Chapter 3

THE ACCOUNTING
INFORMATION
SYSTEM
Continued
1

Chapter 3

The Accounting Information System

Identify the basic steps in the recording

process.
Explain what a journal is and how it helps in the
recording process.
Explain what a ledger is and how it helps in the
recording process.
Explain what posting is and how it helps in the
recording process.
Explain the purposes of a trial balance.
2

4
11

Basic Steps in the

Recording Process.
1.Analyze
2.Journalize
3.Post

11

Recording Process Step

1

Analyze each
transaction and effect
on accounts
4

The Journal...
is an accounting record where the
transactions are recorded in
chronological order.

Recording Process Step 2

Enter transaction information in a

journal, a process called
journalizing

Recording Process Step

3

Transfer (post) the journal

information to the appropriate
accounts in the ledger

GENERAL JOURNAL
Date

Account Titles and Explanations

Debit Credit

2007
Oct. 1 Cash
10,000
10,000
1 Cash

Common Stock
(Invested cash in business)
5,000

Notes Payable
5,000
(Issued 3-month, 12% note payable for cash)
2 Office Equipment
5,000
Cash
5,000
(Purchased office equipment for cash)

Lets Review Using Sierras

Accounts affected?
Oct
. 1 - Owner
Transactions
Type of Account?
invested
$10,000 Cash in
Increase or
business
Decrease?
in exchange for
Debit or credit?
$10,000
Common Stock
Cash
of Common Stock
10,000

10,000

What is the normal balance for the accounts?

52

Oct. 1 Sierra issued a 3-month,

12%, $5,000 Note Payable to Castle
Bank.
Accounts
Cashaffected? Note Payable
Type of Account?
5,000 or Decrease?
5,000
Increase
Debit or credit?

52

10

Oct. 1 Sierra issued a 3-month,

12%, $5,000 Note Payable to Castle
Bank.
Cash
Note Payable
5,000

5,000

52

11

Oct. 2 Sierra acquired office

equipment by paying $5,000 cash to
Superior Sales Co.
Accounts
Office Equipment
affected?
Cash
Type of Account?
5,000 or Decrease?
10,000 5,000
Increase
5,000
Debit or credit?

52

12

Oct. 2 Sierra acquired office

equipment by paying $5,000 cash to
Superior Sales Co.
Office Equipment
Cash
5,000

10,000 5,000
5,000

52

13

6
11

The General Ledger

6

the entire group of accounts

maintained by a company
contains all the asset, liability,
and stockholders equity accounts

14

Chart of Accounts...
is a list of a companys accounts.

15

The General Ledger

16

The General Ledger

17

The Ledger
The entries from the journal
are posted to the
ledger,usually in summary
form, except for the general
journal.
18

7
11

Posting
Transferring information
from the journals to the
general ledger accounts

19

Posting Entries
GENERAL JOURNAL
Account Titles and Explanations
2007
Oct. 1 Cash
10,000

Common Stock
10,000

Account CASH
Date

ref

debit

Account COMMON STOCK

Date
ref
debit

credit

Acct 1010
Balance
debit
credit

credit

Acct 3010
Balance
debit
credit

Posting Entries
GENERAL JOURNAL
Account Titles and Explanations
2007
Oct. 1 Cash
10,000

Common Stock
10,000

Account CASH
Date
Oct 1

ref
gj 1

debit credit
10,000

Account COMMON STOCK

Date
ref
debit
Oct 1
gj 1

Acct 1010
Balance
debit
credit
10,000

Acct 3010
Balance
credit debit
credit
10,000
10,000

Posting Entries
GENERAL JOURNAL
Account Titles and Explanations
2007
Oct. 1 Cash
10,000

Common Stock
10,000

Account CASH
Date
Oct 1

ref
gj 1

debit credit
10,000

Account COMMON STOCK

Date
ref
debit
Oct 1
gj 1

Acct 1010
Balance
debit
credit
10,000

Acct 3010
Balance
credit debit
credit
10,000
10,000

8
11

Trial Balance
A list of all the accounts and their
balances at a given time.

It serves to prove the

mathematical
equality of debits and
credits after posting.
It aids in the
preparation of financial
statements.

23

Sierra Corporation
Trial Balance
October 31, 2007
Cash
Advertising Supplies
Prepaid Insurance
Office Equipment
Notes Payable
Accounts Payable
Unearned Service Revenue
Common Stock
Dividends
Service Revenue
Salaries Expense
Rent Expense

Debit
Credit
$15,200
2,500
600
5,000
$ 5,000
2,500
1,200
10,000
500
10,000
4,000
900
$28,700 $28,700