Topic 3 recording transactions part 2 PDF

TOPIC RECORDING TRANSACTIONS PART - DOUBLE ENTRY ACCOUNTING TOPIC3 PART LEARNING OBJECTIVES Identify the basic steps in the recording process Explain how transactions are recorded in the accounting process Define debits and credits and explain how they are used to record accounting transactions Explain what a journal is and how it helps in the recording process Explain what ledger accounts are and how they help in the recording process ACCOUNTING……THE LANGUAGE OF BUSINESS……… an INFORMATION SYSTEM that…… IDENTIFICATION • Observing economic events to determine which need to be recorded as transactions MEASUREMENT • Quantifying the transactions in monetary terms e.g the dollar RECORDING • Classification into categories & summarizing the transactions COMMUNICATION • Preparing the financial reports from the accounts for analysis & interpretation We need a system to gather data systematically and support timely reporting The system should be:  Efficient  Accessible  Provide a level of control THE DOUBLE ENTRY SYSTEM OF ACCOUNTING!!!!! | Kelly Cook eTravel Pty Ltd Statement of Profit or Loss for the month of May 2017 Accuracy Check Revenue Service Revenue Expenses Advertising Electricity Printing & Stationery Rent Wages & Salaries Total Expenses Profit 8,500 500 400 600 1,100 1,200 3,800 4,700 Kelly Cook eTravel Pty Ltd Statement of Financial Position as at 31 May 2017 Current Liabilites 20,900 Accounts Payable 2,000 22,900 Equity Non Current Assets Capital Property, Plant & 10,000 Equipment Retained Earnings Total Equity Current Assets Cash Accounts Receivable Total Assets Journalising 32,900 Total Liabilties & Equity 32,900 30,000 4,700 -2,000 2,700 Total Equity 31 May 2017 32,700 Cash flows from investing activities: Purchase of Property, Plant & Equipment Net cashflow from investing activites Cash Flows from financing activities: Issue of shares Dividends Net cashflow from financing activites Net increase in cash Cash at beginning of period May 2017 Cash at end of period 31 May 2017 Posting | 2,700 32,700 Kelly Cook eTravel Pty Ltd Statement of Changes in Equity for the month of May 2017 Equity as at May 2017 Share Capital invested Add Profit for month Less Dividends Retained Earnings as at 31 May 2017 Kelly Cook eTravel Pty Ltd Statement of Cash Flows for the month of May 2017 Cash flows from operating activities: Receipts from customers Payments to suppliers Payments to employees Net cashflow from operating activites THE ACCOUNTING PROCESS 200 30,000 6,500 -2,400 -1,200 2,900 -10,000 -10,000 30,000 -2,000 28,000 20,900 20,900 DEBIT AND CREDIT RULES All assets accounts Dr Debit to increase Normal balance = Cr Credit to decrease All liability accounts + All equity accounts Dr Cr Debit to Credit to decrease increase Normal balance Expense accounts Dr Cr Debit to increase Normal balance Credit to decrease Dr Cr Debit to Credit to decrease increase Normal balance Income accounts Dr Cr Debit to Credit to decrease increase Normal balance | DOUBLE ENTRY ACCOUNTING – DEBITS & CREDITS | TOPIC RECORDING TRANSACTIONS PART - DOUBLE ENTRY ACCOUNTING TOPIC3 PART LEARNING OBJECTIVES On completion of this topic, you should be able to: Record journal entries Explain what posting is and how it helps in the recording process Post journal entries to the general ledger Explain the purposes of a trial balance Identify how the financial statements are linked to the trial balance THE ACCOUNTING CYCLE | Kelly Cook eTravel Pty Ltd Transactions for the month of May 2017 Date Transaction 01-May-2017 Kelly Cook invests $30,000 to begin Kelly Cook’s eTravel P/L 02-May-2017 Kelly Cook eTravel P/L purchases Office Furniture & Equipment paying $10,000 in cash 15-May-2017 Kelly Cook eTravel P/L provides services and collects $5,500 in Revenue 20-May-2017 Kelly Cook eTravel P/L provides services, and the client agrees to pay $3,000 within one month 21-May-2017 Kelly Cook eTravel P/L pays cash expenses of $600 for Printing & Stationery 21-May-2017 Kelly Cook eTravel P/L pays cash expenses of $1,100 for Rent 21-May-2017 Kelly Cook eTravel P/L pays cash expenses of 1,200 for Salaries & Wages 21-May-2017 Kelly Cook eTravel P/L pays cash expenses of $400 for Electricity 25-May-2017 Kelly Cook eTravel P/L purchases some online Advertising, agreeing to pay $500 in 30 days 26-May-2017 Kelly Cook renovated her bathroom at her personal residence 30-May-2017 Kelly Cook eTravel P/L collected $1,000 from the client of 20th May 31-May-2017 Kelly Cook eTravel P/L pays $300 to the supplier from which she purchased $500 worth of Advertising 31-May-2017 Kelly Cook eTravel P/L pays $2,000 cash Dividends to Kelly Cook 100 110 120 130 140 145 160 165 170 175 180 185 200 210 220 230 235 250 300 310 320 Chart of Accounts Cash at Bank 400 Accounts Receivable 410 Prepaid Rent 412 Prepaid Insurance 415 Inventory 420 GST Receivable 600 Building 500 Accum Depn - Building 510 Property, Plant & Equip 520 Accum Depn - PPE 530 Vehicles 540 Accum Depn - Vehicles 550 Accounts Payable 560 Unearned Revenue 570 Salaries & Wages Payable 580 Interest Payable 590 GST Payable Loans Payable Share Capital Retained Earnings Dividends Service Revenue Sales Revenue Sales Returns & Allows Sales Discounts Gain on asset sales P & L Summary A/C Advertising Expense Bank Charges Cost of Sales Depreciation Expense Electricty Expense Insurance Expense Interest Expense Printing & Stationery Expense Rent Expense Salaries & Wages Expense Date 1/5/17 Particulars GENERAL JOURNAL Post Ref Cash at Bank Share Capital 100 300 DEBIT 30,000 30,000 (Owner’s initial capital investment) 2/5/17 Property, Plant & Equip Cash at Bank 150 10,000 100 10,000 (Purchase of Office Equipment) 15/5/17 Cash at Bank Service Revenue 100 5,500 400 5,500 (Cash Revenue) 20/5/17 Accounts Receivable Service Revenue DEBIT CREDIT Cash @ Bank #100 30,000 10,000 2/5/17 5,500 15/5/17 600 21/5/17 1,100 21/5/17 1,200 21/5/17 400 21/5/17 1,000 30/5/17 300 31/5/17 2,000 31/5/17 15,600 36,500 Bal 20,900 1/5/17 Printing & Stationary Expense 110 3,000 400 570 Rent Expense Cash at Bank 580 100 1,100 Salary & Wages Expense 590 100 1,200 540 400 600 Advertising Expense Accounts Payable Salaries payable #220 Accts Rec #110 3,000 1,000 30/5/17 Revenue #400 5,500 3,000 2,000 1,200 400 Prepaid Rent #120 PPE #150 2/5/17 10,000 500 500 25/5/17 Advertising #500 500 21/5/17 Electricity #540 400 Accum Dep PPE #175 Depreciation #530 (Pay advertising on account) 30/5/17 Cash at Bank Accounts Receivable 100 1,000 110 1,000 P & L Summary #600 Accounts Payable Cash at Bank 200 100 300 320 100 2,000 Print & Stationery #570 21/5/17 (Cash from credit customer) 31/5/17 Retained Earnings #310 21/5/17 600 Rent #580 1,100 300 (Pay part of advertising expense) Salaries & Wages # 590 31/5/17 Dividends Cash at Bank 1/5/17 Dividends #320 2,000 1,100 100 500 200 25/5/17 Unearned Revenue #210 8,500 (Pay monthly expenses with cash) 25/5/17 31/5/17 31/5/17 20/5/17 600 100 Cash at Bank Accts Pay #200 500 300 200 3,000 Cash at Bank Cash at Bank Electricity Expense CREDIT Capital #300 30,000 (Credit Sale) 21/5/17 GENERAL LEDGER T-ACCOUNTS CREDIT DEBIT 21/5/17 1,200 2,000 (Dividends Paid) 55,600 55,600 15/5/17 20/5/17 THE PALER PRINCIPLE + C D C D C - D C D C D PALER | 12 Kelly Cook e-Travel Pty Ltd TRAIL BALANCE As at 31 May 2017 100 110 170 200 300 320 400 500 540 570 580 590 Account Cash at Bank Accounts Receivable Property, Plant & Equip Accounts Payable Share Capital Dividends Service Revenue Advertising Expense Electricty Expense Printing & Stationery Expense Rent Expense Salaries & Wages Expense DEBIT CREDIT 20,900 2,000 10,000 200 30,000 2,000 8,500 500 400 600 1,100 1,200 38,700 38,700 DOUBLE ENTRY ACCOUNTING – Trial Balance Kelly Cook eTravel Pty Ltd Statement of Profit or Loss for the month of May 2017 Revenue Service Revenue Expenses Advertising Electricity Printing & Stationery Rent Wages & Salaries Total Expenses Profit Current Assets Cash Accounts Receivable Non-current Assets Property, Plant & Equipment Total Assets 8,500 500 400 600 1,100 1,200 3,800 4,700 Kelly Cook eTravel Pty Ltd Statement of Financial Position as at 31 May 2017 Liabilites 20,900 Accounts Payable 2,000 22,900 200 Equity Capital 30,000 Retained Earnings Total Equity 32,700 10,000 32,900 Total Liabilties & Equity Kelly Cook eTravel Pty Ltd Statement of Changes in Equity for the month of May 2017 Equity as at May 2017 Share Capital invested Add Profit for month Less Dividends Retained Earnings as at 31 May 2017 Total Equity 31 May 2017 2,700 ✔️ 32,900 30,000 4,700 2,000 2,700 | 14 32,700 ✔️ ... 160 165 170 175 180 185 20 0 21 0 22 0 23 0 23 5 25 0 30 0 31 0 32 0 Chart of Accounts Cash at Bank 400 Accounts Receivable 410 Prepaid Rent 4 12 Prepaid Insurance 415 Inventory 420 GST Receivable 600 Building... Dividends # 32 0 2, 000 1,100 100 500 20 0 25 /5/17 Unearned Revenue #21 0 8,500 (Pay monthly expenses with cash) 25 /5/17 31 /5/17 31 /5/17 20 /5/17 600 100 Cash at Bank Accts Pay #20 0 500 30 0 20 0 3, 000 Cash... Revenue) 20 /5/17 Accounts Receivable Service Revenue DEBIT CREDIT Cash @ Bank #100 30 ,000 10,000 2/ 5/17 5,500 15/5/17 600 21 /5/17 1,100 21 /5/17 1 ,20 0 21 /5/17 400 21 /5/17 1,000 30 /5/17 30 0 31 /5/17 2, 000