This document provides an overview of the accounting recording process. It discusses debits and credits, the journal, ledger, trial balance, and errors. Debits increase asset and expense accounts and decrease liability and equity accounts. Credits do the opposite. The journal records transactions with the date, accounts debited and credited, and an explanation. The ledger contains individual account information transferred from the journal. The trial balance ensures the total debits equal total credits but does not guarantee the absence of errors. Errors can occur from missing, incorrect, or duplicate entries.
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2. The Recording process
Overviews:
Debits and Credits
Entries of Debit and Credit
The Journal
The Ledger
The Trial Balance
Limitation of Trial Balance and Errors
3. Debits and Credits
Debit: A debit is an accounting entry that either increase an asset or expenses
account, or decrease a liability or equity account. It is positioned to the left in an
accounting entry.
Credit: A credit is an accounting entry that either increase a liability or equity
account, or decrease an asset or expense account. It is positioned to the right in
an accounting entry.
7. Assets and Liabilities
Chapter
3-23
Assets
Debit / Dr. Credit / Cr.
Normal Balance
Chapter
3-24
LiabilitiesLiabilities
Debit / Dr. Credit / Cr.
Normal BalanceNormal Balance
Assets- Debits should exceed
credits.
Liabilities– Credits should
exceed debits.
The normal balance is on the increase side.
8. Owner’s Equity
Chapter
3-25
Debit / Dr. Credit / Cr.
Normal BalanceNormal Balance
Owner’s EquityOwner’s Equity
Chapter
3-25
Debit / Dr. Credit / Cr.
Normal BalanceNormal Balance
Owner’s CapitalOwner’s Capital
Chapter
3-23
Owner’s DrawingOwner’s Drawing
Debit / Dr. Credit / Cr.
Normal BalanceNormal Balance
Owner’s investments and
revenues increase owner’s equity
(credit).
Owner’s drawings and expenses
decrease owner’s equity (debit).
9. Revenues and Expenses
Chapter
3-26
Debit / Dr. Credit / Cr.
Normal BalanceNormal Balance
RevenueRevenue
Chapter
3-27
Debit / Dr. Credit / Cr.
Normal BalanceNormal Balance
ExpenseExpense
The purpose of earning revenues is to
benefit the owner(s).
The effect of debits and credits on
revenue accounts is the same as their
effect on Owner’s Capital.
Expenses have the opposite effect:
expenses decrease owner’s equity.
10. What is a journal?
A journal is a detailed account that records all the
financial transactions of a business, so that they can
then be used for future reconciling and transfer to
other official accounting records.
11. What should an Accounting Journal Record?
The appropriate date.
The amount’s and account’s that will be debited.
The amount’s and account’s that will be credited.
A short description.
A reference such as a check number.
13. Jamal Uddin starts his business which he named “Top Lather BD”. The
business journey was started on November,2016.The selected transaction
occurred during November.
Transactions:
November.
01.Invested $10000 cash is the business.
05.Purchased equipment for $12000 paying $5000 in cash &
balance on account.
25.Paid $3000 cash on balance owed for equipment.
28.Hired a manager at a salary of $ 1000 per month.
30.Withdraw $500 cash for personal use.
14. JOURNAL
Date Account Title & Explanation Ref Debit Credit
November 01
Cash Dr.
Capital Cr.
(Invested cash in business)
10000
10000
November 05
Equipment Dr.
Cash Cr.
Account Payable Cr.
(Purchased equipment by
cash and due)
12000
5000
7000
November 25
Account Payable Dr.
Cash Cr.
( Paid cash for due)
3000
3000
November 28
Not a transaction
November 30
Drawings Dr.
Cash Cr.
(Withdraw cash for personal
use)
500
500
15. Cash
Date Explanation Ref Debit Credit Balance
November
01 Capital 10000 10000 Dr.
05 Equipment 5000 5000 Dr.
25 Account Payable 3000 2000 Dr.
30 Drawing 500 1500 Dr.
What is Laser ?
A ledger is an accounting book that facilitates the transfer of
all journal entries in a chronological sequence to individual
accounts
16. Capital
Equipment
Date Explanation Ref Debit Credit Balance
November 01 Cash
10000 10000 Cr.
Date Explanation Ref Debit Credit Balance
November 05 Cash 12000
12000 Dr.
17. Account Payable
Account Payable
Drawing
Date Explanation Ref Debit Credit Balance
November 05 Equipment 7000 7000 Cr.
November 25 Cash 3000 4000 Cr.
Date Explanation Ref Debit Credit Balance
November 30
Cash 500 500 Dr.
18. Trial Balance
What and Why ?
1. List of balances
2. First step towards financial statement
3. Ensures every entry are recorded
4. Assures the entries are recorded correctly
5. Tool of detecting errors
19. Account Title Debit Credit
Cash 1500
Capital 10000
Equipment 12000
Account Payable 4000
Drawing 500
Total 14000 14000
Trial Balance
20. Limitations of a Trial Balance:
A trail balance only checks the sum of debits against the sum of
credits. That is why it does not guarantee that there are no errors.
A trial may balance even when:
Missing journal entry
Posting incorrect journal entry
Posting journal entry twice
Posting or Journalizing incorrect account
Reversing of amount
21. What Errors will be happen?
Error of omission
Error of original entry
Error of reversal
Error of commission
Error of compensating
22. Locating Errors:
Checking math
Comparing balance
Checking journal summaries
Checking journal and ledger entries