Record Transactions in the Journal. Copy (post) to the Ledger. Prepare the Trial Balance

Transcription

1 Explain accounts, journals, and ledgers as they relate to recording transactions and describe common accounts Chapter 2 Record Transactions in the Journal 2 Basic summary device Detailed record of increases and decreases in specific assets, liabilities, or owner s equity during a period Copy (post) to the Ledger Prepare the Trial 4 Journal Chronological record of transactions Organized by date 3 Listing of all accounts and their balances Ledger Book (or computer record) of all account activity Organized by account 5 6

2 Accounts are grouped in 3 broad categories: Economic resources that will benefit the business in the future Assets = Liabilities Owner s equity 7 8 ors claims to assets (debt) Owner s claim to the assets Capital Withdrawals Revenues Expenses 9 10 All Individual Accounts Combined Make Up the Ledger Asset accounts Accounts payable Liability accounts Ledger Common stock Equity accounts List of all accounts used by a company along with the account numbers Acct. # 101 Account title 111 Accounts receivable 150 Equipment 201 Accounts payable 301 Common stock 305 Retained earnings 401 Service revenue 501 Rent expense 525 Advertising expense 11 12

3 13 Record dual effects of each transaction Each transaction has a: Receiving side Giving side Define debits, credits, and normal account balances. Use double entry accounting and Taccounts. 14 Simple tool for analyzing and determining the balance in a given account Account Name Whether an account is increased by debit or a credit is determined by the account type Asset, liability, or equity s are not good or bad (Left Side) (Right Side) Abbreviated dr Abbreviated cr Assets = Liabilities Owner s equity Assets = Liabilities Equity 17 18

4 Owner Owner s Capital Withdrawals Owner s equity Owner s Owner Owner s Capital Capital Revenues Revenues Revenues Withdrawals Withdrawals Expenses Expenses Expenses Assets Withdrawals Expenses 19 Liabilities Capital Revenues 20 $20,000 $12,000 $8, List the steps of the transactions to the ledger 23 24

5 Four parts: of transaction Title of account debited with dollar amount Title of account credited with dollar amount Brief explanation of transaction Transaction Journal Page 1 Description Jul 1 45,000 Josie Smith, Capital 45,000 Owner investment Accounts Affected Explanation of of transaction Dollar amount of of debits and credits Copying amounts from the journal to the ledger March 22: On account indicates Accounts receivable Accounts receivable is an asset account Increase an asset with a debit Mar 22 Accounts receivable 4, March 22: Performed services indicates revenue has been earned Revenues are increased by credits March 30: is received The payment is on account Mar 22 Accounts receivable 4,000 Service revenue 4,000 Performed services on account Mar 30 3,000 Accounts receivable 3,000 Received payment on account 29 30

6 March 31: A utility bill is an expense The bill will be paid later creating an account payable March 31: Salaries to employees are an expense The salary was paid in cash Mar 31 Utilities expense 130 Accounts payable 130 Received utility bill Mar 31 Salaries expense 2,300 2,300 Paid salaries March 31: Advertising is another expense is paid Origin of accounting transactions Mar 31 Advertising expense Paid advertising Accounts receivable Service revenue Journalize and post sample transactions to the ledger Accounts receivable 9,000 Service revenue 9,000 Performed legal services on account 35 36

7 37 Accounts receivable Service revenue 9,000 9,000 Accounts receivable Service revenue 9,000 9,000 Accounts receivable 9,000 Service revenue 9,000 Performed legal services on account 5,400 Accounts receivable 5,400 Received payment on account 38 Accounts receivable Service revenue 5,400 9,000 5,400 9,000 3,600 5,400 Accounts receivable 5,400 Prepare the trial balance from the TAccounts Received payment on account Summary of the ledger Lists all accounts with their balances Accuracy check s should equal credits NOT a balance sheet Search for missing account Divide the difference between debits and credits by two Divide out of balance amount by nine 41 42

8 of transaction Posting reference DATE Jan DATE Jan 2 DESCRIPTION Josie Smith, Capital REF DEBIT 2 Item 1Apr 3Apr 5Apr 6Apr Jrnl. Ref. J.1. DEBIT Account No. 101 Jrnl. Ref. 3 5 Josie Smith, Capital Jrnl. Ref. 2Jan Acct No. 101 Jrnl Ref J.1 20,000 20,000 J.1 9,000 1 J.1 3,000 14,000 J.1 10,000 4,000 Alternative to the TAccount 45 4 Amounts debited and credited 43 CREDIT CASH Jan Accounts debited and credited Josie Smith, Capital CREDIT Page 1 POST REF DESCRIPTION Account No. 301 Jrnl. Ref. J.1. 44