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HFT 2401. Chapter 2 Accounting for Business Transactions. Basics of Double Entry Accounting. T- Accounts Debits and Credits Posting Trial Balance. Business Events of an Economic Nature are Identified These economic events are reflected in accounts. Account.

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hft 2401

HFT 2401

Chapter 2

Accounting for Business Transactions

basics of double entry accounting
Basics of Double Entry Accounting
  • T- Accounts
  • Debits and Credits
  • Posting
  • Trial Balance
slide3
Business Events of an Economic Nature are IdentifiedThese economic events are reflected in accounts
account
Account
  • The basic storage unit for accounting data
  • Accounts must be established for each separate classification
    • Cash
    • Revenue
    • Expenses
    • Assets
    • Liabilities
    • Equity
t account
T- Account
  • Has three basic parts
    • Title
    • Left Side
    • Right Side
    • Increases are recorded on one side of an account, while decreases are recorded on the opposite
    • Which side depends on what type of account it is
sample t account
Debits – Left Side

Increase or Decrease

Credits – Right Side

Increase or Decrease

Sample T- Account
types of accounts
Types of Accounts
  • Asset Accounts – Normal Balance = Debit
  • Liability Accounts – Normal Balance = Credit
  • Equity Accounts
    • Permanent Equity – Normal Balance – Credit
    • Temporary Owners Equity
      • Revenue – Normal Balance = Credit
      • Expense – Normal Balance = Debit
asset accounts
Asset Accounts
  • Cash
  • Receivables
  • Inventories
  • Prepaid Expenses
  • Investments
  • Property, Plant & Equipment (Fixed Assets)
liabilities
Liabilities
  • Payables
  • Accrued Expenses
  • Unearned Income
  • Mortgage Payable
equity
Equity
  • Capital Account – Permanent Equity
  • Temporary Owners Equity – Revenues & expenses
    • Retained Earnings
revenue
Revenue
  • Room Sales
  • Food Sales
  • Beverage Sales
  • Gift Shop Sales
  • Greens Fees
  • Pro Shop Sales
  • Banquet Sales
  • Interest Income
  • Dividend Income
expenses
Expenses
  • Beverage Expense
  • Food Expense
  • Wages Expense
  • Payroll Taxes
  • Office Supplies Expense
  • Electricity
  • Fuel
  • Insurance
  • Property Taxes
  • Advertising
debits and credits
Debits and Credits
  • Debit – the left side of any account (dr)
  • Credit – the right side of any account (cr)
  • The difference between debits and credits is called the account balance
  • An account may have either a debit or a credit balance
double entry accounting
Double Entry Accounting
  • Uses T-Accounts
  • Basic Rules
    • Asset accounts-increased by debits and decreased by credits
    • Liability accounts are increased by credits and decreased by debits
    • Permanent Equity – Increased by credits and decreased by debits
    • Revenue – Increased by credits and decreased by debits
    • Expenses – Increased by debits and decreased by credits
normal balances of accounts
Normal Balances of Accounts
  • Asset Debit
  • Liability Credit
  • Owners Equity
    • Capital Credit
    • Revenue Credit
    • Expense Debit
    • Draw Debit
ledger general ledger
Ledger / General Ledger
  • Ledger-A group of accounts
  • General Ledger – A group of general accounts including accounts for assets, liabilities, owners equity, revenues, expenses and owner draw
  • Chart of accounts – a complete listing of all accounts
    • Samples
      • Assets 100-199
      • Liabilities 200-299
      • Equity 300-399
      • Revenue 400-499
      • Expenses 500-599
journals journalizing
Journals & Journalizing
  • Where daily transactions are recorded
    • Income journal
    • Payables journal
    • Expense journal
    • Payroll journal
journals
Journals
  • Includes
    • Date of transaction
    • Titles of accounts used
    • Account number
    • Explanation
    • Page number / posting reference number
    • Debit and credit amounts
posting
Posting
  • Transferring amounts from the individual journals to the general journal
  • Can be done daily, but must be done at least once every accounting cycle
trial balance
Trial Balance
  • A listing of all accounts and their respective debit and credit balances
  • Sum of all debits must equal sum of all credits
preparing the trial balance
Preparing the Trial Balance
  • Determine the balance of each account in the ledger
  • List the accounts and show balances – debits in the left column and credits in the right column
  • Add the debits
  • Add the credit
  • Total must balance
homework assignment
Homework Assignment
  • Problem 1
  • Problem 4
  • Problem 5
  • Problem 7
  • Problem 8
  • Problem 9