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ACCTG Chapter3
ACCTG Chapter3
ACCTG Chapter3
SUMMARY OF TRANSACTIONS
THE ACCOUNT
An account is an individual accounting record of increases and decreases in a
specific asset, liability, or stockholders' equity item.
A company will have separate accounts for such item as cash, salaries
expense, accounts payable, and so on.
NORMAL BALANCE
Every account classification has a normal balance, whether it is a debit or credit.
For that particular account, the opposite side entries should never exceed the
normal balance.
THE BASIC STEPS IN THE RECORDING
PROCESS
THE JOURNAL
Transactions are initially recorded in chronological order in a journal before being transferred
to the accounts.
The journal shows the debit and credit effects on specific accounts for each transaction.
Every company has a general journal.
JOURNALIZING
Entering transaction data in the journal is known as journalizing.
Separate journal entries are made for each transaction.
A complete entry consists of:
the date of the transaction,
the accounts and amounts to be debited and credited,
a brief explanation of the transaction.
TECHNIQUE OF JOURNALIZING
GENERAL JOURNAL
1 Cash 5,000
5,000
Notes Payable
Stockholders'
Assets Liabilities Equity Revenues Expenses
Accumulated Depreciation
Depreciation- Expense
Office Equipment
POSTING
Transferring journal entries to the ledger accounts is called posting.
Posting accumulates the effects of journalized transactions into individual
accounts.
EXAMPLE OF POSTING
PURPOSES OF TRIAL BALANCE
A trial balance is a list of accounts and their balances at a given time.
The primary purpose of the trial balance is to prove the mathematical equality
of debits and credits after posting.
A trial balance may uncover errors in journalizing and posting.
A trial balance is useful in the preparation of financial statements.