Topic 3 recording transactions part 2 PDF

Explain how transactions are recorded in the accounting process.. Define debits and credits and explain how they are used to record accounting transactions.. Explain what a journal is

PART 1 - DOUBLE ENTRY ACCOUNTING

TOPIC 3

RECORDING

TRANSACTIONS 2

1 Identify the basic steps in the recording process.

2 Explain how transactions are recorded in the accounting

process.

3 Define debits and credits and explain how they are used to

record accounting transactions.

4 Explain what a journal is and how it helps in the recording

process.

5 Explain what ledger accounts are and how they help in the

recording process.

TOPIC3

PART 1 LEARNING

OBJECTIVES

|

We need a system to gather data systematically and support timely

reporting The system should be:

 Efficient

 Accessible

 Provide a level of control

THE DOUBLE ENTRY SYSTEM OF ACCOUNTING!!!!!

IDENTIFICATION

• Observing economic events to determine which need to be recorded as transactions

MEASUREMENT

• Quantifying the transactions in monetary terms e.g the dollar

RECORDING

• Classification into categories & summarizing the transactions

COMMUNICATION

• Preparing the financial reports from the accounts for analysis & interpretation

|

Service Revenue 8,500 Expenses

Advertising 500 Electricity 400 Printing & Stationery 600 Rent 1,100 Wages & Salaries 1,200

Kelly Cook eTravel Pty Ltd Statement of Financial Position

as at 31 May 2017

Cash 20,900 Accounts Payable 200

Accounts Receivable 2,000

Property, Plant & Equipment

10,000

Retained Earnings 2,700

Total Equity 32,700

Total Assets 32,900 Total Liabilties &

Kelly Cook eTravel Pty Ltd Statement of Changes in Equity for the month of May 2017

Equity as at 1 May 2017 0

Share Capital invested 30,000

Add Profit for month 4,700

Less Dividends -2,000

Retained Earnings as at 31 May 2017 2,700

Total Equity 31 May 2017 32,700

Kelly Cook eTravel Pty Ltd Statement of Cash Flows for the month of May 2017 Cash flows from operating activities:

Receipts from customers 6,500 Payments to suppliers -2,400 Payments to employees -1,200

Net cashflow from operating activites 2,900 Cash flows from investing activities:

Purchase of Property, Plant & Equipment -10,000

Net cashflow from investing activites -10,000 Cash Flows from financing activities:

Issue of shares 30,000 Dividends -2,000

Net cashflow from financing activites 28,000

Cash at beginning of period 1 May 2017 0 Cash at end of period 31 May 2017 20,900

Journalising

Posting

Accuracy Check

THE ACCOUNTING PROCESS

|

DEBIT AND CREDIT

RULES

All assets accounts = All liability accounts + All equity accounts

Debit to decrease

Credit to increase

Normal balance

Debit to

increase

Credit to decrease

Normal

balance

Debit to decrease

Credit to increase

Normal balance

Debit to increase

Credit to decrease

Normal balance

Debit to decrease

Credit to increase

Normal balance

Expense accounts

Dr Cr

Income accounts

Dr Cr

|

DOUBLE ENTRY

ACCOUNTING –

DEBITS & CREDITS

PART 2 - DOUBLE ENTRY ACCOUNTING

TOPIC 3

RECORDING

TRANSACTIONS 2

On completion of this topic, you should be able to:

1 Record journal entries.

2 Explain what posting is and how it helps in the recording

process.

3 Post journal entries to the general ledger.

4 Explain the purposes of a trial balance.

5 Identify how the financial statements are linked to the trial

balance.

TOPIC3

PART 2 LEARNING

OBJECTIVES

|

THE ACCOUNTING CYCLE

Date Transaction

01-May-2017 Kelly Cook invests $30,000 to begin Kelly Cook’s eTravel P/L.

02-May-2017 Kelly Cook eTravel P/L purchases Office Furniture & Equipment paying $10,000 in cash.

15-May-2017 Kelly Cook eTravel P/L provides services and collects $5,500 in Revenue.

20-May-2017 Kelly Cook eTravel P/L provides services, and the client agrees to pay $3,000 within one month.

21-May-2017 Kelly Cook eTravel P/L pays cash expenses of $600 for Printing & Stationery.

21-May-2017 Kelly Cook eTravel P/L pays cash expenses of $1,100 for Rent.

21-May-2017 Kelly Cook eTravel P/L pays cash expenses of 1,200 for Salaries & Wages.

21-May-2017 Kelly Cook eTravel P/L pays cash expenses of $400 for Electricity.

25-May-2017 Kelly Cook eTravel P/L purchases some online Advertising, agreeing to pay $500 in 30 days.

26-May-2017 Kelly Cook renovated her bathroom at her personal residence.

30-May-2017 Kelly Cook eTravel P/L collected $1,000 from the client of 20th May.

31-May-2017 Kelly Cook eTravel P/L pays $300 to the supplier from which she purchased $500 worth of Advertising.

31-May-2017 Kelly Cook eTravel P/L pays $2,000 cash Dividends to Kelly Cook.

Transactions for the month of May 2017 Kelly Cook eTravel Pty Ltd

Chart of Accounts

Date Particulars Post Ref DEBIT CREDIT

GENERAL JOURNAL

2/5/17

15/5/17

30/5/17

31/5/17

25/5/17

20/5/17

21/5/17

Property, Plant & Equip

Cash at Bank

Accounts Receivable

Printing & Stationary Expense

Electricity Expense

Rent Expense

Salary & Wages Expense

Cash at Bank

31/5/17

Advertising Expense

Accounts Payable

Dividends

Share Capital

Cash at Bank

Service Revenue

Cash at Bank

Cash at Bank

Cash at Bank

Cash at Bank

Accounts Payable

Accounts Receivable

Cash at Bank

Cash at Bank

Service Revenue

(Owner’s initial capital investment)

(Cash Revenue)

(Credit Sale)

(Pay monthly expenses with cash)

(Pay advertising on account)

(Cash from credit customer)

(Pay part of advertising expense)

(Dividends Paid)

(Purchase of Office Equipment)

100 300

100 540 100 590 100 580 100 570

150 100

100 400

110 400

100

500 200

110

200 100

320 100

30,000

30,000

10,000

5,500

3,000

600 1,100 1,200 400

500

1,000

300

2,000

10,000

5,500

3,000

600 1,100 1,200 400

500

1,000

300

2,000

55,600 55,600

Cash at Bank

1/5/17

DEBIT CREDIT DEBIT CREDIT

GENERAL LEDGER T-ACCOUNTS

Cash @ Bank #100 Accts Pay #200

Revenue #400

Advertising #500 PPE #150

Electricity #540 Accum Dep PPE #175

Depreciation #530

P & L Summary #600 Print & Stationery #570

Rent #580

Retained Earnings #310

Salaries & Wages # 590

Unearned Revenue #210

Salaries payable #220

Capital #300

Accts Rec #110

Prepaid Rent #120

Dividends #320

1/5/17

2/5/17

21/5/17 21/5/17 21/5/17

30,000

10,000 5,500 600

1,100 1,200 400 31/5/17 31/5/17

300 2,000 30/5/17 1,000

36,500 15,600

3,000

20,900

20/5/17

2/5/17

31/5/17

15/5/17 25/5/17

10,000

500 400

1,000

3,000 5,500

Bal

200

300 500

30,000 1/5/17 2,000

31/5/17

2,000

20/5/17

8,500

25/5/17

21/5/17 21/5/17

1,200

600 21/5/17 1,100

21/5/17 30/5/17

|

PRINCIPLE

PALER

+ C D C D C

- D C D C D

Account DEBIT CREDIT

As at 31 May 2017 TRAIL BALANCE Kelly Cook e-Travel Pty Ltd

20,900 2,000

200 30,000 2,000

8,500 500

400 600 1,100 1,200

38,700 38,700

10,000

|

DOUBLE ENTRY

ACCOUNTING – Trial Balance

Kelly Cook eTravel Pty Ltd Statement of Profit or Loss for the month of May 2017 Revenue

Service Revenue

Expenses

Advertising Electricity Printing & Stationery Rent

Wages & Salaries

Total Expenses

Profit

Kelly Cook eTravel Pty Ltd Statement of Financial Position

as at 31 May 2017 Current Assets Liabilites

Accounts Receivable

Equity Non-current Assets Capital Property, Plant &

Total Equity

Total Assets Total Liabilties &

Equity Kelly Cook eTravel Pty Ltd Statement of Changes in Equity for the month of May 2017

Equity as at 1 May 2017

Share Capital invested Add Profit for month Less Dividends

Retained Earnings as at 31 May 2017

Total Equity 31 May 2017

8,500

500 400 600 1,100 1,200

3,800

4,700

20,900

2,000

22,900 10,000

200

30,000 2,700

32,700

32,900 32,900

0

2,700 32,700

4,700

30,000

2,000

✔️

✔️