Let's move now to those things that Mary Jo needs the record. That she hasn't really encountered before. But she has acquired enough information or enough knowledge about accounting in her first year of operations that she can probably figure out how to handle that. I think we're in the same situation. We've acquired enough information and enough knowledge about accounting by working through the year on one case that we may be able to figure out how to handle this even though we haven't encountered anything exactly like this. So here's what I'm going to encourage you to do. I'm going and encourage you to recognize that what we are not trying to do is memorize account names and memories journal entries, specific journal entries. What we're trying to do here is to use knowledge that we've developed, think about how we might use that knowledge to work through a new situation that we've been presented and new transaction that we need to record. So with each transaction, think about what type of an account moves up or down. Is it asset, liability or owners equity? And then, give that account a name. Figure out if it's going up or down. You'll know the dollar amount and then take as a try at recording. So transactions 8 through 11 of the case or the transactioned we are going to start with now. So take a little bit of time, work through all four of those transactions and then come back and we'll see how it worked out. How was it? My guess is, you got most of these. You were able to work most of these. There may be one or two that are a little bit more tricky. And that's okay, because that means we're going to learn a little bit more by tackling them. Let's start with Transaction 8, collections from customers on account. Total is $60,000 during the year. The company collected money, it got cash. So cash goes up by $60,000. Not a big deal, we know how to deal with that one. If we're collecting cash from customers on account, then what we must be seeing is that the accounts receivable Is decreasing because the customers that are represented by those accounts receivable are paying us, paying their bills off. So our accounts receivable account is going to decrease. We'll have less owed from us from customers once we've collected this, that's a decrease in the accounts receivable account, which was a right side entry to that account. We'll label it number 8. Not too bad? All right, let's go to Transaction 9. On July 1st, Mary Jo paid $5,000 to a local marketing firm for a series of ads hat we run for a year. So through June 30th of the following year. Whereas you paid $5,000 to the local marketing firm, so let's do the easy part first. Cash goes down by $5,000, that's the easy part. What did you get for the $5,000? She got something that would generate future benefit. That sounds like an asset to me. We got an asset account. What are we going to call it? Well, we can call it Prepaid Advertising which is a pretty common way to think about it, pretty common account name but even we can call it adverting for the at coming year that we have already paid for. The important point is that it's an asset account. It's typically called prepaid advertising. But it's an asset account. So we've purchased a new asset. So the left side entry is posted to the left side of this T account. It's a new account, has a beginning balance of zero because we've not entered anything into that account with that name before and we have a decrease in cash, right side ending. Let's move to Transaction 10. The amount the company still owed to suppliers at December 31st totaled $35,000. Where there may have been a transaction that happened somewhere, but this description doesn't really tell us what that transaction is. Let's do some research. Maybe looking at the accounts payable T account would help us. Because that's the account that tells us how much we owe to suppliers. I believe it would recall that the beginning balance at the beginning of year 2 which is the same as the end of year 1 was $25,000 in this account. And then, earlier in transaction three, we had increased that account balance by $70,000 but cause the company had purchased part of the inventory that it bought during the year in account. And we're told here that the ending balance in this account or the amount that owed to suppliers at the end of the year is $35,000. But interestingly, if we start with $25,000 and we add $70,000 into that account, we're at $95,000. So then how could we have an ending balance of $35,000? Something must have happened to reduce the balance in that account. By $60,000 in order for us to get to this ending balance of $35,000. What would cause the balance and the accounts payable account to decrease? A payment to the suppliers. So that's the transaction that we need to record. Is the transaction that gets that left entry of $60,000 into this accounts payable T account. How do we do that? We reduce the accounts payable liability by 60,000. There it is. And we decrease cash by 60,000. So we see a reduction in cash of 60 here, as well. Tricky, tricky, tricky. But I think we did okay working through that one. Transaction 11. In November, the company received a $10,000 deposit from a customer for plants to be delivered the following February. That's a pretty good deal you got cash now, but you don't have to deliver anything until in the future. Well, if you get cash now, you have to record a transaction because one has occurred. So cash goes up by $10,000. The question is, what's the other side of that entry? Well, the receipt of cash by the Garden Spot from a customer, creates an obligation on behalf of the Garden Spot, to provide some product or service in the future. That would fit the definition of a liability. So we have an increase in a liability. What's going to happen when the Garden Spot satisfies that liability? They'll be able to record revenue, they just can't record revenue at this point because I haven't delivered the product to the customer. So that's where we use this deferred revenue account that we've seen previously. So cash goes up by $10,000, the customers paid us cash, we have an obligation, the Feb revenue of $10, 000, that we've got to satisfy in the future. First time we've used this to your account has a beginning balance of zero. So these were a bit more difficult than some of the transactions we've seen before. But I bet you feel pretty good about what we've done. Because think about it. We were able to take some of the information and knowledge that we had acquired from some of the prior transactions we've recorded, and work through these to figure out how to handle them. Nice work.
