Chap002.nuevo

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  • Part I Let’s see if we can analyze transactions and get them into the proper form for double-entry accounting. This will be helpful when you turn to your homework. In the first transaction, on December first, the owner invests $30,000 to start a company called FastForward. From our previous work we know that the cash account and the C. Taylor, Capital account will increase. Part II We record this information in the general journal with a debit, increase, to cash, and a credit, increase, to C. Taylor, Capital. Notice that the account number for the cash account is 101 and C. Taylor, Capital is 301. We are going to post the information in the journal to the general ledger. We will use T-accounts to accomplish this. Part III We place the $30,000 on the left, or debit, side of the cash account and on the right, or credit, side of the C. Taylor, Capital account. Our books are in balance because total assets are equal to total liabilities plus equity. Let’s move to another transaction.
  • On the trial balance we list all the accounts in our general ledger and their related balances. The total of all our debit account balances must equal all our credit account balances. If this is not the case, we may have made an error posting the journal entry into the ledger. We cannot prepare the financial statement until the books are in balance as determined by the trial balance.
  • Chap002.nuevo

    1. 1. PowerPoint Authors:Susan Coomer Galbreath, Ph.D., CPACharles W. Caldwell, D.B.A., CMAJon A. Booker, Ph.D., CPA, CIACynthia J. Rooney, Ph.D., CPAChapter 02ANALYZING AND RECORDINGTRANSACTIONSMcGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.
    2. 2. 2 - 2Analyze each transaction andevent from source documentsANALYZING AND RECORDINGPROCESSRecord relevant transactionsand events in a journalPost journal informationto ledger accountsPrepare and analyzethe trial balanceC 1
    3. 3. 2 - 3SalesTicketsBankStatementsPurchaseOrdersChecksSOURCE DOCUMENTSBills fromSuppliersEmployeeEarningsRecordsC 1
    4. 4. 2 - 4JOURNALIZING &POSTING TRANSACTIONSStep 1: Analyzetransactions and sourcedocuments.LiabilitiesLiabilities EquityEquityAssetsAssets = +Step 2: Apply double-entry accounting(Left side) (Right side)Debit CreditT- AccountACCOUNT NAME: ACCOUNT No.Date Description PR Debit Credit BalanceStep 4: Post entry to ledger Step 3: Record journal entryP 1
    5. 5. 2 - 5LEDGER AND CHART OFACCOUNTSThe ledger is a collection of all accounts for anThe ledger is a collection of all accounts for aninformation system. A company’s size and diversityinformation system. A company’s size and diversityof operations affect the number of accounts needed.of operations affect the number of accounts needed.The ledger is a collection of all accounts for anThe ledger is a collection of all accounts for aninformation system. A company’s size and diversityinformation system. A company’s size and diversityof operations affect the number of accounts needed.of operations affect the number of accounts needed.The chart of accounts is a list of all accounts and includes anidentifying number for each account.The chart of accounts is a list of all accounts and includes anidentifying number for each account.Account Number Account Name Account Number Account Name101 Cash 302 C. Taylor, Withdrawals106 Accounts receivable 403 Revenues126 Supplies 406 Rental revenue128 Prepaid insurance 622 Salaries expense167 Equipment 637 Insurance expense201 Accounts payable 640 Rent expense236 Unearned revenue 652 Supplies expense301 C. Taylor, Capital 690 Utilities expenseC 3
    6. 6. 2 - 6An account is arecord ofincreases anddecreases in aspecific asset,liability, equity,revenue, orexpense item.An account is arecord ofincreases anddecreases in aspecific asset,liability, equity,revenue, orexpense item.THE ACCOUNT AND ITSANALYSISThe generalledger is a recordcontaining allaccounts used bythe company.The generalledger is a recordcontaining allaccounts used bythe company.C 2
    7. 7. 2 - 7DEBITS AND CREDITSA T-account represents a ledger account andA T-account represents a ledger account andis a tool used to understand the effects ofis a tool used to understand the effects ofone or more transactions.one or more transactions.(Left side) (Right side)Debit CreditAccount TitleC 4
    8. 8. 2 - 8LiabilitiesLiabilities EquityEquityAssetsAssets = +DOUBLE-ENTRY ACCOUNTINGDebit Credit Debit Credit Debit CreditASSETS+ -LIABILITIES- +EQUITIES- +C 4NormalNormal NormalNormal NormalNormal
    9. 9. 2 - 9RevenuesRevenuesRevenuesRevenues ExpensesExpensesExpensesExpensesOwner’sOwner’sCapitalCapitalOwner’sOwner’sCapitalCapitalOwnersOwnersWithdrawalsWithdrawalsOwnersOwnersWithdrawalsWithdrawals_+_Debit CreditOwner’sCapital- +Debit CreditOwnersWithdrawals+ -Debit CreditExpenses+ -Debit CreditRevenues- +DOUBLE-ENTRY ACCOUNTINGEquityEquityEquityEquityC 4
    10. 10. 2 - 10ANALYZING TRANSACTIONSAnalysis:(1) Cash 101 30,000C. Taylor, Capital 301 30,000Double entry:(1) 30,000Cash 101 301(1) 30,000C. Taylor, Capital 301Posting:A1
    11. 11. 2 - 11DOUBLE-ENTRY ACCOUNTINGAn account balance is the difference between the increasesand decreases in an account. Notice the T-Account.C 4
    12. 12. 2 - 12After processing its remaining transactions forDecember, FastForward’s Trial Balance is prepared.After processing its remaining transactions forDecember, FastForward’s Trial Balance is prepared.Debits CreditsCash 4,350$Accounts receivable -Supplies 9,720Prepaid Insurance 2,400Equipment 26,000Accounts payable 6,200$Unearned consulting revenue 3,000C. Taylor, Capital 30,000Owners Withdrawals 200Consulting revenue 5,800Rental revenue 300Salaries expense 1,400Rent expense 1,000Utilities expense 230Total 45,300$ 45,300$FastForwardTrial BalanceDecember 31, 2009The trial balancelists all accountbalances in thegeneral ledger. Ifthe books are inbalance, the totaldebits will equal thetotal credits.The trial balancelists all accountbalances in thegeneral ledger. Ifthe books are inbalance, the totaldebits will equal thetotal credits.P2
    13. 13. 2 - 13END OF CHAPTER 2

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