Professional Documents
Culture Documents
2-1
Chapter
The Recording
Process
Financial Accounting, IFRS Edition
Weygandt Kimmel Kieso
Slide
2-2
Study
Study Objectives
Objectives
Slide
2-3
1.
2.
3.
4.
5.
6.
7.
The
The Recording
Recording Process
Process
The Account
Debits and
credits
Debit and credit
procedure
Equity
relationships
Summary of
debit/credit
rules
Slide
2-4
Steps in the
Recording
Process
Journal
Ledger
Posting
The Recording
Process
Illustrated
Summary
illustration of
journalizing and
posting
Limitations of a
trial balance
Locating errors
Use of currency
signs
The
The Account
Account
Account
An Account can
be illustrated in a
T-Account form.
Slide
2-5
Account Name
Debit / Dr.
Credit / Cr.
The
The Account
Account
Debits and 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.
Slide
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.
Credit / Cr.
Transaction #1
$10,000
$3,000
Transaction #3
8,000
Balance
Slide
2-7
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
Transaction #1
Balance
Slide
2-8
Debit / Dr.
Credit / Cr.
$10,000
$3,000
Transaction #2
8,000
Transaction #3
$1,000
Debits
Debits and
and Credits
Credits Summary
Summary
Normal
Normal
Balance
Balance
Debit
Debit
Liabilities
Debit / Dr.
Normal
Normal
Balance
Balance
Credit
Credit
Assets
Credit / Cr.
Normal Balance
Chapter
3-24
Credit / Cr.
Debit / Dr.
Normal Balance
Chapter
3-23
Expense
Debit / Dr.
Revenue
Credit / Cr.
Debit / Dr.
Normal Balance
Chapter
3-27
Slide
2-9
Credit / Cr.
Normal Balance
Chapter
3-26
SO 2
Debits
Debits and
and Credits
Credits Summary
Summary
Balance Sheet
Asset = Liability + Equity
Income Statement
Revenue - Expense
Debit
Credit
Slide
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.
Slide
2-11
Solution
notes page
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
Slide
2-12
Equity
Equity Relationships
Relationships
Issuance of share capital and
revenues increase equity
(credit).
Dividends and expenses
decrease equity (debit).
Slide
2-13
Revenue
Revenue and
and Expense
Expense
Revenue
Debit / Dr.
Credit / Cr.
Normal Balance
Chapter
3-26
Expense
Debit / Dr.
Credit / Cr.
Normal Balance
Chapter
3-27
Slide
2-14
Summary
Summary of
of Debit/Credit
Debit/Credit Rules
Rules
Relationship among the assets, liabilities and equity
of a business:
Illustration 2-12
Summary
Summary of
of Debit/Credit
Debit/Credit Rules
Rules
Review Question
Accounts that normally have debit balances are:
a. assets, expenses, and revenues.
b. assets, expenses, and retained earnings.
c. assets, liabilities, and dividends.
d. assets, dividends, and expenses.
Slide
2-16
Solution
notes page
Summary
Summary of
of Debit/Credit
Debit/Credit Rules
Rules
Kathy Renee Browne, president of Hair It Is
Company has just rented space in a shopping
mall in which she will open and operate a beauty salon. A friend
has advised Kathy to set up a double-entry set of accounting
records in which to record all of her business transactions.
Following are the accounts that Hair It Is Company, will likely
need to record the transactions. Indicate whether the normal
balance of each account is a debit or a credit.
Slide
2-17
Cash
Debit
Equipment
Debit
Supplies
Debit
Accounts payable
Credit
Notes payable
Credit
Share capital
Credit
Solution on
notes page
Steps
Steps in
in the
the Recording
Recording Process
Process
Illustration 2-13
Slide
2-18
Steps
Steps in
in the
the Recording
Recording Process
Process
Journalizing
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 debit
and credit amounts can be easily compared.
Slide
2-19
Steps
Steps in
in the
the Recording
Recording Process
Process
Journalizing - Entering transaction data in the journal.
Illustration: On September 1, stockholders invested $15,000
cash in exchange for ordinary shares, and Softbyte
purchased computer equipment for $7,000 cash.
Illustration 2-14
General Journal
Sept. 1
Cash
15,000
Share capital
Computer equipment
Cash
Slide
2-20
Solution on
notes page
15,000
7,000
7,000
SO 4
Steps
Steps in
in the
the Recording
Recording Process
Process
Simple and Compound Entries
Illustration: 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 2-15
General Journal
Sept. 1
Slide
2-21
Solution on
notes page
Delivery equipment
14,000
Cash
8,000
Accounts payable
6,000
SO 4
Steps
Steps in
in the
the Recording
Recording Process
Process
The Ledger
General Ledger
All accounts maintained by a company.
All asset, liability, equity, revenue and expense accounts.
Illustration 2-16
Slide
2-22
Answer on
notes page
Slide
2-23
The
The Ledger
Ledger
Standard Form of Account
T-account form used in accounting textbooks.
Ledger form used in practice.
Illustration 2-17
Slide
2-24
The
The Ledger
Ledger
Chart of Accounts
Slide
2-25
Illustration 2-18
Posting
Posting
Posting the
process of
transferring
amounts from
the journal to
the ledger
accounts.
Illustration 2-19
Slide
2-26
The
The Recording
Recording Process
Process Illustrated
Illustrated
Follow these steps:
1. Determine what
type of account
is involved.
2. Determine what
items increased
or decreased and
by how much.
3. Translate the
increases and
decreases into
debits and
credits.
Illustration 2-20
Slide
2-27
The
The Recording
Recording Process
Process Illustrated
Illustrated
Illustration 2-21
Slide
2-28
The
The Recording
Recording Process
Process Illustrated
Illustrated
Illustration 2-22
Slide
2-29
SO 6
The
The Recording
Recording Process
Process Illustrated
Illustrated
Illustration 2-23
Slide
2-30
SO 6
The
The Recording
Recording Process
Process Illustrated
Illustrated
Illustration 2-24
Slide
2-31
SO 6
The
The Recording
Recording Process
Process Illustrated
Illustrated
Illustration 2-25
Slide
2-32
SO 6
The
The Recording
Recording Process
Process Illustrated
Illustrated
Illustration 2-26
Slide
2-33
The
The Recording
Recording Process
Process Illustrated
Illustrated
Illustration 2-27
Slide
2-34
SO 6
The
The Recording
Recording Process
Process Illustrated
Illustrated
Illustration 2-28
Slide
2-35
SO 6
The
The Recording
Recording Process
Process Illustrated
Illustrated
Illustration 2-29
Slide
2-36
SO 6
Posting
Posting
Review Question
Posting:
a. normally occurs before journalizing.
b. transfers ledger transaction data to the journal.
c. is an optional step in the recording process.
d. transfers journal entries to ledger accounts.
Solution on
notes page
Slide
2-37
The
The Recording
Recording Process
Process Illustrated
Illustrated
Katherine Turner recorded the following
transactions during the month of March.
Slide
2-38
Solution on
notes page
SO 6
The
The Recording
Recording Process
Process Illustrated
Illustrated
P2-1A. Prairie Park was started on April 1 by C.J. Amaro and associates. The following
selected events and transactions occurred during April.
Apr. 1
11
12
13
17
20
25
Sold 100 coupon books for $30 each. Each book contains 10 coupons that entitle
holder to one admission to the park.
30
30
the
Prairie Park uses the following accounts: Cash, Prepaid Insurance, Land, Accounts Payable,
Unearned Service Revenue, Share Capital-Ordinary, Dividends, Service Revenue, Advertising
Expense, and Salaries and Wages Expense.
Slide
2-39
SO 6
The
The Trial
Trial Balance
Balance
Illustration 2-32
A list of accounts
and their
balances at a
given time.
Purpose is to
prove that debits
equal credits.
Slide
2-40
The
The Trial
Trial Balance
Balance
Limitations of a Trial Balance
The trial balance may balance even when
1. a transaction is not journalized,
2. a correct journal entry is not posted,
3. a journal entry is posted twice,
4. incorrect accounts are used in journalizing or
posting, or
5. offsetting errors are made in recording the amount
of a transaction.
Slide
2-41
Slide
2-42
Answer on
notes page
The
The Trial
Trial Balance
Balance
The accounts
come from the
ledger of
Christel
Corporation at
December 31,
2011.
Slide
2-43
Solution on
notes page
Christel Corporation
Trial Balance (in thousands)
December 31, 2011
SO 7
Comprehensive
Comprehensive Question
Question
A group of student investors in Hong Kong opened Campus Laundromat Inc. on September 1,
2014. During the first month of operations, the following transactions occurred.
Sep. 1
shares.
Paid HK$10,000 cash for store rent for the month of September.
ordinary
10
Received a bill from the Daily News for advertising the opening of the
laundromat HK$2,000.
20
30
Determined that cash receipts for laundry fees for the month were HK$62,000.
The chart of accounts for the company is the same as for Pioneer Advertising Agency Inc.
except for the following: No. 610 Advertising Expense.
Instructions
(a)Journalize
(b)Open
(c)Prepare
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2-44
Understanding
Understanding U.S.
U.S. GAAP
GAAP
Key Differences
Understanding
Understanding U.S.
U.S. GAAP
GAAP
Key Differences
Slide
2-46
Understanding
Understanding U.S.
U.S. GAAP
GAAP
Looking to the Future
Slide
2-47
Copyright
Copyright
Copyright 2011 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 use only and not for
distribution or resale. The Publisher assumes no responsibility for
errors, omissions, or damages, caused by the use of these
programs or from the use of the information contained herein.
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