Chapter 2 The Recording Process ACT 201 Lecture
![Chapter 2: The Recording Process ACT 201 Lecture By: Ms. Adina Malik Chapter 2: The Recording Process ACT 201 Lecture By: Ms. Adina Malik](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-1.jpg)
![The Account • Record of increases and decreases in a specific asset, liability & The Account • Record of increases and decreases in a specific asset, liability &](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-2.jpg)
![Debits & Credits Double-entry accounting system • Commonly abbreviate Debit as ‘Dr. ’ and Debits & Credits Double-entry accounting system • Commonly abbreviate Debit as ‘Dr. ’ and](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-3.jpg)
![Debits & Credits 1 3 Debit > Credit = Debit Balance Credit > Debit Debits & Credits 1 3 Debit > Credit = Debit Balance Credit > Debit](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-4.jpg)
![Accounting Equation: Reminder Basis Equation: Assets = Liabilities + Owner’s Equity Expanded Equation: Assets Accounting Equation: Reminder Basis Equation: Assets = Liabilities + Owner’s Equity Expanded Equation: Assets](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-5.jpg)
![Debit & Credit Procedure ASSETS Normal Balance is on the increase side LIABILITIES Debit & Credit Procedure ASSETS Normal Balance is on the increase side LIABILITIES](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-6.jpg)
![Debit & Credit Procedure: Owner’s Equity Debit & Credit Procedure: Owner’s Equity](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-7.jpg)
![Debit & Credit Procedure: Owner’s Equity Debit & Credit Procedure: Owner’s Equity](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-8.jpg)
![Normal Balance ‘Normal Balance is on the increasing side’ means that: q Normal Balance Normal Balance ‘Normal Balance is on the increasing side’ means that: q Normal Balance](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-9.jpg)
![Debit & Credit Rules Summary Debit & Credit Rules Summary](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-10.jpg)
![Question 1 Question 1](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-11.jpg)
![Question 2 Question 2](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-12.jpg)
![Steps in the Recording Process Source documents, such as a sales slip, a check, Steps in the Recording Process Source documents, such as a sales slip, a check,](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-13.jpg)
![Journal • It discloses in one place the complete effects of a transaction (debit Journal • It discloses in one place the complete effects of a transaction (debit](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-14.jpg)
![Simple & Compound Entries • Entering transaction data in the journal is known as Simple & Compound Entries • Entering transaction data in the journal is known as](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-15.jpg)
![Journal Problem: Prepare a General Journal Transaction 1: Kate Browne invested $ 20, 000 Journal Problem: Prepare a General Journal Transaction 1: Kate Browne invested $ 20, 000](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-16.jpg)
![The Ledger • It is the entire group of accounts maintained by a company. The Ledger • It is the entire group of accounts maintained by a company.](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-17.jpg)
![Posting ‘Journal Entry’ into ‘The Ledger’ Transaction 1: Posting ‘Journal Entry’ into ‘The Ledger’ Transaction 1:](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-18.jpg)
![Posting ‘Journal Entry’ into ‘The Ledger’ Transaction 2: Posting ‘Journal Entry’ into ‘The Ledger’ Transaction 2:](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-19.jpg)
![Problem (Continued) During the year, there were other transactions, as given below: Transaction 3: Problem (Continued) During the year, there were other transactions, as given below: Transaction 3:](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-20.jpg)
![Problem (Continued) Problem (Continued)](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-21.jpg)
![Trial Balance • It is a list of accounts and their balances at a Trial Balance • It is a list of accounts and their balances at a](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-22.jpg)
![Limitations of a Trial Balance The trial balance may balance even when: • A Limitations of a Trial Balance The trial balance may balance even when: • A](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-23.jpg)
![Question Question](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-24.jpg)
![Question Bob Sample opened the Campus Laundromat on September 1, 2010. During the first Question Bob Sample opened the Campus Laundromat on September 1, 2010. During the first](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-25.jpg)
- Slides: 25
![Chapter 2 The Recording Process ACT 201 Lecture By Ms Adina Malik Chapter 2: The Recording Process ACT 201 Lecture By: Ms. Adina Malik](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-1.jpg)
Chapter 2: The Recording Process ACT 201 Lecture By: Ms. Adina Malik
![The Account Record of increases and decreases in a specific asset liability The Account • Record of increases and decreases in a specific asset, liability &](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-2.jpg)
The Account • Record of increases and decreases in a specific asset, liability & owner’s equity item. • The format resembles the letter ‘T’, hence referred to as the T Account • An Account consists of three parts: • A title • Left side, known as debit side • Right side, known as credit side Accounting custom/rule Title of Account Debit Credit
![Debits Credits Doubleentry accounting system Commonly abbreviate Debit as Dr and Debits & Credits Double-entry accounting system • Commonly abbreviate Debit as ‘Dr. ’ and](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-3.jpg)
Debits & Credits Double-entry accounting system • Commonly abbreviate Debit as ‘Dr. ’ and Credit as ‘Cr. ’ • 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.
![Debits Credits 1 3 Debit Credit Debit Balance Credit Debit Debits & Credits 1 3 Debit > Credit = Debit Balance Credit > Debit](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-4.jpg)
Debits & Credits 1 3 Debit > Credit = Debit Balance Credit > Debit = Credit Balance Title of Account Debit/Dr. Credit/Cr. $10, 000 $ 3, 000 $ 8, 000 $ 15, 000 Title of Account Debit/Dr. Credit/Cr. $ 10, 000 $ 3, 000 $ 8, 000 $ 1, 000 Balance 2 Balance
![Accounting Equation Reminder Basis Equation Assets Liabilities Owners Equity Expanded Equation Assets Accounting Equation: Reminder Basis Equation: Assets = Liabilities + Owner’s Equity Expanded Equation: Assets](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-5.jpg)
Accounting Equation: Reminder Basis Equation: Assets = Liabilities + Owner’s Equity Expanded Equation: Assets = Liabilities + (Owner’s Capital Owner’s Drawings + Revenue Expenses) • The equation must be in balance after every transaction. • For every Debit there must be a Credit.
![Debit Credit Procedure ASSETS Normal Balance is on the increase side LIABILITIES Debit & Credit Procedure ASSETS Normal Balance is on the increase side LIABILITIES](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-6.jpg)
Debit & Credit Procedure ASSETS Normal Balance is on the increase side LIABILITIES
![Debit Credit Procedure Owners Equity Debit & Credit Procedure: Owner’s Equity](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-7.jpg)
Debit & Credit Procedure: Owner’s Equity
![Debit Credit Procedure Owners Equity Debit & Credit Procedure: Owner’s Equity](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-8.jpg)
Debit & Credit Procedure: Owner’s Equity
![Normal Balance Normal Balance is on the increasing side means that q Normal Balance Normal Balance ‘Normal Balance is on the increasing side’ means that: q Normal Balance](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-9.jpg)
Normal Balance ‘Normal Balance is on the increasing side’ means that: q Normal Balance for Assets, Owner’s Drawings and Expenses is on the Debit side. q. Normal Balance for Liabilities, Owner’s Capital and Revenue is on the Credit side.
![Debit Credit Rules Summary Debit & Credit Rules Summary](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-10.jpg)
Debit & Credit Rules Summary
![Question 1 Question 1](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-11.jpg)
Question 1
![Question 2 Question 2](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-12.jpg)
Question 2
![Steps in the Recording Process Source documents such as a sales slip a check Steps in the Recording Process Source documents, such as a sales slip, a check,](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-13.jpg)
Steps in the Recording Process Source documents, such as a sales slip, a check, a bill, or a cash register tape, provide evidence of the transaction. Three basic steps generally in every business: • Analyze each transaction for its effects on the accounts. • Enter the transaction information in a journal. • Transfer the journal information to the appropriate accounts in the ledger.
![Journal It discloses in one place the complete effects of a transaction debit Journal • It discloses in one place the complete effects of a transaction (debit](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-14.jpg)
Journal • It discloses in one place the complete effects of a transaction (debit & credit effects) • It provides a chronological record of transactions. • As debit & credit amounts for each entry can be easily compared, it helps to prevent or locate errors. • Also known as ‘General Journal’ or ‘The Book of Original Entry’. GENERAL JOURNAL Date Account Titles and Explanation Ref. Debit Credit
![Simple Compound Entries Entering transaction data in the journal is known as Simple & Compound Entries • Entering transaction data in the journal is known as](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-15.jpg)
Simple & Compound Entries • Entering transaction data in the journal is known as journalizing. • It is important to use ‘correct’ & ‘specific account titles’ in journalizing. • Simple Entry: entry which involves only two accounts, one debit and one credit. • Compound Entry: entry that requires more than two accounts in journalizing. E. g. Butler company purchases a delivery truck costing $14, 000. ($8, 000 paid in cash now and to pay the remaining $6, 000 on account)
![Journal Problem Prepare a General Journal Transaction 1 Kate Browne invested 20 000 Journal Problem: Prepare a General Journal Transaction 1: Kate Browne invested $ 20, 000](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-16.jpg)
Journal Problem: Prepare a General Journal Transaction 1: Kate Browne invested $ 20, 000 cash for establishing her salon named ‘Super Salon’. Transaction 2: Purchased equipment on account (to be paid in 30 days) for a total cost of $ 5, 000 GENERAL JOURNAL Account Titles and Explanation Date Debit 1 Cash K. Browne, Capital (Owner's investment of cash in business) 2 Equipment Accounts Payable (Purchase of equipment on account) Ref. Credit $20, 000 $5, 000
![The Ledger It is the entire group of accounts maintained by a company The Ledger • It is the entire group of accounts maintained by a company.](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-17.jpg)
The Ledger • It is the entire group of accounts maintained by a company. • It keeps in one place all the information about changes in specific account balances. • A General Ledger contains all the asset, liability & owner’s equity accounts. Individual Assets Accounts • Cash • Land • Equipment • Supplies • Etc. Individual Liability Accounts Individual Owner’s Equity Accounts • Accounts Payable • Salaries Payable • Notes Payable • Interest Payable • Etc. • Salaries Expense • Service Revenue • K. Browne, Capital • K. Browne, Drawings • Etc.
![Posting Journal Entry into The Ledger Transaction 1 Posting ‘Journal Entry’ into ‘The Ledger’ Transaction 1:](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-18.jpg)
Posting ‘Journal Entry’ into ‘The Ledger’ Transaction 1:
![Posting Journal Entry into The Ledger Transaction 2 Posting ‘Journal Entry’ into ‘The Ledger’ Transaction 2:](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-19.jpg)
Posting ‘Journal Entry’ into ‘The Ledger’ Transaction 2:
![Problem Continued During the year there were other transactions as given below Transaction 3 Problem (Continued) During the year, there were other transactions, as given below: Transaction 3:](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-20.jpg)
Problem (Continued) During the year, there were other transactions, as given below: Transaction 3: Super Salon pays $ 500 as rent of premise. Transaction 4: Received $ 4, 000 for providing customer service.
![Problem Continued Problem (Continued)](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-21.jpg)
Problem (Continued)
![Trial Balance It is a list of accounts and their balances at a Trial Balance • It is a list of accounts and their balances at a](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-22.jpg)
Trial Balance • It is a list of accounts and their balances at a given time. • Prepared at the end of an accounting period. • The primary purpose of a trial balance is to prove (check) that the debits equal the credits after posting.
![Limitations of a Trial Balance The trial balance may balance even when A Limitations of a Trial Balance The trial balance may balance even when: • A](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-23.jpg)
Limitations of a Trial Balance The trial balance may balance even when: • A transaction is not journalized • A correct journal entry is not posted • A journal entry is posted twice • Incorrect accounts are used in journalizing or posting, or • Offsetting errors are made in recording the amount of a transaction
![Question Question](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-24.jpg)
Question
![Question Bob Sample opened the Campus Laundromat on September 1 2010 During the first Question Bob Sample opened the Campus Laundromat on September 1, 2010. During the first](https://slidetodoc.com/presentation_image/12aa6c552a023e372ddb3e91e1f4c60f/image-25.jpg)
Question Bob Sample opened the Campus Laundromat on September 1, 2010. During the first month of operations, the following transactions occurred. Sept. 1 Bob invested $20, 000 cash in the business Sept. 2 The company paid $1, 000 cash for store rent for Sept. 3 Purchased washers & dryers for $25, 000, paying $10, 000 in cash and $15, 000 on account Sept. 4 Received a bill from the Daily News for advertising the opening of the Laundromat $200 Sept. 10 The company owes employee salaries of $2, 000 and pays them in cash Sept. 20 Bob withdraw $700 cash for personal use Sept. 30 The company determined that cash receipts for laundry services for the month were $6, 200 (a) Journalize the September transactions (b) Open ledger accounts and post the September transactions (c) Prepare a trial balance at September 30, 2010
Accounting recording process
Posting normally occurs before journalizing
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