Documente Academic
Documente Profesional
Documente Cultură
Day 6
Session 1 & 2
Objective 1
Accounting
The process of classifying and summarizing
business transactions, and interpreting their
effect is called accounting
Accounting Terms
Account Owner’s
equity
Ledger
Double-entry
Assets accounting
Liabilities T-account
Accounting Terms
Cash Individual asset accounts
All individual
accounts
combined
make up
the ledger.
Accounts Ledger
Payable
Individual liability accounts
Gay Gillen,
Capital
Contributed Capital
Retained Earnings
Double-Entry Accounting
• Double entry bookkeeping means to record
the dual effects of each business transaction.
• Assets = Liabilities + Owner’s Equity
• Assets are on the left (debit) side.
• Liabilities and Equity are on the right (credit)
side.
The Account
• An account may be defined as a record of the
increases, decreases, and balances in an
individual item of asset, liability, capital,
income (revenue), or expense.
The T-Account
Account Title
Debit Credit
LEFT SIDE
The T-Account
Account Title
Debit Credit
RIGHT SIDE
Objective 2
Owner’s Equity
Assets = Liabilities +
Expenses Revenues
Cash
Liabilities
Owner’s Equity
John’s Gas Station Example
Record transactions
in the journal.
Journals
• What is a journal?
• It is a list in chronological order of all the
transactions for a business.
1 Identify transaction from source documents.
2 Specify accounts affected.
3 Apply debit/credit rules.
4 Record transaction with description.
Journals
• What does a journal entry include?
– date of the transaction
– title of the account debited
– title of the account credited
– amount of the debit and credit
– description of the transaction
– dollar signs are omitted
Recording Transactions
• On April 2, Gay Gillen invested $30,000 in
Gay Gillen eTravel.
• What is the journal entry?
• Cash 30,000
Gay Gillen, Capital 30,000
Bound
Cards
books
Posting
• What is posting?
• It is the transfer of information from the
journal to the appropriate accounts in the
ledger.
Asset Accounts After Posting
Cash
(1) 30,000 (2) 20,000
Land
(4) 300
(2) 20,000
(6) 2,100
Bal.
Bal. 7,600
20,000
Office Supplies
(3) 500
Bal. 500
Liabilities and Owner’s Equity Accounts
After Posting
Accounts Payable
(4) 300 (3) 500
Gay Gillen, Capital
Bal. 200 (1) 30,000
Bal. 30,000
Gay Gillen, Withdrawals
(6) 2,100
Bal. 2,100
Details of Journals and Ledgers
Journal Page 1
Date Accounts and Explanation Debit Credit
April 2 Cash 30,000
Gay Gillen, Capital 30,000
Received initial
investment from owner
Details of Journals and Ledgers
Posting
Account: Cash Account: 101
Balance
Date Ref. Debit Credit Debit Credit
April 2 jrl 30,000 30,000
Journal Page 1
Date Account and
Explanation Post Ref. Debit Credit
April 2 Cash 101 30,000
Gay Gillen, Capital 301 30,000
Initial investment
from owner
DEBITS CREDITS
Locating Trial Balance Errors
• Divide the difference by two.
• Is there a debit/credit balance for this amount
posted in the wrong column?
• Check journal postings.
• Review accounts for reasonableness.
• Computerized accounting programs usually
prohibit out-of-balance entries.
Objective 6
Assets
101 Cash
111 Accounts Receivable
141 Office Supplies
151 Office Furniture
191 Land
Gay Gillen eTravel
Chart of Accounts
Liabilities
201 Accounts Payable
231 Notes Payable
Owner’s Equity
301 Capital
311 Withdrawals
Revenues
401 Service Revenue
Gay Gillen eTravel
Chart of Accounts
Expenses
501 Rent Expense
503 Utilities Expense
502 Salary Expense
Normal Account Balances
• Assets = Liabilities + Owner’s Equity
• Debits = Credits
• The side where we expect increases to be
recorded is the normal balance side.
Objective 7
Analyze transactions
without a journal.
John’s Gas Station
• John is considering either purchasing a garage
for $600,000 or renting one for $60,000 per
year.
• John does not need to record in the journal all
of the transactions that would affect his
decision.
• Why?
John’s Gas Station
• John has not completed a transaction yet.
• However, John can visualize how the ledger
accounts will be affected.
John’s Gas Station