Expanded Ladger

Expanded Ledger


  • A ledger is a group or file of accounts
  • Each account has its own page in the ledger
  • The purpose of expanding the ledger is to provided more detailed information about the equity section
  • Each of the new accounts have a direct effect on the equity section, so they are placed with the equity section in the T-accounts
The Expanded Equity Section
  • Think about these accounts in terms of what effect they would have on the Capital account
  • Expenses and Drawings decrease capital, so they have the opposite t-account status
  • Revenue increases capital so they have the same t-account status

Revenue

  • Revenue is an increase in equity resulting from the sale of goods or services
  • Any increase in equity will result in a credit of the revenue (fees earned) account
Transaction:  Eve Boa, a lawyer, draws up a legal agreement for J. Basso, a client of hers.  For her services, Eve is paid a $250.
DR    Bank           250
CR    Revenue      250

Expenses

  • Expenses are costs associated with the production of revenue or the operation of your business
  • An expense will represent a decrease in equity, which will result in a debit of the expense account
Transaction:  Eve Boa pays her secretary her weekly wage of $400.
DR    Wages Expense              400
CR    Bank                              400

Net Income or Net Loss

  • A net income occurs when your revenue is greater than your expenses during a period of time
  • A net loss occurs when your expenses are greater than your revenue for a period of time 

Drawings

  • Drawings are funds withdrawn from the business by the owner for personal use
  • A drawing will result in a decrease of equity, which means the drawings account will be debited
Transaction:  Eve Boa, the owner, withdraws $300 for her personal use.
DR    E. Boa, Drawings          300
CR    Bank                              300

Summary

  • Capital:  this account will now only contain the beginning capital figure and any new money invested by the owner
  • Revenue:  any sale of goods or services for profit (cash/on account) will result in the credit of the revenue (fees earned) account
  • Expenses:  any time you pay an expense it will result in the debit of the expenses being paid
  • Drawings:  any withdrawal of money from the business for personal use by the owner will result in a debit of the drawings account

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Topics 1) What is Accounting? 2) Financial Position 3) Balance Sheet 4) GAAP 5) Equation Analysis Sheet 6) Analyzing a Transaction 7) Ledger Account 8) Trial Balance 9) Expanded Ledger 10) Income Statement 11) New GAAP 12) Report Form Balance Sheet 13) The Journal 14) Source Documents 15) GAAP for Journal 16) Sales Tax 17) Posting 18) Comparative Income Statement 19) Classified Balance Sheet 20) Adjustments 21) Closing Procedures 22) Depreciation 23) Merchandise Business
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