Documenti di Didattica
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Principles
Prepared by:
Carole Bowman, Sheridan College
CHAPTER
2
THE RECORDING PROCESS
THE ACCOUNT
DR
CR
ILLUSTRATION 2-1
Title of Account
Left or debit side
Debit balance
Credit balance
ILLUSTRATION 2-2
Account Form
Cash
$15,000
- 7,000
1,200
1,500
- 600
- 900
- 200
- 250
600
- 1,300
Cash
$8,050
Debit
15,000
1,200
1,500
600
8,050
Balance
Credit
7,000
600
900
200
250
1,300
DEBITING AN ACCOUNT
Cash
15,000
Example:
Example: The
The owner
ownermakes
makes an
an initial
initial investment
investment of
of
$15,000
$15,000 to
to start
start the
the business.
business. Cash
Cash isis debited
debited
and
and the
the owners
ownersCapital
Capital account
account isiscredited.
credited.
CREDITING AN ACCOUNT
Cash
7,000
Example:
Example: Monthly
Monthly rent
rent of
of $7,000
$7,000 isis paid.
paid. Cash
Cash isis
credited
credited and
and Rent
Rent Expense
Expense isis debited.
debited.
Cash
15,000
8,000
7,000
Example:
Example: Cash
Cash isis debited
debited for
for$15,000
$15,000 and
and credited
credited for
for
$7,000,
$7,000, leaving
leaving aa debit
debit balance
balance of
of $8,000.
$8,000.
DOUBLE-ENTRY SYSTEM
In
Assets
Liabilities
Equity
NORMAL BALANCE
Every
ILLUSTRATION 2-3
NORMAL BALANCES ASSETS AND LIABILITIES
Assets
Increase
Normal
Decrease
Balance
Liabilities
Decrease Increase
Debit
Credit
Normal
Balance
ILLUSTRATION 2-4
NORMAL BALANCE OWNERS CAPITAL
Owners Capital
Decrease
Increase
Debit
Credit
Normal
Balance
ILLUSTRATION 2-5
NORMAL BALANCE OWNERS DRAWINGS
Owners Drawings
Increase
Normal
Balance
Credit
Decrease
Debit
ILLUSTRATION 2-6
NORMAL BALANCES
REVENUES AND EXPENSES
Revenues
Decrease Increase
Normal
Balance
Expenses
Increase Decrease
Debit
Credit
Normal
Balance
ILLUSTRATION 2-7
Assets
Dr.
+
Cr.
-
= Liabilities
Liabilities
Dr.
-
Owners Equity
Cr.
+
Owners
Capital
Dr.
-
Cr.
+
Revenues
Dr.
-
Cr.
+
Owners
Drawings
Dr.
+
Cr.
-
Expenses
Dr.
+
Cr.
-
ILLUSTRATION 2-9
LEDGER
THE JOURNAL
Transactions
THE JOURNAL
The journal makes several significant contributions to the
recording process:
1. It discloses, in one place, the complete effect of a
transaction.
2. It provides a chronological record of transactions.
3. It helps to prevent or locate errors because the debit and
credit amounts for each entry can be readily compared.
JOURNALIZING
Entering
ILLUSTRATION 2-10
TECHNIQUE OF JOURNALIZING
The
The date
date of
of the
the transaction
transaction isis entered
entered in
in the
the date
date column.
column.
J1
GENERAL JOURNAL
Date
2002
Sept. 1
Ref.
Debit
Credit
15,000
15,000
7,000
7,000
ILLUSTRATION 2-10
TECHNIQUE OF JOURNALIZING
The
The debit
debit account
account title
title isis entered
entered at
at the
the extreme
extreme left
left
margin
margin of
of the
theAccount
AccountTitles
Titles and
and Explanation
Explanation column.
column.
The
The credit
credit account
account title
titleisis indented
indentedon
on the
thenext
next line
line..
J1
GENERAL JOURNAL
Date
2002
Sept. 1
Ref.
Debit
Credit
15,000
15,000
7,000
7,000
ILLUSTRATION 2-10
TECHNIQUE OF JOURNALIZING
The
Theamounts
amountsfor
forthe
thedebits
debitsare
arerecorded
recordedin
inthe
theDebit
Debitcolumn
columnand
and
the
theamounts
amountsfor
forthe
thecredits
creditsare
arerecorded
recordedin
inthe
theCredit
Creditcolumn.
column.
J1
GENERAL JOURNAL
Date
2002
Sept. 1
Ref.
Debit
Credit
15,000
15,000
7,000
7,000
ILLUSTRATION 2-10
TECHNIQUE OF JOURNALIZING
A
Abrief
brief explanation
explanation of
of the
the transaction
transaction isis given.
given.
J1
GENERAL JOURNAL
Date
2002
Sept. 1
Ref.
Debit
Credit
15,000
15,000
7,000
7,000
ILLUSTRATION 2-10
TECHNIQUE OF JOURNALIZING
A
Aspace
space isis left
left between
between journal
journal entries.
entries. The
The
blank
blankspace
space separates
separates individual
individual journal
journal entries
entries
and
and makes
makes the
the journal
journal easier
easierto
to read.
read.
J1
GENERAL JOURNAL
Date
2002
Sept. 1
Ref.
Debit
Credit
15,000
15,000
7,000
7,000
ILLUSTRATION 2-10
TECHNIQUE OF JOURNALIZING
The
The column
column entitled
entitled Ref.
Ref. isis left
left blank
blankat
at the
the time
timethe
the
journal
journal entry
entryisis made
made and
and isis used
used later
laterwhen
when the
the
journal
journal entries
entries are
aretransferred
transferred to
to the
theledger
ledgeraccounts.
accounts.
J1
GENERAL JOURNAL
Date
2002
Sept. 1
Ref.
Debit
Credit
15,000
15,000
7,000
7,000
GENERAL JOURNAL
Date
2002
Oct. 2
Ref.
Debit
Credit
14,000
14,000
ILLUSTRATION 2-11
GENERAL JOURNAL
Date
2002
Oct. 2
1
2
3
Ref.
Debit
Credit
34,000
8,000
26,000
This
This isis the
the wrong
wrong format;
format; all
all debits
debits must
must be
be listed
listed
before
beforethe
the credits
credits are
arelisted.
listed.
J1
GENERAL JOURNAL
Date
2002
Oct. 2
Ref.
Debit
Credit
8,000
34,000
26,000
THE LEDGER
The
GENERAL
LEDGER
ILLUSTRATION 2-12
Individual
Assets
Equipment
Supplies
Accounts Rec.
Cash
Individual
Liabilities
Interest Payable
Salaries Payable
Accounts Payable
Notes Payable
Individual
Owners Equity
Salaries Expense
Service Revenue
Doucet, Drawings
Doucet, Capital
ILLUSTRATION 2-14
Date
2002
01-Sep Cash
M. Doucet, Capital
Invested cash in business.
Date
2002
01-Sep
Ref
101
301
General Ledger
Cash
Account Title and Explanation Ref
J1
Debit
J1
Credit
15,000
Debit
15,000
15,000
Credit
101
Balance
15,000
ILLUSTRATION 2-14
Date
2002
01-Sep Cash
M. Doucet, Capital
Invested cash in business.
General Ledger
M. Doucet, Capital
Date Account Title and Explanation Ref
2002
1-Sep
J1
Ref
101
301
Debit
Debit
J1
Credit
15,000
15,000
Credit
15,000
301
Balance
15,000
ILLUSTRATION 2-28
A TRIAL BALANCE
PIONEER ADVERTISING AGENCY
Trial Balance
October 31, 2002
Cash
Advertising Supplies
Prepaid Insurance
Office Equipment
Notes Payable
Accounts Payable
Unearned Revenue
C. R. Byrd, Capital
C. R. Byrd, Drawings
Service Revenue
Salaries Expense
Rent Expense
Debit
$ 15,200
2,500
600
5,000
Credit
$ 5,000
2,500
1,200
10,000
500
10,000
4,000
900
$ 28,700
$ 28,700
LIMITATIONS OF A
TRIAL BALANCE
A trial balance does not prove that all transactions have
been recorded or that the ledger is correct.
Numerous errors may exist even though the trial balance
columns agree.
The trial balance may balance even when
1. a transaction is not journalized,
2. a correct journal entry is not posted,
3. a journal entry is posted twice,
4. incorrect accounts are used in journalizing or posting,
5. offsetting errors are made in recording the amount of
the transaction.
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Copyright 2002 John Wiley & Sons Canada, Ltd. All rights
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