Professional Documents
Culture Documents
After studying this chapter, you should be able to: 1. Describe the characteristics of an account and record transactions using a chart of accounts and journal. 2. Describe and illustrate the posting of journal entries to accounts. 3. Prepare an unadjusted trial balance and explain how it can be used to discover errors. 4. Discover and correct errors in recording transactions.
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Objective 1 Objective 1 Describe the characteristics of an account and record transactions using a chart of accounts and journal.
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Accounting systems are designed to show the increases and decreases in each financial statement item as a separate record. This record is called an account.
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The T Account
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Title
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Title Debit
The left side of the account is called the debit side.
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Credit
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Title Debit Credit Amounts entered on the right side are credits.
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(In Rp 000)
Cash
25,000 (b) 7,500 (e) (f) (h) 5,900
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(a) (d)
Balance
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Owners equity is the owners right to the assets of the business. A drawing account represents the amount of withdrawals by the owner.
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Revenues are increases in owners equity as a result of selling services or products to customers.
Fees earned Commission revenue Rent revenue
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The using up of assets or consuming services in the process of generating revenues results in expenses.
Wages expense Rent expense Miscellaneous expense
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Journalizing
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This transaction is initially entered in a record called a journal. The process of recording a transaction in the journal is called journalizing.
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Journalizing requires the following steps: 1. Record the date. If this is the first entry on the page, the year is inserted above the month. As long as the month does not change, the rest of the journal entries on the require on the day be recorded. 2. The title of the account debited is listed in the Description column.
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3. Enter the amount in the Debit column. 4. Record the credit account in the Description column. 5. Enter the amount in the Credit column. Watch these steps take place as the entry to record Chris Clarks deposit is presented in the next slide.
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@solusinet
(a) On November 1, Cita Cinta opens a new business and deposits Rp. 25,000,000 in a bank account in the name of SolusiNet.
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(In Rp 000)
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Liability Accounts
Debit for decreases () Debit for decreases () Credit for increases (+) Credit for increases (+)
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2-1 Example Exercise 2-1 Prepare a journal entry for the purchase of a truck on June 3 for Rp.42,500, 000 paying Rp.8,500,000 cash and the remainder on account. Follow My Example 2-1 June 3 Truck Cash Accounts Payable Rp. 42,500,000 8,500,000 34,000,000
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@solusinet
(d) On November 18, SolusiNet received fees of Rp7,500,000 from customers for services provided.
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@solusinet
(e) Throughout the month, SolusiNet incurred the following expenses: wages, Rp. 2,125,000; rent Rp. 800,000; utilities, Rp. 450,000; and miscellaneous, Rp.275,000.
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30 Wages Expense Rent Expense Utilities Expense Miscellaneous Expense Cash Paid expenses.
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(g) On November 30, a count revealed that Rp.800,000 of the supplies inventory had been used during the month.
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Revenue Accounts
Debit for Credit for decreases increases () (+) Less
Expense Accounts
Debit for increases (+) Credit for decreases ()
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Continued
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Equals Net Income (credit > debits) increases owners equity (capital) Net Loss (debits > credits) decreases owners equity (capital)
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2-1 Example Exercise 2-2 Prepare a journal entry on August 7 for the fees earned on account, Rp.115,000,000. Follow My Example 2-2 Aug. 7 Accounts Receivable Fees Earned 115,000,000 115,000,000
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Drawing Account
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The owner of a proprietorship may withdraw cash from the business for personal use. Such withdrawals have the effect of decreasing owners equity.
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@solusinet
(h) On November 30, Cita Cinta withdrew Rp.2,000,000 in cash from SolusiNet for personal use.
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Nov 30 Cita Cinta, Drawing Cash Cita Cinta withdrew cash for personal use.
2007
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2-1 Example Exercise 2-3 Prepare a journal entry on December 29 for the payment of Rp.12,000,000 to the owner of Smartstaff Consulting Services, Dominique Walsh, for personal use. Follow My Example 2-3 Dec. 29 Dominique Walsh, Drawing Cash 12,000,000 12,000,000
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2-1 Increase (Normal Bal.) Decreases Balance sheet accounts: Asset Liability Owners Equity: Capital Drawing Income statement accounts: Revenue Expense Debit Credit Credit Debit Credit Debit Credit Debit Debit Credit Debit Credit
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2-1 Example Exercise 2-4 State for each account whether it is likely to have (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries. Also, indicate its normal balance. 1. 2. 3. 4. 5. 6. Ambarwati, Drawing Accounts Payable Cash Fees Earned Supplies Utilities Expense
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Follow My Example 2-4 1. 2. 3. 4. 5. 6. Debit entries only; normal debit balance Debit and credit entries; normal credit balance Debit and credit entries; normal debit balance Credit entries only; normal credit balance Debit and credit entries; normal debit balance Debit entries only; normal debit balance
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The equality of debits and credits for each transaction is built into the accounting equation: Assets = Liabilities + Owners Equity. Because of this double equality, this system is called the doubleentry accounting system.
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Transaction Analysis
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1. Determine whether an asset, liability, owners equity, revenue, expense, or drawing account is affected by the transaction. 2. For each account affected by the transaction, determine whether the account increases or decreases. 3. Determine whether each increase or decrease should be recorded as a debit or a credit. Continued
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4. Record the transaction using a journal entry. 5. Periodically post journal entries to the accounts in the ledger. 6. Prepare an unadjusted trial balance at the end of the period.
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Objective 2 Objective 2 Describe and illustrate the posting of journal entries to the accounts.
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The process of transferring the debits and credits from the journal entries to the accounts is called posting.
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@solusinet
Dec. 1 SolusiNet paid a premium of Rp.2,400,000 for a comprehensive insurance policy covering liability, theft and fire. The policy covers a one-year period.
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@solusinet
Dec. 1 SolusiNet paid rent for December, Rp.800,000. The company from which SolusiNet is renting its store space requires the payment of rent on the first of each month, rather than at the end of the month.
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An alternative approach is to debit Rent Expense for Rp.800,000 on December 1. This avoids having to transfer the balance to an expense account at the end of the month.
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SolusiNet received an offer from a local retailer to rent the land purchased on November 5. The retailer plans to use the land as a parking lot for its employees and customers. SolusiNet agreed to rent the land to the retailer for three months, with the rent payable in advance.
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@solusinet Dec. 1 SolusiNet receives Rp. 360,000 for three months rent for use of its land beginning December 1.
1 Cash Unearned Rent Received advance payment for three months rent on land. 11 23 360 000 360 000
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@solusinet Dec. 4 SolusiNet purchased office equipment on account from PD.Tunas Jaya. for Rp.1,800,000
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Dec. 13 SolusiNet paid a receptionist and part-time assistant Rp.950,000 for two weeks wages.
13 Wages Expense Cash Paid two weeks wages. 51 11 950 000 950 000
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@solusinet
Dec. 16 SolusiNet received Rp.3,100,000 from fees earned for the first half of December.
16 Cash Fees Earned Received fees from customers. 11 41 3 100 00 3 100 00
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Dec. 16 Fees earned on account totaled Rp.1,750,000 for the first half of December.
16 Accounts Receivable Fees Earned Recorded fees earned on account. 12 41 1 750 000 1 750 000
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@solusinet Dec. 20 SolusiNet paid Rp.900,000 to Executive Supply Co. on the Rp.1,800,000 debt owed from the December 4 transaction.
20 Accounts Payable Cash Paid part of amount owed to Executive Supply Co. 21 11 900 000 900 000
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Dec. 27 SolusiNet paid the receptionist and part-time assistant Rp.1,200,000 for two weeks wages.
27 Wages Expense Cash Paid two weeks wages. 51 11 1 200 000 1 200 000
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Dec. 31 NetSolutions paid Rp.310,000 for telephone charges for the month.
31 Utilities Expense Cash Paid telephone charges. 54 11 310 000 310 000
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Dec. 31 SolusiNet paid Rp.225,000 for electric usage for the month.
JOURNAL Date
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Post. Ref.
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@solusinet
Dec. 31 SolusiNet received Rp.2,870,000 from fees earned for the second half of December.
31 Cash Fees Earned Received fees from customers. 11 41 2 870 000 2 870 000
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@solusinet
Dec. 31 NetSolutions earned Rp.1,120,000 on account for the second half of December.
31 Accounts Receivable Fees Earned Recorded fees earned on account. 12 41 1 120 000 1 120 000
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On March 1, the cash account balance was Rp. 22,350,000. During March, cash receipts totaled Rp.241,880,000 and the March 31 balance was Rp.19,125,000. Determine the cash payments made during March.
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In Rp.000
Using the following T-account solve for the amount of cash payment (indicated by ? below). Cash Mar. 1 Bal 22,350 ? Cash receipts 241,880 Mar. 31 Bal. 19,125 Cash payments
Rp.19,125 = Rp.22,350 + Rp.241,880 Cash payments Cash payments = Rp.22,350 + Rp.241,880 Rp.19,125 = Rp.245,105
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2-3
Objective 3 Objective 3 Prepare an unadjusted trial balance and explain how it can be used to discover errors.
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The equality of debits and credits in the ledger should be proved at the end of each accounting period by preparing a trial balance. The heading should first list the name of the company, the statements title, and the date it is prepared.
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SolusiNet Unadjusted Trial Balance 31-Dec-07 In Rp. Debit Credit Balances Balances 0 6 5 000 2 2 0 000 0 0 0 000 4 0 0 000 0 0 0 000 8 0 0 000 9 0 0 000 3 6 0 000 25 0 0 0 000 0 0 0 000 16 3 4 0 000 2 7 5 000 6 0 0 000 9 8 5 000 8 0 0 000 4 5 5 000 6 0 0 000 42 6 0 0 000
Cash Account Receivable Supplies Prepaid Insurance Land Office Equipment Account Payable Unearned Rent Chris Clark, Capital Chris Clark, Drawing Fees Earned Wages Expense Rent Expense Utilities Expense Suppliexpense Miscellaneous Expense
2 2 2 2 20 1
4 4 1
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2-3 Follow My Example 2-6 a. The totals are equal since both the debit and credit entries were journalized and posted for Rp.6,500,000. b. The totals are unequal. The credit total is higher by Rp.270,000 (Rp.2,850,000 Rp.2,580,000). c. The totals are unequal. The debit total is higher by Rp.7,000,000 (Rp.3,500,000 + Rp.3,500,000).
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2-4
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A transposition occurs when the order of the digits is changed mistakenly, such as writing Rp.542,000 as Rp.452,000 or Rp.524,000. In a slide, the entire number is mistakenly moved one or more spaces to the right or the left, such as writing RP.542.000 as $54,200.
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Another type of error is a posting error. Assume that on May 5 a Rp.12,500,000 purchase of office equipment on account was incorrectly journalized and posted as a debit to Supplies and a credit to Accounts Payable for Rp.12,500,000.
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May 31 Office Equipment Supplies To correct erroneous debit to Supplies on May 5. See invoice from Bella Office Equipment Company.
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2-4 Example Exercise 2-7 The following errors took place in journalizing and posting transactions: a. A withdrawal of Rp.6,000,000 by Roni Ahmad, owner of the business, was recorded as a debit to Office Salaries Expense and a credit to Cash. b. Utilities Expense of Rp.4,500,000 paid for the current month was recorded as a debit to Miscellaneous Expense and a credit to Accounts Payable. Journalize the entries to correct the errors. Omit explanations.
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2-4 Follow My Example 2-7 a. Cheri Ramey, Drawing Office Salaries Expense b. Accounts Payable Miscellaneous Expense Utilities Expense Cash
In Rp.000
6,000 6,000 4,500 4,500 4,500 4,500
Note: The first entry in (b) reverses the incorrect entry, and the second entry records the correct entry. For Practice: PE 2-7A, PE 2-7B
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