Potters & Sculptors - Making Rock from Mud
Wes Hello Troy. Here we are again. I found those transactions confusing. Hope I'm not alone.
Troy Hello Wes, how did you do? I haven't studied so hard in years. I could not get my stuff to balance, so I know that I got something in the wrong place.
Wes Well, I'm not sure. Spent most of my time just trying to figure out what went where. Didn't even get to the balance stage. I think I'm going to have to put more time in this.
Troy I have lost track of how many times I have read the lessons but I am starting to get it. I still get confused about where to put some numbers.
George Hi, be with you in a couple of minutes
Wes Troy, your ribs are beautiful. Do you sell?
Troy Yes, I have a store on Etsy that works pretty good for me.
Wes Will check it out.
Troy I also have a blog where I write about cups that I purchase online. It is Bungartstudios.blogspot.com And I have just starting writing for Studio Potters Archive Blog
Wes Checked your blog. What's the latter?
George Hi again
Troy Hello George
George no women?
Wes Hi George, just us.
George Guess what? I just finished my inputs and they don't balance either.
Are you using google docs or Excel?
Troy Good! I don't know where I went wrong but I am sure that it must be in how I categorized numbers in the T accounts.
Wes I'm in Excel, but ran into problems adding transactions without adding lines to the spreadsheet. When you do that you distort the rest of the sheet or am I doing something wrong?
George My apologies -- Some of the T-accounts weren't long enough for all the transx
Troy It was a whole new lesson just to figure out how to add lines to my spreadsheet in google docs but I got it.
George I wanted to not have you think about the software too much
Wes Hopefully an accounting package will take our lack of sophistication into accout.
Troy Wes, besides adding lines you need change which lines total up to the balance at the bottom of the T account you added lines to.
George In google docs it looks like you can only add lines. In excel you can add just a range of cells and push everything below down to make room
George Let me post just the transaction sheet to talk about
Troy I have the transaction sheet printed out in front of me.
George How about you, Wes
Wes Yes. Same here
George OK lets talk about them #18 first. Actually any questions about the first 17 transactions
Wes I was stuck on 18 until I realized Paypal is an asset account.
Troy The first 17 made sense to me.
George Right - you had to create a new T-account for it
Wes Same here on the first 17
Troy it is easy to understand when I see it, it is just when I have to make the decisions that it gets confusing.
George so 18 was trivial after you knew it was just like a checking account
Troy I did not create any new T accounts
George Did you debit cash
Troy Yes I put it into cash. I saw that paypal was a category but I did not think to make my own
Troy In the long run it still adds up to an asset, right?
George It is definitely more like a bank account than cash on hand. But all are assets
It affects Transx 19 . . .
George . . where we take all our loot to the bank
Wes I didn't see that before, but now makes sense.
George So on transx18 - debit paypal, credit Sales Revenue
George What's the amount on transx 19?
Wes $1330+th $50=1380
Troy I got $1380. and I put it into cash/credit
George right - but w/o the $50 for me, because I added the extra account
Wes To checking?
Troy Okay, I understand
George Debit checking, credit cash -- cash = $100
Troy I took it from cash/credit and I debited to checking.
George #20 - trick question
Wes Looked straight forward. Debit checking and cash, credit sales?
Troy I added it all to cash. debit/ increase Troy and I credited it to revenue equity acct
George I count all money in hand as cash, but you could do it your way, Wes
George but you have to split it to 2 accounts
Wes Not sure I understand. Which two. I put it in Revenue Equity/Sales
George Revenue is the right area, Troy, but not right detail account - Sales Revenue
George If you gathered all the proceeds and went directly to the bank - checking would be right as the debit for the full $740
Troy account 401 is sales and above that it is called revenue equity account
George Revenue is a category that includes several detail accounts
Wes Have to take a break. Minor emergency. Will be back and get caught up.
George 401 was the right T-account to credit. All the revenue detail T-accounts will add together to make up revenue
Troy Transx 21 debit to cash and credit to 115 notes receivable, an asset account
George Right – and transx 22 is the same but credit accounts receivable
Troy transx 22 -- Debit to cash and credit to 110 accounts receivable / asset account
George Transx 23 -- dr _________ cr____________?
George cash and rental recpts?
Troy I didn't enter 23 but my notes say I did. cash debit and revenue credit
Troy Okay I had it in rental but never entered it to cash
George It is a lot of T-accounts to track visually and to cross check debits and credits.
24 is another trick question. Many businesses have an account for returns, but we don't - What did you do?
Troy For transx 24 -- I debit sales $50
George That's what I did
Troy I thought that I credited cash but I never entered it
George Did you credit checking?
Wes I'm back. On 23 I did cash and rental receipts
Troy yes, I found it!
Wes On transx 24 -- I debited sales and credited checking
George Ok 25-7 are basic expenses, but I wanted to let you know about supplies.
If you purchase supplies that are used up right away that is an expense.
Troy On 25 -- I credited cash and debited studio & shipping supplies
Wes When do supplies go into owner's equity or do they?
George If you buy enough to last for a longer time, then it is an asset
Wes OK, it's a judgment call?
George Do you want to have to inventory what is left over in 6 months.
Wes In my case I guess I will put these types in expense categories.
George If I buy enough paper to last 5 years, I'll need to inventory it every time I need to do an accurate balance sheet.
George So we should create a supplies expense account that is distinct from the asset account.
George What about Transx 28?
Wes $1000 debit to Accounts receiveable, credit to sales?
Troy debit assets accounts receivables and credits 401 revenue equity account
George both right!
Any questions about the last 4 transactions?
Wes Only 31, debit to checking, then I created a Revenue Equity account/Class Income. Have a feeling this wasn't right.??
Troy cash debit sales 401 credit
George That's a good move. Sales would work, but you might want to track your income streams separately.
George I credited sales, feeling like I didn't want to make yet another T-account!
Troy is 32 Debit to mortgages payables
Troy Okay, I think that I have it!
Wes I'm good...getting it.
George Wait -- that mortgage question
Wes Kind of tricky. Do we know what portion of the mortgage is business or other?
George Assume 100% business. We have to credit checking. . .
George so we must debit mortgages payable, but that is a liability account that has a normal credit balance. . . I should have started that T-account with some balance payable, so our debit wouldn't make the balance go negative.
Wes That was my problem, couldn't find such an account.
Troy That would make sense, I sweated over that one.
George We will ignore interest for now, and reduce the balance by our payment.
George I will make some adjustments, find and correct my mistakes and repost the sheets tonight.
Wes Thanks again George.
George Please be thinking about what accounts you will need for your own businesses
Troy Thanks George
George You can go ahead and sign on to waveaccounting.com
Got a hot date?
Talk to you guys later, you are really helping me put this material together.
Wes Will do. Got to get out in the studio. P.s my emergency was rounding up chickens. a few were out and we have opportunistic hawks (some hot date!)
George Thanks for participating. Bye