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Summary Financial Accounting guide notes

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  • Course
  • 410378
  • Institution
  • IE University
  • Book
  • Introduction to Financial Accounting:Pearson International Edition

This document contains guided notes on how to do the straight-line method and accelerated depreciation, how to make the journal entries with depreciation in various types of transactions (ex. A sale made for less amount than the purchase amount), how to make the journal entries for the distinct typ...

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  • Depreciation methods, depreciation in journal entries, sales revenue in journal entries, discounts j
  • May 9, 2023
  • 12
  • 2022/2023
  • Summary

Subjects

  • financial accounting
  • income statement
  • journal entries
  • depreciation
  • discounts
  • bad debts
  • sales revenue in journal

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  • IE University
  • Business Administration and Data Analytics
  • 410378
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Depreciation


● Straight line method


Year Book value Depreciation
0 50,000 (Book value - residual value) / useful life = 2200
1 47800 (50,000 - 2200)
2 43400 (47800 - 2200)
3 41,200 (43400 - 2200)


● Accelerated depreciation / DDB


DDB rate = 2 * (100% / n) n = estimated useful life
DDB rate = 10% or 0.10


Year Depreciation Book value
0 50,000
1 5000 (50,000 * DDB) 45,000 (50,000 - 5000)
2 4500 (45,000 * DDB) 40,500 (45,000 - 4500)




Depreciation journal entries


Straight line method


Depreciation expense formula
Acc. depreciation formula

, ● Sale for less amount than purchase amount


Cash Amount it was sold for
Acc depreciation formula


Loss on sale of equipment original cost - acc depreciation = carrying amount
carrying amount - cash = Loss
Equipment original cost


● Sale for same amount than purchase amount


Cash Amount it was sold for
Acc depreciation formula
Equipment original cost


● Sale for more amount than the purchase amount


Cash Amount it was sold for
Acc depreciation formula
Gain same formula as Loss
Equipment original cost




Sales revenue journal entries


● Cash and credit sale


Cash
Acc receivable
Sales revenue


● Sales returns

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