Chapter 02

ANALYZING AND RECORDING

TRANSACTIONS

PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA

McGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.
 2-2

C1
ANALYZING AND RECORDING
PROCESS

Analyze each transaction and Record relevant transactions

event from source documents and events in a journal

Prepare and analyze Post journal information

the trial balance to ledger accounts
 2-3

C1

SOURCE DOCUMENTS
Bills from
Checks Suppliers Purchase
Orders
Employee
Earnings
Records Bank
Statements

Sales
Tickets
 2-4

C2

THE ACCOUNT AND ITS ANALYSIS

An account is a
record of
increases and The general
decreases in a ledger is a record
specific asset, containing all
liability, equity, accounts used by
revenue, or the company.
expense item.
 2-5

C2

THE ACCOUNT AND ITS ANALYSIS

Owner, Capital
Owner, Withdrawals
 2-6

C2

ASSET ACCOUNTS

Cash
Accounts
Land
Receivable

Buildings
Asset Notes
Receivable
Accounts
Prepaid
Equipment
Accounts
Supplies
 2-7

C2

LIABILITY ACCOUNTS

Accounts Notes
Payable Payable

Liability
Accounts
Accrued Unearned
Liabilities Revenue
 2-8

C2

EQUITY ACCOUNTS

Owner’s Owner’s
Capital Withdrawals

Equity
Accounts

Revenues Expenses
 2-9

C2

THE ACCOUNT AND ITS ANALYSIS

Assets = Liabilities + Equity

+ – + –
Owner’s Owner's
Revenues Expenses
Capital Withdrawals
 2 - 10

C3

LEDGER AND CHART OF ACCOUNTS

The ledger is a collection of all accounts for an
information system. A company’s size and diversity
of operations affect the number of accounts needed.

The chart of accounts is a list of all accounts and includes an

identifying number for each account.
Account Number Account Name Account Number Account Name
101 Cash 302 C. Taylor, Withdrawals
106 Accounts receivable 403 Revenues
126 Supplies 406 Rental revenue
128 Prepaid insurance 622 Salaries expense
167 Equipment 637 Insurance expense
201 Accounts payable 640 Rent expense
236 Unearned revenue 652 Supplies expense
301 C. Taylor, Capital 690 Utilities expense
 2 - 11

C4

DEBITS AND CREDITS

A T-account represents a ledger account and
is a tool used to understand the effects of
one or more transactions.

Account Title
(Left side) (Right side)
Debit Credit
 2 - 12

C4

DOUBLE-ENTRY ACCOUNTING

Assets = Liabilities + Equity

ASSETS LIABILITIES EQUITIES

Debit Credit Debit Credit Debit Credit

+ - - + - +
Normal Normal Normal
 2 - 13

C4

DOUBLE-ENTRY ACCOUNTING

Equity
Owner’s _ Owner's _ Expenses
Capital Withdrawals + Revenues

Owner’s Owner's Revenues Expenses

Capital Withdrawals

Debit Credit Debit Credit Debit Credit Debit Credit

- + + - - + + -
 2 - 14

C4

DOUBLE-ENTRY ACCOUNTING
An account balance is the difference between the increases
and decreases in an account. Notice the T-Account.
 2 - 15

P1
JOURNALIZING &
POSTING TRANSACTIONS
Assets = Liabilities + Equity
T- Account
(Left side) (Right side)
Debit Credit

Step 1: Analyze
Step 2: Apply double-
transactions and source
entry accounting
documents.

GENERAL JOURNAL Page 123

ACCOUNT NAME: ACCOUNT No.
Post.
Date Description Ref. Debit Credit
Date Description PR Debit Credit Balance

Step 4: Post entry to ledger Step 3: Record journal entry

 2 - 16

END OF CHAPTER 2