem with each chapter to provide an overview of all the chapter concepts. Students can study
and review this problem to view how all the chapter concepts fit together.

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3-1
Chapter 3
Beginning the Accounting Cycle
Chapter Overview
The chapter begins by explaining the accounting cycle is the accounting procedures performed over a
period of time and the accounting cycle takes place over a period of time called a fiscal year. The
accounting cycle has several steps: the transaction occurs, is analyzed, recorded as a journal entry in the
general journal, and posted to the general ledger. The information in the general ledger is used to prepare
the trial balance. While the trial balance is not a formal financial statement, it is used to prepare formal
financial statements: the income statement, the statement of owner’s equity, and the balance sheet.
Transaction analysis is used to understand how to record a business transaction as a journal entry.
Examples of increasing assets, decreasing liabilities, increasing expenses, etc. are used to illustrate the
many possible types of journal entries. Posting the same journal entries to the general ledger is then
illustrated. A trial balance is prepared from the general ledger information while the text also explains
ways to troubleshoot if the trial balance does not balance. Demonstration Problems illustrate the entire
process and offer tips to journalizing and posting.
Learning Objectives
After studying Chapter 3, your students should gain proficiency in the following:
1. Analyze and Record Business Transactions into a Journal.
2. Posting to the Ledger.
3. Preparing the Trial Balance.

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