Professional Documents
Culture Documents
2-1
Chapter
The Recording
Process
Chapter
2-2
Study
Study Objectives
Objectives
1.
2.
3.
4.
5.
6.
7.
Chapter
2-3
The
The Recording
Recording Process
Process
The Account
Debits and
credits
Expansion of
basic equation
Chapter
2-4
Steps in the
Recording
Process
Journal
Ledger
The Recording
Process
Illustrated
Summary
illustration of
journalizing and
posting
Limitations of a
trial balance
Locating errors
Use of dollar
signs
The
The Account
Account
Account
An Account can
be illustrated in a
T-Account
form.
Chapter
2-5
Account Name
Debit / Dr.
Credit / Cr.
Debits
Debits and
and Credits
Credits
Double-entry accounting system
Each transaction must affect two or more
accounts to keep the basic accounting equation
in balance.
Recording done by debiting at least one
account and crediting another.
DEBITS must equal CREDITS.
Chapter
2-6
Debits
Debits and
and Credits
Credits
If Debits are greater than Credits, the account
will have a debit balance.
Account Name
Debit / Dr.
Transaction #1
$10,000
Transaction #3
8,000
Balance
Chapter
2-7
Credit / Cr.
$3,000
Transaction #2
$15,000
Debits
Debits and
and Credits
Credits
If Credits are greater than Debits, the account
will have a credit balance.
Account Name
Debit / Dr.
Transaction #1
Balance
Chapter
2-8
$10,000
Credit / Cr.
$3,000
Transaction #2
8,000
Transaction #3
$1,000
Debits
Debits and
and Credits
Credits Summary
Summary
Normal
Normal
Balance
Balance
Debit
Debit
Debit / Dr.
Normal
Normal
Balance
Balance
Credit
Credit
Assets
Credit / Cr.
Normal Balance
Chapter
3-24
Owners Equity
Credit / Cr.
Debit / Dr.
Liabilities
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Chapter
3-23
Expense
Debit / Dr.
Revenue
Chapter
3-25
Credit / Cr.
Debit / Dr.
Normal Balance
Chapter
3-27
Chapter
2-9
Credit / Cr.
Normal Balance
Chapter
3-26
SO 2
Debits
Debits and
and Credits
Credits Summary
Summary
Balance Sheet
Income Statement
Revenue - Expense
Debit
Credit
Chapter
2-10
Debits
Debits and
and Credits
Credits Summary
Summary
Review Question
Debits:
a. increase both assets and liabilities.
b. decrease both assets and liabilities.
c. increase assets and decrease liabilities.
d. decrease assets and increase liabilities.
Chapter
2-11
Debits
Debits and
and Credits
Credits Summary
Summary
Discussion Question
Q2-4: Maria Alvarez, a beginning accounting
student, believes debit balances are favorable
and credit balances are unfavorable. Is Maria
correct? Discuss.
Assets
Assets and
and Liabilities
Liabilities
Assets
Debit / Dr.
Credit / Cr.
Normal Balance
Liabilities Credits
should exceed debits.
Chapter
3-23
Liabilities
Debit / Dr.
Credit / Cr.
Normal Balance
Chapter
3-24
Chapter
2-13
Owners
Owners Equity
Equity
Owners investments and
revenues increase owners
equity (credit).
Owners Equity
Debit / Dr.
Credit / Cr.
Normal Balance
Chapter
3-25
Owners Capital
Debit / Dr.
Chapter
3-25
Chapter
2-14
Owners Drawing
Credit / Cr.
Debit / Dr.
Normal Balance
Normal Balance
Credit / Cr.
Chapter
3-23
Revenue
Revenue and
and Expense
Expense
Revenue
Debit / Dr.
Credit / Cr.
Normal Balance
Chapter
3-26
Expense
Debit / Dr.
Normal Balance
Chapter
3-27
Chapter
2-15
Credit / Cr.
Debits
Debits and
and Credits
Credits Summary
Summary
Review Question
Accounts that normally have debit balances are:
a. assets, expenses, and revenues.
b. assets, expenses, and owners capital.
c. assets, liabilities, and owners drawings.
d. assets, owners drawings, and expenses.
Chapter
2-16
Expansion
Expansion of
of the
the Basic
Basic Equation
Equation
Relationship among the assets, liabilities and
owners equity of a business:
Basic
Equation
Illustration 2-11
Assets = Liabilities +
Owners Equity
Expanded
Basic
Equation
Steps
Steps in
in the
the Recording
Recording Process
Process
Illustration 2-12
The
The Journal
Journal
Book of original entry.
Transactions recorded in chronological order.
Contributions to the recording process:
1. Discloses the complete effects of a transaction.
2. Provides a chronological record of transactions.
3. Helps to prevent or locate errors because the
Chapter
2-19
Journalizing
Journalizing
Journalizing - Entering transaction data in the journal.
Illustration: On September 1, Ray Neal invested $15,000
cash in the business, and Softbyte purchased computer
equipment for $7,000 cash.
Illustration 2-13
General Journal
Sept. 1
Cash
15,000
R. Neal, Capital
Computer equipment
Cash
Chapter
2-20
15,000
7,000
7,000
Journalizing
Journalizing
Simple and Compound Entries
Illustration: Assume that on July 1, Butler Company
purchases a delivery truck costing $14,000. It pays $8,000
cash now and agrees to pay the remaining $6,000 on account.
Illustration 2-14
General Journal
Sept. 1
Chapter
2-21
Delivery equipment
14,000
Cash
8,000
Accounts payable
6,000
The
The Ledger
Ledger
A General Ledger contains the entire group of accounts
maintained by a company.
The General Ledger includes all the asset, liability,
owners equity, revenue and expense accounts.
Illustration 2-15
Chapter
2-22
Chapter
2-23
Standard
Standard Form
Form of
of Account
Account
T-account form used in accounting textbooks.
In practice, the account forms used in ledgers are
much more structured.
Illustration 2-16
Chapter
2-24
Posting
Posting
Posting the
process of
transferring
amounts from
the journal to
the ledger
accounts.
Illustration 2-17
Chapter
2-25
Posting
Posting
Review Question
Posting:
a. normally occurs before journalizing.
b. transfers ledger transaction data to the
journal.
Chapter
2-26
Chart
Chart of
of Accounts
Accounts
Accounts and account numbers arranged in sequence in
which they are presented in the financial statements.
Illustration 2-18
Chapter
2-27
The
The Recording
Recording Process
Process Illustrated
Illustrated
Follow these steps:
1. Determine what
type of account
is involved.
Illustration 2-19
2. Determine what
items increased
or decreased
and by how
much.
3. Translate the
increases and
decreases into
debits and
credits.
Chapter
2-28
The
The Recording
Recording Process
Process Illustrated
Illustrated
Illustration 2-20
Chapter
2-29
The
The Recording
Recording Process
Process Illustrated
Illustrated
Illustration 2-21
Chapter
2-30
The
The Recording
Recording Process
Process Illustrated
Illustrated
Illustration 2-22
Chapter
2-31
The
The Recording
Recording Process
Process Illustrated
Illustrated
Illustration 2-23
Chapter
2-32
The
The Recording
Recording Process
Process Illustrated
Illustrated
Illustration 2-24
Chapter
2-33
The
The Recording
Recording Process
Process Illustrated
Illustrated
Illustration 2-25
Chapter
2-34
The
The Recording
Recording Process
Process Illustrated
Illustrated
Illustration 2-26
Chapter
2-35
The
The Recording
Recording Process
Process Illustrated
Illustrated
Illustration 2-27
Chapter
2-36
The
The Recording
Recording Process
Process Illustrated
Illustrated
Illustration 2-28
Chapter
2-37
The
The Trial
Trial Balance
Balance
Illustration 2-31
A list of accounts
and their
balances at a
given time.
Purpose is to
prove that debits
equal credits.
Chapter
2-38
The
The Trial
Trial Balance
Balance
Limitations of a Trial Balance
The trial balance may balance even when
1.
posting, or
of a transaction.
Chapter
2-39
The
The Trial
Trial Balance
Balance
Review Question
A trial balance will not balance if:
a. a correct journal entry is posted twice.
b. the purchase of supplies on account is debited to
Chapter
2-40
Recording
Recording Process
Process
Discussion Question
Chapter
2-42
Copyright
Copyright
Copyright 2009 John Wiley & Sons, Inc. All rights reserved.
Reproduction or translation of this work beyond that permitted
in Section 117 of the 1976 United States Copyright Act
without the express written permission of the copyright owner
is unlawful. Request for further information should be
addressed to the Permissions Department, John Wiley & Sons,
Inc. The purchaser may make back-up copies for his/her own
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assumes no responsibility for errors, omissions, or damages,
caused by the use of these programs or from the use of the
information contained herein.
Chapter
2-43