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The Recording Process. Chapter 2. Accounting Principles, Ninth Edition. The Recording Process. Recording process is the steps & procedures that are used to help in preparing financial statements. Journalizing - Simple Entry. Journalizing - Entering transaction data in the journal.

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slide1
The Recording Process

Chapter2

Accounting Principles, Ninth Edition

slide2

The Recording Process

Recording process is the steps & procedures that are used to help in preparing financial statements.

journalizing simple entry
Journalizing -Simple Entry

Journalizing - Entering transaction data in the journal.

Illustration: On September 1, Ray Neal invested $15,000 cash in the business, and Softbyte purchased computer equipment for $7,000 cash.

General Journal

Sept. 1

Cash

15,000

  • R. Neal, Capital

15,000

Computer equipment

7,000

  • Cash

7,000

journalizing compound entry
Journalizing -Compound Entry

Illustration: Assume that on July 1, Butler Company purchases a delivery truck costing $14,000. It pays $8,000 cash now and agrees to pay the remaining $6,000 on account.

General Journal

Sept. 1

Delivery equipment

14,000

  • Cash

8,000

6,000

  • Accounts payable
slide11

Example : On April 1, Ragland established the lzon travel agency. The following transactions were completed during the month:

  • 1-Invested $ 20,000 cash.
  • 2-Paid $ 400 cash for April office rent.
  • 3-Purchased office equipment for $ 2,500 cash.
  • 4-Incurred $ 300 of advertising costs on account.
  • 5-Paid $ 600 cash for office supplies.
  • 6-Earned $ 9000 for services rendered, Cash of $ 1000 is received from customers, and the balance of $ 8000 is billed to customers on account.
  • 7-Withdrew $ 200 cash for personal use.
  • 8-Paid amount due in transaction (4).
  • 9-Paid employees' salaries, $ 1200.
  • 10-Cash of $ 6000 is received from customers who have previously been billed in transaction (6).
  • Required: Prepare journal entries (Journalize the above transactions).
the ledger
The Ledger
  • A General Ledger contains the entire group of accounts maintained by a company.
  • The General Ledger includes all the asset, liability, owner’s equity, revenue and expense accounts.
1 t account form
(1) T- Account Form
  • Record of increases and decreases in a specific asset, liability, equity, revenue, or expense item.
  • Debit = “Left”
  • Credit = “Right”

Account

An Account can be illustrated in a T-Account form.

1 t account form1
(1) T- Account Form

If Debits are greater than Credits, the account will have a debit balance.

Transaction #1

$10,000

$3,000

Transaction #2

Transaction #3

8,000

Balance

$15,000

1 t account form2
(1) T- Account Form

If Credits are greater than Debits, the account will have a credit balance.

Transaction #1

$10,000

$3,000

Transaction #2

8,000

Transaction #3

Balance

$1,000

chart of accounts
Chart of Accounts

Accounts and account numbers arranged in sequence in which they are presented in the financial statements.

slide25

The Ledger

(2) Standard form (three column form/ Running balance form)This format is called the three-column form of account. It has three money columns—debit, credit, and balance. The balance in the account is determined after each transaction. Companies use the explanation space and reference columns to provide special information about the transaction. It has the following form: :

3 the trial balance
3- The Trial Balance
  • A list of accounts and their balances at a given time.
  • Purpose is to prove that debits equal credits.
slide29

EX. The accounts in the ledger of Sanford Delivery Service contain the following balances on July 31, 2010.

Accounts Receivable $ 7,642 Prepaid Insurance $1,968

Accounts Payable 8,396 Repair Expense 961

Cash ? Service Revenue 10,610

Delivery Equipment 49,360 Sanford, Drawing 700

Gas and Oil Expense 758 Sanford, Capital 44,636

Insurance Expense 523 Salaries Expense 4,428

Notes Payable 18,450 Salaries Payable 815

Instructions

Prepare a trial balance and fill in the missing amount for Cash.

slide30

Solution

SANFORD DELIVERY SERVICE

Trial Balance

July 31, 2010

the trial balance
The Trial Balance

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.