What Is A General Ledger And How Is It Helpful In Accounting

What Is A General Ledger And How Is It Helpful In Accountingwhat About

What is a general ledger and how is it helpful in accounting? What about the impact of debits and credits to revenue and expense accounts? Class - Please attempt this exercise and see what you come up with. Please do not attach a file with your response, instead write or copy and paste your answer into the threads. Thanks. Paul E2-16A Bob Morin opened a medical practice specializing in surgery. During the first month of operation (August), the business, titled Bob Morin, Professional Corporation (P.C.), experienced the following events: Aug 6 Morin invested $39,000 in the business, which in turn issued its common stock to him. 9 The business paid cash for land costing $29,000. Morin plans to build an office building on the land. 12 The business purchased medical supplies for $1,700 on account. 15 Bob Morin, P.C., officially opened for business. 15–31 During the rest of the month, Morin treated patients and earned service revenue of $7,600, receiving cash for half the revenue earned. 15–31 The business paid cash expenses: employee salaries, $1,300; office rent, $700; utilities, $500. 31 The business sold supplies to another physician for cost of $700. 31 The business borrowed $12,000, signing a note payable to the bank. 31 The business paid $800 on account. — Requirements 1. Analyze the effects of these events on the accounting equation of the medical practice of Bob Morin, P.C. 2. After completing the analysis, answer these questions about the business. a. How much are total assets? b. How much does the business expect to collect from patients? c. How much does the business owe in total? d. How much of the business’s assets does Morin really own? e. How much net income or net loss did the business experience during its first month of operations? Everyone - Please attempt this exercise and see what you come up with. Please do not attach a file with your response, instead write or copy and paste your answer into the threads. Thanks. E2-15A The following selected events were experienced by either Fact Finders, Inc., a corporation, or Peter Flip, the major stockholder. State whether each event (1) increased, (2) decreased, or (3) had no effect on the total assets of the business. Identify any specific asset affected. a. Received $8,500 cash from customers on account. b. Flip used personal funds to purchase a flat screen TV for his home. c. Sold land and received cash of $71,000 (the land was carried on the company’s books at $71,000). d. Borrowed $56,000 from the bank. e. Made cash purchase of land for a building site, $93,000. f. Received $22,000 cash and issued stock to a stockholder. g. Paid $68,000 cash on accounts payable. h. Purchased equipment and signed a $104,000 promissory note in payment. i. Purchased merchandise inventory on account for $16,500. j. The business paid Flip a cash dividend of $7,000.

Paper For Above instruction

A general ledger is a fundamental accounting tool that serves as the central repository for all financial transactions of a business. It records every financial transaction in detail, categorized into accounts such as assets, liabilities, equity, revenue, and expenses. This comprehensive recording provides the foundation for preparing financial statements like the balance sheet and income statement, offering a clear overview of the company's financial health at any given time. The general ledger ensures accuracy, completeness, and organization of financial data, facilitating effective financial analysis, decision-making, and compliance with accounting standards.

In accounting, the general ledger simplifies the process of tracking how transactions affect a company's financial position. Each transaction recorded in the ledger impacts one or more accounts through debit and credit entries, following the double-entry accounting system. Debits and credits are fundamental to maintaining the accounting equation: Assets = Liabilities + Equity. For example, an increase in assets is recorded as a debit, while an increase in liabilities or equity is recorded as a credit. When revenue is earned, it increases assets (like cash or accounts receivable), and is credited to revenue accounts, thereby increasing net income. Conversely, expenses reduce net income and are recorded as debits in expense accounts.

The impact of debits and credits is crucial in understanding financial outcomes. For instance, when revenue accounts are credited, it indicates an increase in income, which ultimately boosts retained earnings under equity. Expenses, debited as they are incurred, decrease net income, reflecting the cost of operations. The careful recording of these effects in the ledger ensures the accuracy of financial statements and helps in identifying the financial performance and position of a business over specific periods.

Applying this understanding to the case of Bob Morin’s medical practice, the events demonstrate how transactions impact the accounting equation and financial statements. For example, the initial investment of $39,000 increases both assets (cash) and equity (common stock). Purchasing land for $29,000 decreases cash and increases land assets, while buying medical supplies on account increases supplies (asset) and increases accounts payable (liability). Revenue earned from patient services increases cash and revenue accounts, affecting net income, while expenses such as salaries and rent decrease cash and net income. Borrowing money increases cash (asset) and notes payable (liability). The sales of supplies to another physician, at cost, affects inventory and revenue, while payments on accounts payable reduce liabilities and cash.

In conclusion, the general ledger is indispensable for maintaining an organized and accurate record of all financial activities. It supports detailed tracking of debits and credits, ensures adherence to accounting principles, and provides the data necessary for financial analysis and reporting. This systematic recording process enables businesses like Bob Morin’s P.C. to monitor their financial health, make informed decisions, and comply with statutory reporting requirements efficiently.

References

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