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Chapter2 Chapter2 Presentation Transcript

  • 2-1 CHAPTER 2CHAPTER 2 Recording BusinessRecording Business TransactionsTransactions
  • 2-2 InvertedPyramid The Body ofThe Body of Accounting KnowledgeAccounting Knowledge Chapter 1
  • 2-3 Tools of The Recording ProcessTools of The Recording Process Debits and Credits Journal Entries Ledger Accounts
  • 2-4 TheThe AccountingAccounting CycleCycle First, however, let’s look at...First, however, let’s look at...
  • 2-5 Analyze source documents. Journalize transactions in the general journal. Post entries to the accounts in the general ledger. Prepare financial statements. Prepare a trial balance. Steps in The Accounting CycleSteps in The Accounting Cycle
  • 2-6 Let’s start withLet’s start with The General Ledger AccountThe General Ledger Account A ledger account is a tool used for classifying and summarizing information about increases, decreases, and balances of financial statements items. Think of it as a storage container like a bucket. Dollars, which are used to measure economic transactions, are “poured” into and out of the container.
  • 2-7 General LedgerGeneral Ledger Was not a Civil War HeroWas not a Civil War Hero
  • 2-8 Two General Ledger AccountTwo General Ledger Account FormatsFormats Three-Amount Column Format (Debit, Credit, Balance) Used in general ledgers in the business world T-Account Format Used primarily for teaching and analysis of complex transactions
  • 2-9 General Ledger AccountGeneral Ledger Account Three-Amount Column FormatThree-Amount Column Format ACCOUNT NAME: ACCOUNT No. Date Description PR Debit Credit Balance 1 2 3
  • 2-10 For the sake of simplicity, we often use this format in teaching accounting even though it is no longer used in practice. Debit Credit Account Name General Ledger AccountGeneral Ledger Account T-Account FormatT-Account Format
  • 2-11 The T-AccountThe T-Account Increases to the T-account are recorded on one side of the T-account, and decreases are recorded on the other side. Debit Credit Account Name
  • 2-12 The T-AccountThe T-Account The side which increases and the side which decreases is determined by the type of account. Debit Credit Account Name
  • 2-13 What Are Debits and Credits?What Are Debits and Credits? Tools used for recording transactions Debit (DR) Credit (CR) Debit refers to the LEFTLEFT and Credit to the RIGHTRIGHT side of the T-Account. Debit and Credit are neutral terms and do not connote value judgments. Neither is “good” or “bad”!
  • 2-14 [Baltimore Sun, September 23, 1998]
  • 2-15 Tools used for recording transactions Debit (DR) Credit (CR) Debit refers to the LEFTLEFT and Credit to the RIGHTRIGHT side of the T-Account Account Name LEFT RIGHT What Are Debits and Credits?What Are Debits and Credits?
  • 2-16 Tools used for recording transactions Debit (DR) Credit (CR) Debit refers to the LEFTLEFT and Credit to the RIGHTRIGHT side of the T-Account Account Name LEFT RIGHT DEBIT SIDE CREDIT SIDE Used as Adjectives: What Are Debits and Credits?What Are Debits and Credits?
  • 2-17 Tools used for recording transactions Debit (DR) Credit (CR) Debit refers to the LEFTLEFT and Credit to the RIGHTRIGHT side of the T-Account Account Name LEFT RIGHT DEBIT CREDITUsed as Verbs: Synonym for Debit? What Are Debits and Credits?What Are Debits and Credits?
  • 2-18 Common Business TerminologyCommon Business Terminology
  • 2-19 Names of Ledger AccountsNames of Ledger Accounts There are no “magic” names for many accounts e.g., either “Heat, Light & Power” or “Utilities Expense” could be used for an account name. Other accounts have names which must be used e.g., “Cash”, “Accounts Receivable” and “Accounts Payable”.
  • 2-20 Let’s see how debits and credits affect the different types of accounts. Debit Credit Account Name Types of Ledger AccountsTypes of Ledger Accounts
  • 2-21 Assets Liabilities Stockholders’ Equity Revenues Expenses Assets Liabilities Stockholders’ Equity Revenues Expenses Types of Ledger AccountsTypes of Ledger Accounts
  • 2-22 Again, debits and credits are used to increase or decrease account balances. Determining whether to use a debit or credit to record an increase or decrease depends on the type of account in question. The Balance Sheet equation is the basis for the determination. Using Debits and CreditsUsing Debits and Credits
  • 2-23 Balance Sheet ModelBalance Sheet Model ((Revisited)Revisited) A = L + SE
  • 2-24 Account Name Debit Credit Account Name Debit Credit Assign a T-Account to each element of the Balance Sheet Model Assign a T-Account to each element of the Balance Sheet Model A = L + SE Account Name Debit Credit Balance Sheet ModelBalance Sheet Model ((Revisited)Revisited)
  • 2-25 Account Name Debit Credit Account Name Debit Credit Debits and credits affect the Balance Sheet Model as follows: Debits and credits affect the Balance Sheet Model as follows: A = L + SE Account Name Debit Credit Balance Sheet ModelBalance Sheet Model ((Revisited)Revisited)
  • 2-26 Account Name AA = L + SE Account Name Debit Credit Debit Credit Debits and credits affect the Balance Sheet Model as follows: Debits and credits affect the Balance Sheet Model as follows: ASSETSASSETS Debit for Increase Credit for Decrease Balance Sheet ModelBalance Sheet Model ((Revisited)Revisited)
  • 2-27 AA = LL + SE Account Name Debit Credit Debits and credits affect the Balance Sheet Model as follows: Debits and credits affect the Balance Sheet Model as follows: LIABILITIESLIABILITIES Debit for Decrease Credit for Increase ASSETSASSETS Debit for Increase Credit for Decrease Balance Sheet ModelBalance Sheet Model ((Revisited)Revisited)
  • 2-28 AA = LL + SESE Debits and credits affect the Balance Sheet Model as follows: Debits and credits affect the Balance Sheet Model as follows: ASSETSASSETS Debit for Increase Credit for Decrease EQUITIESEQUITIES Debit for Decrease Credit for Increase LIABILITIESLIABILITIES Debit for Decrease Credit for Increase Balance Sheet ModelBalance Sheet Model ((Revisited)Revisited)
  • 2-29 Recall that Stockholders’ Equity consists of the following components: Recall that Stockholders’ Equity consists of the following components: + Retained EarningsCapital Stock C/S + R/E Stockholders’ EquityStockholders’ Equity A Closer LookA Closer Look
  • 2-30 Therefore, the Capital Stock and Retained Earnings accounts are affected in the following manner by debits and credits because they are part of Stockholders’ Equity: Therefore, the Capital Stock and Retained Earnings accounts are affected in the following manner by debits and credits because they are part of Stockholders’ Equity: CAPITAL STOCKCAPITAL STOCK Debit for Decrease Credit for Increase RET. EARNINGSRET. EARNINGS Debit for Decrease Credit for Increase Stockholders’ EquityStockholders’ Equity A Closer LookA Closer Look
  • 2-31 Also, because RevenueRevenue accounts increase Stockholders’ Equity, they are affected by debits and credits as follows: Also, because RevenueRevenue accounts increase Stockholders’ Equity, they are affected by debits and credits as follows: REVENUESREVENUES Debit for Decrease Credit for Increase Stockholders’ EquityStockholders’ Equity A Closer LookA Closer Look
  • 2-32 And because ExpenseExpense accounts decrease Stockholders’ Equity, they are affected by debits and credits as follows: And because ExpenseExpense accounts decrease Stockholders’ Equity, they are affected by debits and credits as follows: EXPENSESEXPENSES Debit for Increase Credit for Decrease Stockholders’ EquityStockholders’ Equity A Closer LookA Closer Look
  • 2-33 Normal BalancesNormal Balances Each of the 5 account types also has a normalnormal balancebalance side. It is always the side which is used to record increases in the account.
  • 2-34 Normal BalancesNormal Balances The normal balances for each of the FIVEFIVE types of accounts are as follows: Account Name Debit Balance Credit Balance AssetsAssets ExpensesExpenses LiabilitiesLiabilities Stockholders’Stockholders’ EquityEquity
  • 2-35 Three Alternative ApproachesThree Alternative Approaches For Learning Debits and CreditsFor Learning Debits and Credits Alternative #1 The textbook approach on p. 59 Alternative #2 Expanded Accounting Equation This is Rice’s preferred approach Alternative #3 “A L O R E” acronym
  • 2-36 Alternative Approach #1Alternative Approach #1 Textbook ApproachTextbook Approach 59 Check it out at top of page!
  • 2-37 Alternative Approach #2Alternative Approach #2 Expanded Accounting EquationExpanded Accounting Equation ASSETS + EXP. = LIAB. + S/H EQUITY + REV. A + E = L + S/E + R Dr. Cr. + - Bal. Dr. Cr. +- Bal.
  • 2-38 Alternative Approach #3Alternative Approach #3 ““A L O R E” AcronymA L O R E” Acronym A (ssets)A (ssets) L (iabilities)L (iabilities) O (wners' equity)O (wners' equity) R (evenues)R (evenues) E (xpenses)E (xpenses) Debit Credit + - - + - + - + + -
  • 2-39 Debits and CreditsDebits and Credits Question 1Question 1 Which of the following accounts would normally be expected to have a debit (or left-side) balance? a. Accounts Payable b. Buildings c. Interest Revenue d. Capital Stock
  • 2-40 Debits and CreditsDebits and Credits Solution 1Solution 1 Which of the following accounts would normally be expected to have a debit (or left-side) balance? a. Accounts Payable b. Buildings c. Interest Revenue d. Capital Stock BUILDINGS is an asset account and normally has a DEBIT balance. The other three accounts normally have CREDIT balances. BUILDINGS is an asset account and normally has a DEBIT balance. The other three accounts normally have CREDIT balances.
  • 2-41 Debits and CreditsDebits and Credits Question 2Question 2 Which of the following accounts would normally be expected to have a credit (or right-side) balance? a. Accounts Receivable b. Salary Expense c. Salary Payable d. Land
  • 2-42 Debits and CreditsDebits and Credits Solution 2Solution 2 Which of the following accounts would normally be expected to have a credit (or right-side) balance? a. Accounts Receivable b. Salary Expense c. Salary Payable d. Land
  • 2-43 Which of the following accounts would normally be expected to have a credit (or right-side) balance? a. Accounts Receivable b. Salary Expense c. Salary Payable d. Land SALARY PAYABLE is a liability account and normally has a CREDIT balance. The other three accounts normally have DEBIT balances. SALARY PAYABLE is a liability account and normally has a CREDIT balance. The other three accounts normally have DEBIT balances. Debits and CreditsDebits and Credits Solution 2Solution 2
  • 2-44 Debits and CreditsDebits and Credits ExampleExample If the balance in Accounts Receivable (an asset) is $750 (debit side balance), Accounts ReceivableAccounts Receivable 750
  • 2-45 Debits and CreditsDebits and Credits ExampleExample If the balance in Accounts Receivable (an asset) is $750 (debit side balance), What would we do to increaseincrease the account by $200? 750 Accounts ReceivableAccounts Receivable
  • 2-46 If the balance in Accounts Receivable (an asset) is $750 (debit side balance), What would we do to increaseincrease the account by $200? 750 200200 Debits and CreditsDebits and Credits ExampleExample Accounts ReceivableAccounts Receivable
  • 2-47 Debits and CreditsDebits and Credits ExampleExample If the balance in Accounts Receivable (an asset) is $750 (debit side balance), What would we do to increaseincrease the account by $200? What would we do to decreasedecrease the account by $350? 750 200200 Accounts ReceivableAccounts Receivable
  • 2-48 Debits and CreditsDebits and Credits ExampleExample If the balance in Accounts Receivable (an asset) is $750 (debit side balance), What would we do to increaseincrease the account by $200? What would we do to decreasedecrease the account by $350? 750 200200 350350 Accounts ReceivableAccounts Receivable
  • 2-49 Debits and CreditsDebits and Credits ExampleExample Note the lack of $. It is understood that the yardstick is dollars. It is not “money”! 750 200200 350350 Accounts ReceivableAccounts Receivable
  • 2-50 Balancing The T-AccountBalancing The T-Account To get the balance of the T-Account . . . . . . net the totals on the two sides against each other. Place the residual amount on the appropriate side. 750 200200 350350 Accounts ReceivableAccounts Receivable
  • 2-51 To get the balance of the T-Account . . . . . . net the totals on the two sides against each other. Place the residual amount on the appropriate side. Balancing The T-AccountBalancing The T-Account 750 200200 350350 600 Accounts ReceivableAccounts Receivable
  • 2-52 Balancing The T-AccountBalancing The T-Account To get the balance of the T-Account . . . (Can use the either the approach above to show the balance, the text’s approach or Rice’s approach) 750 200200 350350 600 Accounts ReceivableAccounts Receivable
  • 2-53 Approach on Previous slide Using the example at the bottom of p. 57 Three Alternative Approaches toThree Alternative Approaches to Balancing The T-AccountBalancing The T-Account (1) 10,000 (2) 5,000 (3) 1,000 13,400 CashCash (4) 600 (5) 2,000 Text Approach (1) 10,000 (2) 5,000 (3) 1,000 16,000 13,400 CashCash (4) 600 (5) 2,000 2,600 bal (1) 10,000 (2) 5,000 (3) 1,000 13,400 CashCash (4) 600 (5) 2,000 Rice’s Approach ALL 3 are O.K.!
  • 2-54 Debits and CreditsDebits and Credits Question 3Question 3 The Cash account has three entries: a debit for $1,200, a credit for $300, and another credit for $400. What is the balance in the Cash account? a. $ 1,900 Debit. b. $ 500 Credit. c. $ 700 Credit. d. $ 500 Debit.
  • 2-55 The Cash account has three entries: a debit for $1,200, a credit for $300, and another credit for $400. What is the balance in the Cash account? a. $ 1,900 Debit. b. $ 500 Credit. c. $ 700 Credit. d. $ 500 Debit. Debits and CreditsDebits and Credits Question 3Question 3 $1,200 $ 400$ 400 $ 500 Cash $ 300$ 300
  • 2-56 Implications Of Debits And CreditsImplications Of Debits And Credits Debits and Credits are used to indicate that something happened to an account. Interpreting the implications requires an analysis of the entire journal entry.
  • 2-57 ImplicationsImplications QuestionQuestion 11 If the company made a Credit entry to Notes Payable, would the account increase or decrease?
  • 2-58 ImplicationsImplications QuestionQuestion 11 If the company made a Credit entry to Notes Payable, would the account increase or decrease? ANSWER: Notes Payable would increase.
  • 2-59 ImplicationsImplications QuestionQuestion 22 Notes Payable is the account where we record long-term borrowings. What event would cause us to record an increase in our long-term borrowings?
  • 2-60 ImplicationsImplications QuestionQuestion 22 Notes Payable is the account where we record long-term borrowings. What event would cause us to record an increase in our long-term borrowings? ANSWER: Such an increase could imply that the company borrowed money.
  • 2-61 ImplicationsImplications QuestionQuestion 33 If the company borrowed money, which account would also be affected and in what way?
  • 2-62 ImplicationsImplications QuestionQuestion 33 If the company borrowed money, which account would also be affected and in what way? ANSWER: There would also be an equal-sized increase in the Cash account.
  • 2-63 ImplicationsImplications QuestionQuestion 44 Suppose instead of an increase to Cash, you find an increase to the Land account. How do you interpret the increase in Notes Payable?
  • 2-64 ImplicationsImplications QuestionQuestion 44 Suppose instead of an increase to Cash, you find an increase to the Land account. How do you interpret the increase in Notes Payable? ANSWER: The company acquired land and gave a note that promised to pay for the land in the future.
  • 2-65 Recording TransactionsRecording Transactions Initially, all transactions are recorded in the GeneralGeneral JournalJournal.
  • 2-66 Recording TransactionsRecording Transactions Each transaction always affects at least two different accounts. One account has a debit effect. The second account has a credit effect. This methodology was named “double entry” accounting by whom? Pacioli Initially, all transactions are recorded in the GeneralGeneral JournalJournal.
  • 2-67 General Journal PageGeneral Journal Page GENERAL JOURNAL Page: Date Description PR Debit Credit
  • 2-68 Journal EntriesJournal Entries Example 1Example 1 On January 1, 19X7, Caldwell Company borrows $10,000 from the bank. Prepare the appropriate general journal entry for the above transaction.
  • 2-69 Journal EntriesJournal Entries Solution 1Solution 1 Two accounts are affected: Cash is increased by $10,000. Notes Payable is increased by $10,000.
  • 2-70 Journal EntriesJournal Entries Solution 1Solution 1 Two accounts are affected: Cash is increased by $10,000. Notes Payable is increased by $10,000. GENERAL JOURNAL Page: 1 Date Description PR Debit Credit
  • 2-71 Journal EntriesJournal Entries Solution 1Solution 1 Two accounts are affected: Cash is increased by $10,000. Notes Payable is increased by $10,000. GENERAL JOURNAL Page: 1 Date Description PR Debit Credit 1-Jan Cash 100 10,000 Notes Payable 201 10,000 to record loan from bank
  • 2-72 Journal EntriesJournal Entries Solution 1Solution 1 Two accounts are affected: Cash is increased by $10,000. Notes Payable is increased by $10,000. GENERAL JOURNAL Page: 1 Date Description PR Debit Credit 1-Jan Cash 100 10,000 Notes Payable 201 10,000 to record loan from bank Typically, accounts are numbered. The account numbers are used as references for posting to the General Ledger. More on account numbers will come later. Typically, accounts are numbered. The account numbers are used as references for posting to the General Ledger. More on account numbers will come later.
  • 2-73 Journal EntriesJournal Entries Example 2Example 2 On January 15, 19X7, Caldwell Company purchases a truck for $19,500 cash. Prepare the appropriate journal entry for the above transaction.
  • 2-74 Journal EntriesJournal Entries Solution 2Solution 2 Two accounts are affected: Trucks is increased by $19,500. Cash is decreased by $19,500.
  • 2-75 Journal EntriesJournal Entries Solution 2Solution 2 Two accounts are affected: Trucks is increased by $19,500. Cash is decreased by $19,500. GENERAL JOURNAL Page: 1 Date Description PR Debit Credit
  • 2-76 Journal EntriesJournal Entries Solution 2Solution 2 Two accounts are affected: Trucks is increased by $19,500. Cash is decreased by $19,500. GENERAL JOURNAL Page: 1 Date Description PR Debit Credit 15-Jan Trucks 150 19,500 Cash 100 19,500 to record purchase of truck
  • 2-77 Journal EntriesJournal Entries Example 3Example 3 On January 20, 19X7, Caldwell Co. pays the $400 electric bill for January. Prepare the appropriate journal entry for the above transaction.
  • 2-78 Journal EntriesJournal Entries Solution 3Solution 3 Two accounts are affected: Utility Expense is increased by $400. Cash is decreased by $400.
  • 2-79 Journal EntriesJournal Entries Solution 3Solution 3 Two accounts are affected: Utility Expense is increased by $400. Cash is decreased by $400. GENERAL JOURNAL Page: 1 Date Description PR Debit Credit
  • 2-80 Journal EntriesJournal Entries Solution 3Solution 3 Two accounts are affected: Utility Expense is increased by $400. Cash is decreased by $400. GENERAL JOURNAL Page: 1 Date Description PR Debit Credit 20-Jan Utility Expense 511 400 Cash 100 400 to record payment of January electric bill
  • 2-81 More About The GeneralMore About The General LedgerLedger It is a complete collection of all the accounts of a company Accounts are individually numbered for easy reference It is used to collect the information about all of the transactions affecting a specific account A cumulative, running balance is maintained when using the 3-column
  • 2-82 Categories ofCategories of General Ledger AccountsGeneral Ledger Accounts The five types of accounts fall into one of two categories Real Accounts Nominal Accounts Real Accounts Nominal Accounts
  • 2-83 Real AccountsReal Accounts This category includes Assets, Liabilities, and Stockholders’ Equities (i.e., Balance Sheet accounts) Accounts are permanent. Account balances are carried forward from one fiscal year to the next.
  • 2-84 Nominal AccountsNominal Accounts Nominal accounts include revenues and expenses. Nominal accounts are temporary. Nominal account balances are closed out to zero at the end of the fiscal year. Closing Entries will be discussed in Chapter 4.
  • 2-85 Numbering AccountsNumbering Accounts The listing of all accounts and their account numbers is called the chart ofchart of accountsaccounts.
  • 2-86 Numbering AccountsNumbering Accounts The listing of all accounts and their account numbers is called the chart ofchart of accountsaccounts. A typical account numbering scheme might appear as follows: Assets 100-199 Revenues 400-499 Liabilities 200-299 Expenses 500-599 Equities 300-399 Assets 100-199 Revenues 400-499 Liabilities 200-299 Expenses 500-599 Equities 300-399 (See page 63 and inside back
  • 2-87 Start with the journal entry from the General Journal. GENERAL JOURNAL Page: 1 Date Description PR Debit Credit 1-Jan Cash 10,000 Notes Payable 10,000 to record loan from bank Posting to the GLPosting to the GL ExampleExample
  • 2-88 GENERAL JOURNAL Page: 1 Date Description PR Debit Credit 1-Jan Cash 10,000 Notes Payable 10,000 to record loan from bank ACCOUNT NAME: CASH ACCOUNT No. 100 Date Description PR Debit Credit Balance Beginning Balance 0 0 Next, find the appropriate page in the General Ledger for Cash. Posting to the GLPosting to the GL ExampleExample
  • 2-89 GENERAL JOURNAL Page: 1 Date Description PR Debit Credit 1­Jan Cash 100 10,000      Notes Payable 10,000 to record loan from bank Post the account reference number. Posting to the GLPosting to the GL ExampleExample ACCOUNT NAME: CASH ACCOUNT No. 100 Date Description PR Debit Credit Balance Beginning Balance 0 0
  • 2-90 GENERAL JOURNAL Page: 1 Date Description PR Debit Credit 1-Jan Cash 100 10,000 Notes Payable 10,000 to record loan from bank ACCOUNT NAME: CASH ACCOUNT No. 100 Date Description PR Debit Credit Balance Beginning Balance 0 0 1-JanLoan G1 10,000 Posting to the GLPosting to the GL ExampleExample Post the transaction info to the GL.
  • 2-91 GENERAL JOURNAL Page: 1 Date Description PR Debit Credit 1-Jan Cash 100 10,000 Notes Payable 10,000 to record loan from bank ACCOUNT NAME: CASH ACCOUNT No. 100 Date Description PR Debit Credit Balance Beginning Balance 0 0 1-JanLoan G1 10,000 10,000 Update the General Ledger balance. Posting to the GLPosting to the GL ExampleExample
  • 2-92 GENERAL JOURNAL Page: 1 Date Description PR Debit Credit 1-Jan Cash 100 10,000 Notes Payable 10,000 to record loan from bank ACCOUNT NAME: Notes Payable ACCOUNT No. 201 Date Description PR Debit Credit Balance Beginning Balance 0 0 Posting to the GLPosting to the GL ExampleExample Next, find the Notes Payable page in the General Ledger.
  • 2-93 GENERAL JOURNAL Page: 1 Date Description PR Debit Credit 1-Jan Cash 100 10,000 Notes Payable 201 10,000 to record loan from bank ACCOUNT NAME: Notes Payable ACCOUNT No. 201 Date Description PR Debit Credit Balance Beginning Balance 0 0 Posting to the GLPosting to the GL ExampleExample Post the account reference number.
  • 2-94 GENERAL JOURNAL Page: 1 Date Description PR Debit Credit 1-Jan Cash 100 10,000 Notes Payable 201 10,000 to record loan from bank ACCOUNT NAME: Notes Payable ACCOUNT No. 201 Date Description PR Debit Credit Balance Beginning Balance 0 0 1-JanLoan G1 10,000 Posting to the GLPosting to the GL ExampleExample Post the transaction info to the GL.
  • 2-95 GENERAL JOURNAL Page: 1 Date Description PR Debit Credit 1-Jan Cash 100 10,000 Notes Payable 201 10,000 to record loan from bank ACCOUNT NAME: Notes Payable ACCOUNT No. 201 Date Description PR Debit Credit Balance Beginning Balance 0 0 1-JanLoan G1 10,000 10,000 Posting to the GLPosting to the GL ExampleExample Update the General Ledger balance.
  • 2-96 GENERAL JOURNAL Page: 1 Date Description PR Debit Credit 15-Jan Trucks 9,500 Cash 9,500 to record purchase of truck ACCOUNT NAME: CASH ACCOUNT No. 100 Date Description PR Debit Credit Balance Beginning Balance 0 0 1-JanLoan from bank G1 10,000 10,000 Examine the next journal entry. Posting to the GLPosting to the GL ExampleExample
  • 2-97 GENERAL JOURNAL Page: 1 Date Description PR Debit Credit 15-Jan Trucks 9,500 Cash 100 9,500 to record purchase of truck Posting to the GLPosting to the GL ExampleExample ACCOUNT NAME: CASH ACCOUNT No. 100 Date Description PR Debit Credit Balance Beginning Balance 0 0 1-JanLoan from bank G1 10,000 10,000 Record the account reference.
  • 2-98 GENERAL JOURNAL Page: 3 Date Description PR Debit Credit 15-Jan Trucks 9,500 Cash 100 9,500 to record purchase of truck ACCOUNT NAME: CASH ACCOUNT No. 100 Date Description PR Debit Credit Balance Beginning Balance 0 0 1-JanLoan from bank G1 10,000 10,000 15-JanPurchase of truck G3 9,500 Posting to the GLPosting to the GL ExampleExample Post the entry to the GL.
  • 2-99 GENERAL JOURNAL Page: 3 Date Description PR Debit Credit 15-Jan Trucks 9,500 Cash 100 9,500 to record purchase of truck ACCOUNT NAME: CASH ACCOUNT No. 100 Date Description PR Debit Credit Balance Beginning Balance 0 0 1-JanLoan from bank G1 10,000 10,000 15-JanPurchase of truck G3 9,500 500 Posting to the GLPosting to the GL ExampleExample Update the General Ledger balance.
  • 2-100 TRIAL BALANCETRIAL BALANCE Used to periodically test whether the General Ledger is in balance. Consists of a listing of each account with its balance as of a specific date. All Debit balances are in one column. All Credit balances are in another column.
  • 2-101 Trial Balance IllustrationTrial Balance Illustration (Text example is on p. 79)(Text example is on p. 79) First Company Trial Balance 12/31/X8 Debits Credits Cash 500$ Accounts Receivable 1,200 Equipment 3,800 Accounts Payable 700$ Notes Payable 1,450 Capital Stock 3,000 Retained Earnings - 1/1/X8 - Dividends 250 Revenues 11,000 Salary Expense 5,000 Utility Expense 3,000 Rent Expense 2,400 16,150$ 16,150$
  • 2-102 First Company Trial Balance 12/31/X8 Debits Credits Cash 500$ Accounts Receivable 1,200 Equipment 3,800 Accounts Payable 700$ Notes Payable 1,450 Capital Stock 3,000 Retained Earnings - 1/1/X8 - Dividends 250 Revenues 11,000 Salary Expense 5,000 Utility Expense 3,000 Rent Expense 2,400 16,150$ 16,150$ Notice that Total Debits are equal to Total Credits. Notice that Total Debits are equal to Total Credits. Trial Balance IllustrationTrial Balance Illustration (Text example is on p. 79)(Text example is on p. 79)
  • 2-103 Trial Balance ErrorsTrial Balance Errors Click picture to view videoClick picture to view video
  • 2-104 Loose EndsLoose Ends Questions on the 15 transactions on pp. 64-71?
  • 2-105 Loose EndsLoose Ends Questions on the 15 transactions on pp. 64-71? Don’t read the chapter! First full par. on p. 75
  • 2-106 Loose EndsLoose Ends Questions on the 15 transactions on pp. 64-71? Don’t read the chapter! First full par. on p. 75 Skip Analyzing and Using the Financial Results p. 81
  • 2-107 Loose EndsLoose Ends Questions on the 15 transactions on pp. 64-71? Don’t read the chapter! First full par. on p. 75 Skip Analyzing and Using the Financial Results p. 81 The Dividends account is not a primary type of account as implied on pp. 58-59!
  • 2-108 The DividendsDividends account is a contra account to Retained Earnings. Therefore, it is affected by debits and credits as follows: The DividendsDividends account is a contra account to Retained Earnings. Therefore, it is affected by debits and credits as follows: DIVIDENDSDIVIDENDS Debit for Increase Credit for Decrease Dividends AccountDividends Account
  • 2-109 Have you ever had that “I’ve- just-been-run- over-by-a- train” feeling?