Ch02_Wey_Fin_6e

Ch02_Wey_Fin_6e - Chapter 2 Chapter The Recording Process...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Chapter 2 Chapter The Recording Process Financial Accounting, Sixth Edition Chapter 2 -1 The Account Account Re of incre s and de ase in a spe cord ase cre s cific asse liability, e t, quity, re nue or e nseite . ve , xpe m De = “Le bit ft” C dit = “Right” re An Account can An be illustrated in a T-Account form. T-Account Chapter 2 -2 Account Name Debit / Dr. Credit / Cr. SO 1 Explain what an account is and how it helps in the recording process. Debits and Credits Double-entry accounting syste m Double-entry Each transaction m affe two or m accounts to ke p the ust ct ore e basic accounting e quation in balance . Re cording doneby de biting at le oneaccount and cre ast diting anothe r. DEBITS must equal CREDITS. must Chapter 2 -3 SO 2 Define debits and credits and explain their use SO in recording business transactions. in Debits and Credits If Debits are greater than Credits, the account will greater have a debit balance. Account Name Debit / Dr. Transaction #1 $10,000 Transaction #3 Credit / Cr. 8,000 Balance Chapter 2 -4 $3,000 Transaction #2 $15,000 SO 2 Define debits and credits and explain their use SO in recording business transactions. in Debits and Credits If Credits are greater than Debits, the account will greater have a credit balance. Account Name Debit / Dr. Transaction #1 Chapter 2 -5 $3,000 Transaction #2 8,000 Balance $10,000 Credit / Cr. Transaction #3 $1,000 SO 2 Define debits and credits and explain their use SO in recording business transactions. in Debits and Credits Summary Liabilit ies Norm al Balance Debit Norm al Balance Credit Asset s Credit / Cr. Normal Balance Normal Chapter 3-24 St ockholders’ Equit y Credit / Cr. Debit / Dr. Debit / Dr. Debit / Dr. Credit / Cr. Normal Balance Normal Normal Balance Normal Chapter 3-23 Expense Debit / Dr. Chapter 3-25 Revenue Credit / Cr. Debit / Dr. Normal Balance Normal Chapter 3-27 Chapter 2 -6 Credit / Cr. Normal Balance Normal Chapter 3-26 SO 2 SO Debits and Credits Summary Balance Sheet Asset = Liability + Equity Income Statement Income Revenu - Expens = e e Debit Credit Chapter 2 -7 SO 2 Define debits and credits and explain their use SO in recording business transactions. in Assets and Liabilities Asset s Debit / Dr. Credit / Cr. Assets - De should e e bits xce d cre dits. Normal Balance Normal Liabilities – Cre should dits e e de xce d bits. Chapter 3-23 Liabilit ies Debit / Dr. Credit / Cr. Thenormal balance is on t heincre side ase . Normal Balance Normal Chapter 3-24 Chapter 2 -8 SO 2 Define debits and credits and explain their use SO in recording business transactions. in Stockholders’ Equity Owner’s investments and revenues incre stockholde e ase r’s quity (cre dit). St ockholders’ Equit y Debit / Dr. Credit / Cr. Normal Balance Normal Dividends and expenses de ase cre stockholde e r’s quity (de bit). Chapter 3-25 Common St ock Debit / Dr. Ret ained Earnings Credit / Cr. Chapter 2 -9 Chapter 3-25 Credit / Cr. Debit / Dr. Normal Balance Normal Debit / Dr. Normal Balance Normal Chapter 3-25 Dividends Credit / Cr. Normal Balance Normal Chapter 3-23 SO 2 Define debits and credits and explain their use SO in recording business transactions. in Revenue and Expense Revenue Debit / Dr. Credit / Cr. The purpose of earning revenues is to benefit the stockholders. Normal Balance Normal Chapter 3-26 Expense Debit / Dr. Normal Balance Normal Chapter 3-27 Chapter 2-10 Credit / Cr. The effect of debits and credits on revenue accounts is the same as their effect on stockholders’ equity. Expenses have the opposite effect: expenses decrease stockholders’ equity. SO 2 Define debits and credits and explain their use SO in recording business transactions. in Stockholders’ Equity Relationships Illustration 2-11 Chapter 2-11 SO 2 Define debits and credits and explain their use SO in recording business transactions. in Expansion of the Basic Equation Re lationship am theasse liabilitie and stockholde e ong ts, s rs quity of Re a busine ss: I llustration 2-12 Basic Equation Assets = Liabilities + Stockholders’ Equity Expanded Basic Equation Thee quation m bein balanceafte e ry transaction. For e ry ust r ve ve Debit t he m bea Credit. Debit re ust Credit Chapter 2-12 SO 2 Define debits and credits and explain their use SO in recording business transactions. in Steps in the Recording Process Illustration 2-13 Analyze each transaction Enter transaction in a journal Transfer journal information to ledger accounts Business documents, such as a sales slip, a check, a bill, or a cash register tape, provide evidence of the transaction. Chapter 2-13 SO 3 Identify the basic steps in the recording process. The Journal Book of original e ntry. Transactions re corde in chronological orde d r. C ontributions to there cording proce ss: 1. Disclose thecom tee cts of a transaction. s ple ffe 2. Provide a chronological re s cord of transactions. 3. He to pre nt or locatee lps ve rrors be causethede and cre bit dit am ounts can bee asily com d. pare Chapter 2-14 SO 4 Explain what a journal is and how it helps in the recording process. Journalizing Journalizing - Entering transaction data in the journal. E2-4 (Facts) Pre nte be is inform se d low ation re d to Hanshe Re Estate late w al Age ncy. Oct. 1 Pe Hanshe be busine as a re e te w gins ss al stateage with a cash inve e nt stm nt of $15,000. 3 Purchase officefurniturefor $1,900, on account. s 6 S lls a houseand lot for B. Kidm bills B. Kidm $3,200 for re e an; an alty se s provide rvice d. 27 Pays $700 on balancere d to transaction of Oct. 3. late 30 Pays theadm inistrativeassistant $2,500 salary for Oct. E2-5 Instructions - Journalizethetransactions for E2-4. Chapter 2-15 SO 4 Explain what a journal is and how it helps in the recording process. Journalizing E2-4 (Facts) Presented below is information related to Hanshew Real Estate Agency. Oct. 1 Pete Hanshew begins business as a real estate agent with a cash investment of $15,000. Ge ral Journal ne Date Account Tit le Oct. 1 C ash C m stock om on R. ef Debit C redit 15,000 15,000 (Owners investm ent) Chapter 2-16 SO 4 Explain what a journal is and how it helps in the recording process. Journalizing E2-4 (Facts) Presented below is information related to Hanshew Real Estate Agency. Oct. 3 Purchases office furniture for $1,900, on account. Ge ral Journal ne Dat e Oct . Account Tit le 3 Of f ice f ur nit ur e A ccount s payable Ref . Debit Credit 1,900 1,900 (Pur chase f ur nit ur e) Chapter 2-17 SO 4 Explain what a journal is and how it helps in the recording process. Journalizing E2-4 (Facts) Presented below is information related to Hanshew Real Estate Agency. Oct. 6 Sells a house and lot for B. Kidman; bills B. Kidman $3,200 for realty services provided. Ge ral Journal ne Dat e Oct . Account Tit le 6 Ref . Account s r eceivable S er vice r evenue Debit Credit 3,200 3,200 (Realt y ser vices pr ovided) Chapter 2-18 SO 4 Explain what a journal is and how it helps in the recording process. Journalizing E2-4 (Facts) Presented below is information related to Hanshew Real Estate Agency. Oct. 27 Pays $700 on balance related to transaction of Oct. 3. Ge ral Journal ne Dat e Account Tit le Oct . 27 Account s payable Cash Ref . Debit Credit 700 700 (Payment on account ) Chapter 2-19 SO 4 Explain what a journal is and how it helps in the recording process. Journalizing E2-4 (Facts) Presented below is information related to Hanshew Real Estate Agency. Oct. 30 Pays the administrative assistant $2,500 salary for Oct. Ge ral Journal ne Dat e Account Tit le Oct . 30 Salar y expense Cash Ref . Debit Credit 2,500 2,500 (Payment f or salar ies) Chapter 2-20 SO 4 Explain what a journal is and how it helps in the recording process. Journalizing Simple Entry – Two accounts, one debit and one credit. Compound Entry – Three or more accounts. Example – On June15, H. Burns, purchase e d quipm nt for $15,000 by e paying cash of $10,000 and thebalanceon account (to bepaid within 30 days). Ge ral Journal ne Dat e J une 15 Account T it le Equipment Cash A ccount s payable Ref . Debit Credit 15,000 10,000 5,000 (Pur chased equipment ) Chapter 2-21 SO 4 Explain what a journal is and how it helps in the recording process. SO The Ledger Ledger contains thee ntiregroup of accounts m aintaine by a d com pany. A general ledger contains all theasse liability, t, stockholde e r’s quity, re nue and e nseaccounts. ve , xpe Chart of Accounts Chapter 2-22 SO 5 Explain what a ledger is and how it helps in the recording process. Chart of Accounts Accounts arranged in sequence in which they are presented in the financial statements. Hanshew Real Estate Agency Chart of Accounts Assets 101 112 126 130 Cash Accounts receivable Supplies Prepaid insurance 150 158 Office furniture Accumulated depreciation Stockholders' Equity 300 306 350 Revenues 400 Liabilities 200 201 209 212 230 Chapter 2-23 Accounts payable Notes payable Unearned revenue Salaries payable Interest payable Common stock Retained earnings Dividends Service revenue Expenses 631 711 722 726 729 905 Supplies expense Depreciation expense Insurance expense Salaries expense Rent expense Interest expense SO 6 Explain what posting is and how it helps in the recording process. Standard Form of Account T-account form used in accounting textbooks. In practice, the account forms used in ledgers are much more structured. Cash Date Oct. Chapter 2-24 Explanation 1 27 30 Ref. No. 101 Debit Credit 15,000 700 2,500 Balance 15,000 14,300 11,800 SO 5 Explain what a ledger is and how it helps in the recording process. Posting Posting – t heproce of transfe ss rring am ounts fromthejournal to the Posting le r accounts. dge General Journal Dat e Oct. Account Tit le Debit 101 Cash Ref . 15,000 Common stock 15,000 General Ledger Cash Dat e Oct. 1 Chapter 2-25 Explanat ion Owner investment J1 Credit Ref . Debit J1 15,000 Acct . N o. 101 Credit Balance 15,000 SO 6 Explain what posting is and how it helps in the recording process. The Recording Process Illustrated Illustration 2-20 Follow the ste se ps: 1. De rm what type te ine of account is involve d. 2. De rm what ite s te ine m incre d or de ase ase cre d and by how m uch. 3. Translatethe incre s and ase de ase into de cre s bits and cre dits. Chapter 2-26 SO 6 Explain what posting is and how it helps in the recording process. The Trial Balance A list of accounts and their balances at a given time. Purpose is to prove that debits equal credits. Chapter 2-27 Hanshew Real Estate Agency Trial Balance October 31, 2008 Cash Accounts receivable Office furniture Accounts payable Common stock Service revenue Salaries expense Debit $ 11,800 3,200 1,900 Credit $ 2,500 $ 19,400 1,200 15,000 3,200 $ 19,400 SO 7 Prepare a trial balance and explain its purposes. ...
View Full Document

Ask a homework question - tutors are online