Professional Documents
Culture Documents
03 - Analyzing and Recording Transactions PDF
03 - Analyzing and Recording Transactions PDF
C2 - 1
Learning Objectives
• Double-Entry Accounting
• Analyzing and Recording Transactions
• Chart of Accounts, Trial Balance
• Journal, Ledger, and Trial Balance
• Recording and Posting an Entry
• Correcting Errors
C2 - 2
Double-Entry Accounting
“ Double-entry accounting is based on a
simple concept: each party in a business
transaction will receive something and give
something in return. In bookkeeping terms,
what is received is a debit and what is given
is a credit. The T account is a representation
of a scale or balance.”
DEBITS CREDITS
received = given
C2 - 4
Expanded Accounting Equation
“The basic accounting equation can be
expanded to include all five financial categories
indicating what has been received and given.”
DEBITS CREDITS
received = given
Assets
C2 - 5
DEBITS CREDITS
received = given
Assets
Expenses
C2 - 6
Expanded Accounting Equation
“ The basic accounting equation can be
expanded to include all five financial categories
indicating what has been received and given.”
DEBITS CREDITS
received = given
Liabilities
Assets
Expenses
C2 - 7
DEBITS CREDITS
received = given
Liabilities
Assets
Owner’s Equity
Expenses
C2 - 8
Expanded Accounting Equation
“ The basic accounting equation can be
expanded to include all five financial categories
indicating what has been received and given.”
DEBITS CREDITS
received = given
Liabilities
Assets
Owner’s Equity
Revenues
Expenses
C2 - 9
DEBITS CREDITS
received = given
Liabilities
Assets
Owner’s Equity
Net
Income
Revenues
Expenses
C2 - 10
NetSolutions
A Sole Proprietorship
Chris Clark,
Owner
C2 - 11
Business Transactions
Entry A. Chris Clark (investor)
Chris Clark
deposits $25,000
in a bank account
for NetSolutions.
General Journal
Date Description Debit Credit
11/1
C2 - 12
Business Transactions
Entry A. Chris Clark (investor)
Chris Clark
deposits $25,000 Cash
in a bank account
for NetSolutions.
General Journal
Date Description Debit Credit
11/1 Cash 25,000
C2 - 13
Business Transactions
Entry A. Chris Clark (investor)
Chris Clark
deposits $25,000 Cash A promise
in a bank account to the owner
for NetSolutions.
General Journal
Date Description Debit Credit
11/1 Cash 25,000
Chris Clark, Capital 25,000
C2 - 14
Business Transactions
Entry B. Land Owner (seller)
NetSolutions buys
land for $20,000.
General Journal
Date Description Debit Credit
11/5
C2 - 15
Business Transactions
Entry B. Land Owner (seller)
NetSolutions buys
land for $20,000. Land
General Journal
Date Description Debit Credit
11/5 Land 20,000
C2 - 16
Business Transactions
Entry B. Land Owner (seller)
NetSolutions buys
land for $20,000. Land Cash
General Journal
Date Description Debit Credit
11/5 Land 20,000
Cash 20,000
C2 - 17
Business Transactions
Entry C. Supplier (seller)
NetSolutions buys
supplies for
$1,350, agreeing to
pay in the near
future.
receive NetSolutions give
give
Debit (buyer) Credit
Credit
General Journal
Date Description Debit Credit
11/10
C2 - 18
Business Transactions
Entry C. Supplier (seller)
NetSolutions buys
supplies for Supplies
$1,350, agreeing to
pay in the near
future.
receive NetSolutions give
give
Debit (buyer) Credit
Credit
General Journal
Date Description Debit Credit
11/10 Supplies 1,350
C2 - 19
Business Transactions
Entry C. Supplier (seller)
NetSolutions buys
supplies for Supplies A promise
$1,350, agreeing to to pay later
pay in the near
future.
receive NetSolutions give
give
Debit (buyer) Credit
Credit
General Journal
Date Description Debit Credit
11/10 Supplies 1,350
Accounts Payable 1,350
C2 - 20
Business Transactions
Entry D. Customer (buyer)
NetSolutions
earns fees of
$7,500, receiving
cash.
General Journal
Date Description Debit Credit
11/18
C2 - 21
Business Transactions
Entry D. Customer (buyer)
NetSolutions
earns fees of Cash
$7,500, receiving
cash.
General Journal
Date Description Debit Credit
11/18 Cash 7,500
C2 - 22
Business Transactions
Entry D. Customer (buyer)
NetSolutions
earns fees of Cash Services
$7,500, receiving
cash.
General Journal
Date Description Debit Credit
11/18 Cash 7,500
Fees Earned 7,500
C2 - 23
Business Transactions
Entry E. Various suppliers
NetSolutions paid:
wages, $2,125; rent,
$800; utilities, $450;
and miscellaneous,
$275.
receive NetSolutions give
give
Debit (buyer) Credit
Credit
General Journal
Date Description Debit Credit
C2 - 24
Business Transactions
Entry E. Various suppliers
NetSolutions paid:
Services,
wages, $2,125; rent,
benefits
$800; utilities, $450;
and miscellaneous,
$275.
receive NetSolutions give
give
Debit (buyer) Credit
Credit
General Journal
Date Description Debit Credit
11/18 Wages Expense 2,125
Rent Expense 800
Utilities Expense 450
Misc. Expense 275
C2 - 25
Business Transactions
Entry E. Various suppliers
NetSolutions paid:
Services,
wages, $2,125; rent, Cash
benefits
$800; utilities, $450;
and miscellaneous,
$275.
receive NetSolutions give
give
Debit (buyer) Credit
Credit
General Journal
Date Description Debit Credit
11/18 Wages Expense 2,125
Rent Expense 800
Utilities Expense 450
Misc. Expense 275
Cash 3,650
C2 - 26
Business Transactions
Entry F. Supplier (payee)
NetSolutions pays
$950 to creditors
on account.
General Journal
Date Description Debit Credit
11/30
C2 - 27
Business Transactions
Entry F. Supplier (payee)
NetSolutions pays
Reduction in
$950 to creditors
obligation
on account.
General Journal
Date Description Debit Credit
11/30 Accounts Payable 950
C2 - 28
Business Transactions
Entry F. Supplier (payee)
NetSolutions pays
Reduction in
$950 to creditors Cash
obligation
on account.
General Journal
Date Description Debit Credit
11/30 Accounts Payable 950
Cash 950
C2 - 29
Business Transactions
Entry G. Internal Transaction
(no external entity)
At the end of the
month, the cost of
supplies on hand
is $550.
General Journal
Date Description Debit Credit
11/30
C2 - 30
Business Transactions
Entry G. Internal Transaction
(no external entity)
At the end of the
month, the cost of Use of
supplies on hand supplies
is $550.
General Journal
Date Description Debit Credit
11/30 Supplies Expense 800
Business Transactions
Entry G. Internal Transaction
(no external entity)
At the end of the
month, the cost of Use of
supplies Supplies
supplies on hand
is $550.
General Journal
Date Description Debit Credit
11/30 Supplies Expense 800
Supplies 800
Chris Clark
withdraws $2,000
in cash.
General Journal
Date Description Debit Credit
11/30
C2 - 33
Business Transactions
Entry H. Chris Clark (payee)
Chris Clark
Reduction in
withdraws $2,000
obligation
in cash.
General Journal
Date Description Debit Credit
11/30 Chris Clark, Drawing 2,000
C2 - 34
Business Transactions
Entry H. Chris Clark (payee)
Chris Clark
Reduction in
withdraws $2,000 Cash
obligation
in cash.
General Journal
Date Description Debit Credit
11/30 Chris Clark, Drawing 2,000
Cash 2,000
C2 - 35
NetSolutions
Chart of Accounts
C2 - 36
NetSolutions
Trial Balance
November 30, 2016
11 Cash 5,900
14 Supplies 550
17 Land 20,000
21 Accounts Payable 400
31 Chris Clark, Capital 25,000
32 Chris Clark, Drawing 2,000
41 Fees Earned 7,500
51 Wages Expense 2,125
52 Rent Expense 800
54 Utilities Expense 450
55 Supplies Expense 800
59 Miscellaneous Expense 275
32,900 32,900
C2 - 37
NetSolutions
Trial Balance
November 30, 2016
11 Cash 5,900
14 Supplies 550
Balance 17 Land 20,000
Sheet 21 Accounts Payable 400
31 Chris Clark, Capital 25,000
32 Chris Clark, Drawing 2,000
41 Fees Earned 7,500
51 Wages Expense 2,125
52 Rent Expense 800
54 Utilities Expense 450
55 Supplies Expense 800
59 Miscellaneous Expense 275
32,900 32,900
C2 - 38
NetSolutions
Trial Balance
November 30, 2016
11 Cash 5,900
14 Supplies 550
17 Land 20,000
21 Accounts Payable 400
31 Chris Clark, Capital 25,000
32 Chris Clark, Drawing 2,000
41 Fees Earned 7,500
51 Wages Expense 2,125
Income 52 Rent Expense 800
Statement 54 Utilities Expense 450
55 Supplies Expense 800
59 Miscellaneous Expense 275
32,900 32,900
C2 - 39
C2 - 40
Journal, Ledger, Trial Balance
C2 - 41
C2 - 42
Recording and Posting an Entry
General Journal Page 1
Post.
Date Description Ref. Debit Credit
12/1 Prepaid Insurance 2,400
Cash 2,400
C2 - 43
1 General Ledger
Account: Prepaid Insurance Account No. 15
Post. Balance
Date Item Ref. Debit Credit Debit Credit
12/1
C2 - 44
Recording and Posting an Entry
General Journal Page 1
Post.
Date Description Ref. Debit Credit
12/1 Prepaid Insurance 2,400
Cash 2,400
General Ledger 2
C2 - 45
General Ledger
Account: Prepaid Insurance Account No. 15
Post. Balance
Date Item Ref. Debit Credit Debit Credit
12/1 1 2,400 2,400
3
C2 - 46
Recording and Posting an Entry
General Journal Page 1
Post.
Date Description Ref. Debit Credit
12/1 Prepaid Insurance 2,400
Cash 2,400
General Ledger 4
C2 - 47
C2 - 48
Recording and Posting an Entry
General Journal Page 1
Post.
Date Description Ref. Debit Credit
12/1 Prepaid Insurance 15 2,400
Cash 11 2,400
1 4 5 2
General Ledger
Account: Cash Account No. 11
Post. Balance
Date Item Ref. Debit Credit Debit Credit
11/30 Balance 5,900
12/1 1 2,400 3,500
3
C2 - 49
Correcting Errors
Three Types of Errors
Journal Entry Ledger Posting Correction Procedure
C2 - 50
Correcting Errors
Three Types of Errors
Journal Entry Ledger Posting Correction Procedure
C2 - 51
Correcting Errors
Three Types of Errors
Journal Entry Ledger Posting Correction Procedure
C2 - 52
Correcting Errors – An Example
C2 - 53
C2 - 54
Correcting Errors – An Example
C2 - 55
C2 - 56
C2 - 57