Accounting principles 9e willey kieso chapter 02

Summary illustration of journalizing and postingJournalLedger Steps in the Recording Process Steps in the Recording Process The Recording Process Illustrated The Recording Process Illust

Chapter 2

The Recording

Process

1 Explain what an account is and how it helps in the

recording process.

recording business transactions.

Summary illustration of journalizing and posting

JournalLedger

Steps in the Recording Process

Steps in the Recording Process

The Recording Process Illustrated

The Recording Process Illustrated

The Trial Balance

The Trial Balance

The Recording Process

The Recording Process

Account Name

Debit / Dr Credit / Cr

Record of increases and decreases

in a specific asset, liability, equity, revenue, or expense item.

Double-entry accounting system

Each transaction must affect two or more accounts to keep the basic accounting equation

in balance.

Recording done by debiting at least one account and crediting another.

DEBITS must equal CREDITS must equal

Debits and Credits

Debits and Credits

Account Name

Debit / Dr Credit / Cr

If Debits are greater than greater than Credits, the account

will have a debit balance.

$10,000 $3,000 Transaction #2

$15,000

8,000 Transaction #3

Balance

Transaction #1

Debits and Credits

Debits and Credits

Account Name

Debit / Dr Credit / Cr

If Credits are greater than greater than Debits, the account

will have a credit balance.

$10,000 $3,000 Transaction #2

Balance

Transaction #1

Debits and Credits

Debits and Credits

$1,000

8,000 Transaction #3

Debit / Dr Credit / Cr

Normal Balance

Chapter 3-25

Credit

Normal Balance

Credit

Normal Balance

Debit

Normal Balance

Debit Debits and Credits Summary

Debits and Credits Summary

Balance Sheet Income Statement

Debit

Credit

Debits and Credits Summary

Debits and Credits Summary

a increase both assets and liabilities.

b decrease both assets and liabilities.

c increase assets and decrease liabilities.

d decrease assets and increase liabilities.

Review Question

Debits and Credits Summary

Debits and Credits Summary

Discussion Question

Q2-4: Maria Alvarez, a beginning accounting

student, believes debit balances are favorable

and credit balances are unfavorable Is Maria

correct? Discuss.

See notes page for discussion

Debits and Credits Summary

Debits and Credits Summary

Assets - Debits should exceed credits.

Liabilities – Credits should exceed debits

The normal balance is on the increase side.

Assets and Liabilities

Assets and Liabilities

Owner’s investments and

revenues increase owner’s equity (credit)

Owner’s drawings and expenses

decrease owner’s equity (debit).

The purpose of earning

revenues is to benefit the owner(s).

The effect of debits and credits on revenue accounts

is the same as their effect

on Owner’s Capital.

Expenses have the opposite effect: expenses decrease owner’s equity.

Revenue and Expense

Revenue and Expense

Accounts that normally have debit balances are:

a assets, expenses, and revenues.

b assets, expenses, and owner’s capital.

c assets, liabilities, and owner’s drawings.

d assets, owner’s drawings, and expenses.

Review Question

Debits and Credits Summary

Debits and Credits Summary

Expansion of the Basic Equation

Expansion of the Basic Equation

Relationship among the assets, liabilities and

owner’s equity of a business:

The equation must be in balance after every

transaction For every

transaction For every Debit Debit there must be a Credit there must be a Credit .

Assets = Liabilities Owner’s Equity

Business documents , such as a sales slip, a check, a

bill, or a cash register tape, provide evidence of the

transaction.

Steps in the Recording Process

Steps in the Recording Process

Analyze each transaction Enter transaction in a journal Transfer journal information to ledger accounts

Illustration 2-12

Book of original entry.

Transactions recorded in chronological order.

Contributions to the recording process:

1 Discloses the complete effects of a transaction.

2 Provides a chronological record of transactions.

3 Helps to prevent or locate errors because the debit and credit amounts can be easily compared.

The Journal

The Journal

Journalizing - Entering transaction data in the journal.

Journalizing

Journalizing

Illustration: On September 1, Ray Neal invested $15,000

cash in the business, and Softbyte purchased computer

equipment for $7,000 cash.

Simple and Compound Entries

Journalizing

Journalizing

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.

Illustration 2-14

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

The Ledger

The Ledger

Illustration 2-15

T-account form used in accounting textbooks.

In practice, the account forms used in ledgers are

much more structured.

Standard Form of Account

Standard Form of Account

Illustration 2-16

a normally occurs before journalizing.

b transfers ledger transaction data to the

journal.

c is an optional step in the recording process.

d transfers journal entries to ledger accounts.

Review Question

Posting

Posting

Accounts and account numbers arranged in sequence in

which they are presented in the financial statements.

Chart of Accounts

Chart of Accounts

Illustration 2-18

The Recording Process Illustrated

The Recording Process Illustrated

Follow these steps:

The Recording Process Illustrated

The Recording Process Illustrated

Illustration 2-20

The Recording Process Illustrated

The Recording Process Illustrated

Illustration 2-21

The Recording Process Illustrated

The Recording Process Illustrated

Illustration 2-22

The Recording Process Illustrated

The Recording Process Illustrated

Illustration 2-23

The Recording Process Illustrated

The Recording Process Illustrated

Illustration 2-24

The Recording Process Illustrated

The Recording Process Illustrated

Illustration 2-25

The Recording Process Illustrated

The Recording Process Illustrated

Illustration 2-26

The Recording Process Illustrated

The Recording Process Illustrated

Illustration 2-27

The Recording Process Illustrated

The Recording Process Illustrated

Illustration 2-28

The Trial Balance

The Trial Balance

Illustration 2-31

The trial balance may balance even when

posting, or

of a transaction.

The Trial Balance

The Trial Balance

Limitations of a Trial Balance

A trial balance will not balance if:

Supplies and credited to Cash.

Owner’s Drawing for $1,000 and credited to Cash for $100

Payable for $45 and credited to Cash for $45.

Review Question

The Trial Balance

The Trial Balance

Q2-19 Jim Benes is confused about how accounting

information flows through the accounting system He believes

the flow of information is as follows.

a Debits and credits posted to the ledger.

b Business transaction occurs

c Information entered in the journal.

d Financial statements are prepared.

e Trial balance is prepared.

Is Jim correct? If not, indicate to Jim the proper flow of the

information.

Recording Process

Recording Process

Discussion Question

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