Chapter 2-1 Chapter The Recording Process Chapter 2-2 Accounting Principles, Ninth Edition Study Study Objectives Objectives Explain what an account is and how it helps in the recording process Define debits and credits and explain their use in recording business transactions 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 Prepare a trial balance and explain its purposes Chapter 2-3 The The Recording Recording Process Process The TheAccount Account Debits and credits Expansion of basic equation Chapter 2-4 Steps Stepsin inthe the Recording Recording Process Process Journal Ledger The TheRecording Recording Process Process Illustrated Illustrated Summary illustration of journalizing and posting The TheTrial TrialBalance Balance Limitations of a trial balance Locating errors Use of dollar signs The The Account Account Account Record of increases and decreases in a specific asset, liability, equity, revenue, or expense item Debit = “Left” Credit = “Right” An Account can be illustrated in a T-Account form Chapter 2-5 Account Name Debit / Dr Credit / Cr SO Explain what an account is and how it helps in the recording process Debits Debits and and Credits Credits Double-entry accounting system Each transaction must affect two or more accounts to keep the basic accounting equation in balance Recording done by debiting at least one account and crediting another DEBITS must equal CREDITS Chapter 2-6 SO Define debits and credits and explain their use in recording business transactions Debits Debits and and Credits Credits If Debits are greater than Credits, the account will have a debit balance Account Name Debit / Dr Transaction #1 $10,000 Transaction #3 8,000 Balance Chapter 2-7 Credit / Cr $3,000 Transaction #2 $15,000 SO Define debits and credits and explain their use in recording business transactions Debits Debits and and Credits Credits If Credits are greater than Debits, the account will have a credit balance Account Name Debit / Dr Transaction #1 Balance Chapter 2-8 $10,000 Credit / Cr $3,000 Transaction #2 8,000 Transaction #3 $1,000 SO Define debits and credits and explain their use in recording business transactions Debits Debits and and Credits Credits Summary Summary Normal Normal Balance Balance Debit Debit Debit / Dr Normal Normal Balance Balance Credit Credit Assets Credit / Cr Normal Balance Chapter 3-24 Owner’s Equity Credit / Cr Debit / Dr Liabilities Debit / Dr Credit / Cr Normal Balance Normal Balance Chapter 3-23 Expense Debit / Dr Revenue Chapter 3-25 Credit / Cr Debit / Dr Normal Balance Chapter 3-27 Chapter 2-9 Credit / Cr Normal Balance Chapter 3-26 SO Debits Debits and and Credits Credits Summary Summary Balance Sheet Income Statement Asset = Liability + Equity Revenue - Expense Debit Credit Chapter 2-10 SO Define debits and credits and explain their use in recording business transactions The The Recording Recording Process Process Illustrated Illustrated Illustration 2-20 Chapter 2-29 LO Explain what posting is and how it helps in the recording process The The Recording Recording Process Process Illustrated Illustrated Illustration 2-21 Chapter 2-30 The The Recording Recording Process Process Illustrated Illustrated Illustration 2-22 Chapter 2-31 The The Recording Recording Process Process Illustrated Illustrated Illustration 2-23 Chapter 2-32 The The Recording Recording Process Process Illustrated Illustrated Illustration 2-24 Chapter 2-33 The The Recording Recording Process Process Illustrated Illustrated Illustration 2-25 Chapter 2-34 The The Recording Recording Process Process Illustrated Illustrated Illustration 2-26 Chapter 2-35 The The Recording Recording Process Process Illustrated Illustrated Illustration 2-27 Chapter 2-36 The The Recording Recording Process Process Illustrated Illustrated Illustration 2-28 Chapter 2-37 The The Trial Trial Balance Balance Illustration 2-31 A list of accounts and their balances at a given time Purpose is to prove that debits equal credits Chapter 2-38 LO Prepare a trial balance and explain its purposes The The Trial Trial Balance Balance Limitations of a Trial Balance The trial balance may balance even when a transaction is not journalized, a correct journal entry is not posted, a journal entry is posted twice, incorrect accounts are used in journalizing or posting, or offsetting errors are made in recording the amount of a transaction Chapter 2-39 LO Prepare a trial balance and explain its purposes The The Trial Trial Balance Balance Review Question A trial balance will not balance if: a a correct journal entry is posted twice b the purchase of supplies on account is debited to Supplies and credited to Cash c a $100 cash drawing by the owner is debited to Owner’s Drawing for $1,000 and credited to Cash for $100 d a $450 payment on account is debited to Accounts Payable for $45 and credited to Cash for $45 Chapter 2-40 LO Prepare a trial balance and explain its purposes Recording Recording Process Process Discussion Question Q2-19 Jim Benes is confused about how accounting information flows through the accounting system He believes the flow of information is as follows a Debits and credits posted to the ledger b Business transaction occurs c Information entered in the journal d Financial statements are prepared e Trial balance is prepared Is Jim correct? If not, indicate to Jim the proper flow of the information See notes page for discussion Chapter 2-41 LO Prepare a trial balance and explain its purposes Chapter 2-42 LO Prepare a trial balance and explain its purposes Copyright Copyright Copyright © 2009 John Wiley & Sons, Inc All rights reserved Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc The purchaser may make back-up copies for his/her own use only and not for distribution or resale The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein Chapter 2-43 .. .Chapter The Recording Process Chapter 2-2 Accounting Principles, Ninth Edition Study Study Objectives Objectives Explain what... (debit) Normal Balance Chapter 3-25 Owner’s Capital Debit / Dr Chapter 3-25 Chapter 2-14 Owner’s Drawing Credit / Cr Debit / Dr Normal Balance Normal Balance Credit / Cr Chapter 3-23 SO Define... Debit / Dr Revenue Chapter 3-25 Credit / Cr Debit / Dr Normal Balance Chapter 3-27 Chapter 2-9 Credit / Cr Normal Balance Chapter 3-26 SO Debits Debits and and Credits Credits Summary Summary