Copyright 2006 Pearson Education Canada Inc 4 1

Copyright 2006 Pearson Education Canada Inc. 4 -1

Outline § § § The Accounting Cycle Transactional Analysis: Step 1 Journalizing: Step 2 The General Journal Steps 3 and 4 of the Accounting Cycle Posting to the General Journal: Step 3 The General Ledger and “T” Accounts Posting Procedures: An Illustration The Chart of Accounts Taking the Trial Balance: Step 4 Discovering Sources of Error Computers in Accounting Copyright 2006 Pearson Education Canada Inc. 4 -2

The Accounting Cycle STEP ONE ANALYZING TRANSACTIONS STEP THREE POSTING STEP TWO JOURNALIZING STEP FOUR TAKING THE TRIAL BALANCE Copyright 2006 Pearson Education Canada Inc. 4 -3

Transactional Analysis: Step 1 § Transactional analysis – Identification of business transaction § Determine values received – Debits § Determine values given – Credits § DEBITS = CREDITS Copyright 2006 Pearson Education Canada Inc. 4 -4

Journalizing: Step 2 § Recording values received (debits) and values given (credits) in a journal § Chronological recording of the transaction - like keeping a business diary § Debits = Credits Copyright 2006 Pearson Education Canada Inc. 4 -5

The General Journal § 1. 2. 3. 4. Used to record hospitality entity transactions in chronological order Date Column Account Names and Description column Reference column – REF Debit (dr) and Credit (cr) columns Copyright 2006 Pearson Education Canada Inc. 4 -6

ILLUSTRATION Chapter 4 Exercise 2 (b) General Journal Copyright 2006 Pearson Education Canada Inc. 4 -7

Steps 3 and 4 of the Accounting Cycle STEP 3 Posting Transferring information From the journal to the ledger STEP 4 Taking a trial balance of The General Ledger Dr=Cr Copyright 2006 Pearson Education Canada Inc. 4 -8

Posting to The General Ledger: Step 3 The book of final entry Used to complete Step 3 of the Accounting Cycle. Posting to the General Ledger Contains the group of accounts that constitute a hospitality organization’s accounting system It may be a book, a tray of cards, a CD-ROM, or “T” accounts Copyright 2006 Pearson Education Canada Inc. 4 -9

General Ledger ”T” Accounts Copyright 2006 Pearson Education Canada Inc. 4 -10

General Ledger “T” Accounts Copyright 2006 Pearson Education Canada Inc. 4 -11

Posting Procedures: An Illustration Copyright 2006 Pearson Education Canada Inc. 4 -12

The Chart of Accounts § Sequential listing of the firm’s accounts found in the General Ledger § Facilitates finding ledger accounts during journalizing, posting and preparing financial statements Copyright 2006 Pearson Education Canada Inc. 4 -13

Chart of Accounts - Chapter 4 – Problem 2 (b) Copyright 2006 Pearson Education Canada Inc. 4 -14

Calculation of General Account Balance for the Cash Account-Refer to Problem 2 Chapter 4 ØDebit postings are added ØTotal 355, 000 ØCredit postings are added ØTotal 185, 526 ØSince debit postings are Higher than credit postings The ending balance of cash is 169, 474 (355, 000 -185, 526) and appears on the debit side Copyright 2006 Pearson Education Canada Inc. 4 -15

Taking the Trial Balance: Step 4 § Used to check the accuracy of the debit and credit balances in the General Ledger at the end of the accounting period § List of General Ledger accounts with their current balances as of the last day of the accounting period Copyright 2006 Pearson Education Canada Inc. 4 -16

Trial Balance for Lockwood Hotel Corporation - Refer to Problem 2 Chapter 4 DEBIT BALANCES MUST BE EQUAL TO CREDIT BALANCES Copyright 2006 Pearson Education Canada Inc. § Note that the order of accounts in the Trial Balance is the same as in the General Ledger (Assets, Liabilities, § Owners’ Equity, Revenues, and Expenses) § Balances of accounts with Debit balances are added in a left-hand money column while the balances of the accounts with credit balances are added in the right-hand columns § The equality of value exchanges must be maintained 4 -17

Discovering Sources of Error § If a trial balances, the existence of errors and or omissions is still possible § Different types of errors or omissions § Rule of “ 9” for transposition errors Copyright 2006 Pearson Education Canada Inc. 4 -18

Computers in Accounting § Facilitate data entry § Might eliminate posting errors; will not allow posting if journal entry doesn’t balance § Eliminate errors in the calculation of account balances Copyright 2006 Pearson Education Canada Inc. 4 -19

Computers in Accounting Expedite the accounting process Errors can be corrected more easily Copyright 2006 Pearson Education Canada Inc. 4 -20