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Chapter 3. The Recording Process. 3-1 Three Parts of an Account. (1) ACCOUNT TITLE. (Left Side) (2) DEBIT. (Right Side) (3) CREDIT. Total Debits > Total Credits = Debit Balance Total Credits > Total Debits = Credit Balance Total Debits = Total Credits = Zero Balance.

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chapter 3

Chapter 3

The Recording Process

3 1 three parts of an account
3-1 Three Parts of an Account

(1) ACCOUNT TITLE

(Left Side)

(2) DEBIT

(Right Side)

(3) CREDIT

Total Debits > Total Credits = Debit Balance

Total Credits > Total Debits = Credit Balance

Total Debits = Total Credits = Zero Balance

3 1 three parts of an account continued
3-1 Three Parts of an Account(continued)

Example:

CASH

9/1 Balance 12,000

9/5 2,000

9/30 Balance 11,000

9/10 2,000

9/20 1,000

(Debit Balance)

ACCOUNTS PAYABLE

9/6 3,000

9/21 2,000

9/1 Balance 6,000

9/17 9,000

9/30 Balance 10,000

(Credit Balance)

3 2 double entry recording rules
3-2 Double Entry Recording Rules

ASSETS

LIABILITIES

Increase Account by DEBIT

Decrease Account by DEBIT

Decrease Account by DEBIT

Increase Account by DEBIT

Normal Balance

Normal Balance

DIVIDENDS

COMMON STOCK

Increase Account by DEBIT

Decrease Account by DEBIT

Decrease Account by DEBIT

Increase Account by DEBIT

Normal Balance

Normal Balance

RETAINED EARNINGS

EXPENSES

Decrease Account by DEBIT

Increase Account by DEBIT

Increase Account by DEBIT

Decrease Account by DEBIT

Normal Balance

Normal Balance

REVENUES

Decrease Account by DEBIT

Increase Account by DEBIT

Normal Balance

3 3 normal account balances
3-3 Normal Account Balances

Review the normal balances of accounts introduced in Chapters One and Two. Review how an increase in the account would be recorded (DR/CR).

Instructions:

(a) For each account, indicate the normal balance (Debit/Credit).

(b) For each account, indicate how an increase in the account is recorded (DR/CR)

3 3 normal account balances continued
3-3 Normal Account Balances(continued)

Answer:

Note: The normal balance is same as increase to the account.

3 4 the recording process
3-4 The Recording Process

ANALYZE

Business Transactions (for effects on specific accounts)

Business Documents

RECORD

Transactions entered in a Journal (book of original entry)

Journalizing

TRANSFER

Journal Information transferred to Ledger Accounts

Posting

3 5 journalizing
3-5 Journalizing

General Journal

3 6 analyzing and journalizing transactions
3-6 Analyzing and Journalizing Transactions

Steps in the Recording Process

Instructions: Analyze and journalize the transactions provided.

3 7 forms of accounts and balances
3-7 Forms of Accounts and Balances
  • Tabular
  • Account (or T-Account)
  • Three-Column

All forms must show increases and decreases to the account in order to determine the account balances (amounts are assumed).

101

Cash

Cash

9/1 Bal. + 12,000

9/5 + 500

9/10 - 2,000

9/20 - 1,500

9/30 Bal. 9,000

9/1 Bal. 12,000

9/5 500

9/10 2,000

9/20 1,500

9/30 Bal. 9,000

Three-Column Account Form

Cash

No. 101

POSTING

3 8 steps in posting
3-8 Steps in Posting

Instructions: Post the first two entries recorded in the General Journal.

General Journal

Jl

Cash

No. 101

Common Stock

No. 340

Rent Expense

No. 560