C H A P T E R . 3. The Mechanics of Accounting. Learning Objective 1. Understand the process of transforming transaction data into useful accounting information. Exchange Transactions. What Are the Different Exchange Transactions?. Business Documents.
The Mechanics of
TransactionsWhat Are the Different Exchange Transactions?
Transaction analysis framework
A = L + OE
Invest in company
Pay off a note
Borrow funds to settle a debt
The cash account has a beginning balance of $35. A check for $12 is written to pay for supplies. Using a T-account, what is the ending balance of the cash account?
23Using a T-Account
Credits are simply entries on the right.
Explain How Debits and Credits Work for $12 is written to pay for supplies. Using a T-account, what is the ending balance of the cash account?
Assets = Liabilities + Owners’ Equity
What is another name for the journal?
General Journal Entry Format for $12 is written to pay for supplies. Using a T-account, what is the ending balance of the cash account?:
Date Debit Entry . . . . . . . . . . . . . . . xx
Credit Entry . . . . . . . . . . . . xx
Explanation.Step 2: Record Transactions
Supplies purchased for $25 are purchased “on account.”
Prepare the correct journal entry. What do we mean by purchased “on account?”
A check for $100 is received in payment for services rendered.
Make the correct journal entry.
Merchandise is sold to a customer on account for $75. The cost of the product was $60.
Make the journal entries.
Entered when posted to ledger. for $12 is written to pay for supplies. Using a T-account, what is the ending balance of the cash account?Journal 1 Page 1
Date Transaction Ref. Debits Credits
Jan. 1 Supplies 25
Accounts Payable 25
Purchased supplies on account.
Feb. 1 Cash 101 100
Received cash for services.
Mar. 1 Accounts Receivable 75
Sales Revenue 75
Sold merchandise on account.
ACCOUNT: Cash Balance
Account No. 101
Date Explanation Ref. Debits Credits Balance
Jan. 1 Balance 100
2 Issued 100 shares of capital stock at $10 per share GJ1 1,000 1,100
3 Purchased equipment GJ1 300 800
4 Sold inventory GJ1 60 860
5 Monthly payment on loan GJ1 230 630
6 Revenue GJ1 2,500 3,130General Ledger
Current Assets (100-150):
105 Accounts Receivable
Long-Term Assets (151-199):
Current Liabilities (200-219):
201 Notes Payable
202 Accounts Payable
Long-Term Liabilities (220-239):
222 Mortgage Payable
OWNERS’ EQUITY (300-399):
301 Capital Stock
330 Retained Earnings
400 Sales Revenue
500 Cost of Goods Sold
501 Sales Salaries and Commissions
523 Rent Expense
528 Advertising Expense
573 Utilities Expense
579 Accounting and Legal Fees
Name of Account Balance
balance is usually
on the side that
account. It is
referred to as the
Do you see the mnemonic memory device, DEAD COIL?
What is the Trial Balance used for?
Sample Trial Balance Balance
The Example Company
December 31, 2006
Cash $ 21
Accounts Receivable 15
Accounts Payable $ 30
Capital Stock 150
Retained Earnings 24
Sales Revenue 919
Cost of Goods Sold 850
Advertising Expense 10
Miscellaneous Expenses 15______
Total $ 1,123 $ 1,123
"Failure is the
begin again with