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Financial Accounting
Chapter 2- Recording Process
 FCES Students’ Council Financial Accounting Chapter 2

ً
‫ بتحصل عندى زى مثال ىان‬transaction ‫ بتاعت اى‬Recording process ‫ ده هنتكلم عن ال‬chapter ‫ف ال‬
‫ قل ف ال‬cash ‫ و ال‬Debit ‫ زادت ف ال‬supplies ‫ هتكون‬entry ‫ ف كدا ال‬$1000 ‫ ب‬supplies ‫اشتيت‬ ‫ر‬
‫ ى‬balance ‫ و بكدا ربق ىف‬Amount ‫ بنفس ال‬credit
‫ بتاع كل‬normal balance ‫ و هنعرف ال‬،entry ‫بي ال‬
.trial balance ‫ و ال‬general ledger ‫ و هنعرف ازاى نعمل‬Account

Describe how accounts, debits, and credits are used to record business transactions.

⚫ Record of increases and decreases in a specific asset, liability, owners’ equity,

revenue, or expense item.
• Debit = “Left”
• Credit = “Right
 An account can be illustrated in a T-account form.

Account Name
Debit / Dr. Credit / Cr.

.‫ أو أي حاجة تا ىن‬Liability ‫ أو‬asset ‫ علشان نسجل أي زيادة أو نقص حل ألي‬T-account ‫بنستخدم ال‬ -

- Double entry 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 at least one other
account.
- Note: Debits must equal credits.
‫ى‬ ‫ر‬
‫ ال قولنا عليه ىف‬equation ‫ أو أكت علشان نظبط المتان بتاع ال‬two accounts ‫ الزم تأثر عل‬transaction ‫أي‬
Double ‫ واحد عشان كدا اتسم‬account ‫ ل‬Cr ‫ واحد و‬account ‫ ل‬Dr ‫ بنعمل كدا بأننا نعمل عاألقل‬،ch.1
.entry system

• If the sum of Debit entries is greater than the sum Debit/Dr. Credit/Cr.
of Credit entries, the account will have a debit
$10,000 $3,000
balance. $8,000
$15,000

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 FCES Students’ Council Financial Accounting Chapter 2

• If the sum of Credit entries is greater than the sum of Debit entries, the account will
have a credit balance.

Debit/Dr Credit/Cr
$10,000 $3,000
8,000
$1,000
‫ بتاعها أكت و ر‬sum ‫ بتتكتب فالناحية ال‬account ‫يع ىن النتيجة النهائية لل‬
.‫ االكت‬balance ‫ ليه ال‬account ‫بيبق ال‬

Debit and Credit nature of the accounts:

Asset
Debit /sDr. Credit / Cr.
• Assets - Debits should exceed credits.
• Liabilities – Credits should exceed debits.
• Normal balance is on the increase side. Normal
Balance
Chapter Liabilitie
‫ى‬
3-23

‫ طب‬Credit ‫ بتاعها هو ال‬normal balance ‫ ال‬Assets ‫بمعن ان ال‬ Debits/ Dr. Credit / Cr.

‫يعن لما ر ى‬ ً
‫ ى‬normal balance ‫يعن ايه اصال‬‫ى‬
debit ‫بتيد بتكون ف ال‬
‫ الل عكسها ربق ىه ال‬،credit side ‫ و لو قلت بتكون ف ال‬side Normal Balance

‫ و لما‬credit side ‫ بتاعها هو ال‬normal balance ‫ ال‬،liabilities Chapter

3-24

.debit side ‫بتقل بتتكتب ف ال‬

• Owner’s investments and revenues increase owner’s
equity (credit).

Revenue
Debit / Dr. Credit / Cr.

Owner’s Capital
Debit / Dr. Credit / Cr.

Normal Balance
Chapter
3-26

Normal Balance
Chapter
3-25

‫يعن لما ى‬
‫بتيد بيكون‬ ‫ ى‬credit ‫ بيكون‬owner’s equity and revenues ‫ بتاع ال‬normal balance ‫و هنا ال‬
.debit side ‫ و لما بيقل بيتحط ف ال‬Credit

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 FCES Students’ Council Financial Accounting Chapter 2

• Owner’s drawings and expenses decrease owner’s equity (debit).

Owner’s Drawing Expense

Debit / Dr. Credit / Cr. Debit / Dr. Credit / Cr.

Normal Balance Normal Balance

Chapter
Chapter
3-27
3-23

• The purpose of earning revenues is to benefit the owners.

• The effect of debits and credits on revenue accounts is the same as their effect on
Owner’s Capital.
• Expenses have the opposite effect: expenses decrease owner’s equity.

ً
‫ عشان اصال اى‬Owner’s capital ‫ هو نفس التأثت الل بيحصل عل ال‬revenue ‫أي تغيت بيأثر عل ال‬
‫ى‬
owner’s ‫ تزيد ال‬Revenues ‫بمعن ان لما ال‬ ‫الشكه ده عشان يفيد اصحاب ر‬
،‫الشكه‬ ‫ بتحققها ر‬revenues
ً ‫ ر ى‬equity
Owner’s ‫ بتأثر عل ال‬Expenses ‫ و لكن ال‬owner’s equity ‫هتيد و طبعا لو قلت هتقلل ال‬
‫ بس بالنقصان ى‬equity
.‫ تقل‬owner’s equity ‫ تزيد كل ما ال‬Expenses ‫يعن بينهم عالقه عكسيه كل ما ال‬

 NB: So, the accounts that have normal balance “Debit” are:
• Assets.
Owner'
• Expenses. s equity
 NB: the accounts that have normal balance “Credit” are:
• Revenues.
• Owner’s equity Expense
• Liabilities.
‫ ى‬account ‫ و أي‬ROL ‫ بكلمة‬Credit ‫علشان نحفظهم بسهولة هنعلم ال‬
‫تان ر‬
.Debit ‫بيبق‬
- The equation must be balance after every transaction, total Debits must equal total
Credits.
Q: Debits:
1- Increase both assets and liabilities.
2- Decrease both assets and liabilities.

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 FCES Students’ Council Financial Accounting Chapter 2

3- Increase assets and decrease liabilities.

4- Decrease assets and increase liabilities.

Q: Accounts that normally have debit balances are:

1- Assets, expenses, and revenues.
2- Assets, expenses, and equity.
3- Assets, liabilities, and owner’s equity.
4- Assets, owner’s drawing, and expenses.

- The equation must be in balance after every transaction. Total Debits must equal
total Credits.

Steps in the Recording Process:

- Analyze each transaction, enter transaction in a journal then transfer journal information
to ledger accounts.
- Business documents, such as a sales slip, a check, or a bill, provide evidence of the
transaction.
- The Journal:
• Book of original entry.
• Transactions recorded in chronological order.
• Contributions to the recording process:
1. Discloses the complete effects of a transaction.
2. Provides a chronological record of transaction.
3. Helps to prevent or locate errors because the debit and credit amounts can be
easily compared.

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 FCES Students’ Council Financial Accounting Chapter 2

‫بالتتيب عل حسب تاري خ حدوثها و‬‫ ال اتعملت و بتتسجل ر‬entry ‫ بيتسجل جواه اصل ال‬general Journal ‫و ال‬
‫ و ر‬Credit ‫ أو‬Debit ‫ اذا كانت‬accounts ‫ عل ال‬transaction ‫بيظهر فيها تأثت ال‬
‫بيبق سهل انك تاخد بالك من أي‬
‫ر‬
.‫دلوقن‬ ‫خطأ او تتجنب حدوث الخطأ اصال النه سهل المقارنه ما بينهم زي ما هنشوف‬

 For example: On September 1, Ray Neal invested $15,000 cash in the business, and
Soft byte purchased computer equipment for $7,000 cash.

General Journal
Date Account Title Ref. Debit Credit
Sept . 1 Cash 15,000
Owner's capital 15,000

Equipment 7,000
Cash 7,000

 On July 1, Butler Company purchases a delivery truck costing $14,000. It pays $8,000
cash now and agrees to pay the remaining $6,000 on account.

General Journal
Date Account Title Ref. Debit Credit
July 1 Equipment 14,000
Cash 8,000
Accounts payable 6,000

Example: Kate Browne engaged in the following activities in establishing her salon, Hair It
Is:

1. Opened a bank account in the name of Hair It Is and deposited $20,000 of her own
money in this account as her initial investment.
2. Purchased equipment on account (to be paid in 30 days) for a total cost of $4,800.

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 FCES Students’ Council Financial Accounting Chapter 2

3. Interviewed three persons for the position of hair stylist. Prepare the entries to record
the transactions.
Q: Prepare the entries to record the transactions.
The answer:
1. Opened a bank account and deposited $20,000.
Cash 20,000
Owner’s Capital 20,000
2. Purchased equipment on account (to be paid in 30 days) for a total cost of $4,800.
Equipment 4,800
Accounts payable 4,800
3. Interviewed three persons for the position of hair stylist.
- No entry.

The Ledger
• General Ledger contains all the asset, liability, and owner’s equity accounts.

Standard form of accounts:

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 FCES Students’ Council Financial Accounting Chapter 2

 NB: After journalizing the entries we will post it to the Ledger.

Balance ‫ ال جواه خانة زيادة لحساب ال‬Ledger ‫ ال عندنا فال‬entries ‫ نحط ال‬journalizing ‫بعد لما نعمل ال‬
‫و بكدا ر‬
.‫يبق دايما عندنا تحديث‬
Posting: means transferring journal entries to ledger accounts.
Q: Posting:
1- Normally occurs before journalizing.
2- Transfers ledger transaction data to the journal.
3- Is an optional step in the recording process.
4- Transfers journal entries to ledger accounts.

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 FCES Students’ Council Financial Accounting Chapter 2

Charts of Accounts

ً ً
‫ و طبعا االرقام ديه كلها ثابته و بتكون‬101 ‫ رقمه بيكون‬cash ‫ زى مثال ال‬،‫ بيكون ليه رقم كده بتاعه‬account ‫كل‬
‫ الل ف اول‬figure‫ و هتالقوها متوضحه بسهم ف ال‬،‫ لوحده‬account ‫ و انت بتعمل كل‬ledger ‫موجوده ف ال‬
.‫الصفحه‬
• The recording process illustrated:
1- Determine what type of account is involved.
2- Determine what items increased or decreased and by how much.
3- Translate the increases and decreases into debits and credits.

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 FCES Students’ Council Financial Accounting Chapter 2

• So, the 1st step is to analyze the entries by the equation analysis.
• 2nd step is to debit and credit the accounts in the journal.
• 3rd step is to post it in the Ledger by using the T-account.

‫محطوطي بالتواري خ ر‬
‫ى‬ ً
‫بالتتيب من‬ ‫ و‬entries ‫ الل هو اصال عباره عن‬general journal ‫و ده بيكون شكل ال‬
.‫االقدم لالحدث‬

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 FCES Students’ Council Financial Accounting Chapter 2

- After posting all the entries the Ledger, it will look like this.

‫ زى ما شوفنا من‬general journal ‫ و بيكون ىف‬journalizing ‫ و ده اسمه‬entries ‫يبق كدا اول حاجه انا بعمل ال‬
‫ر‬
ً
‫ و‬entries ‫ الل كان ف كل ال‬cash ‫ و بجمع مثال ال‬account ‫ ل كل‬t- account ‫ و بعدين بنبتدى نعمل‬،‫شويه‬
‫ و بعدين بيكون شكله زى‬ledger ‫ ىف ال‬Posting ‫ و ده اسمه‬،‫ لوحده زى ما شوفنا فوق برضو‬t- account ‫بحطه ف‬
.general ledger ‫ و بكده بيكون اسمه‬account ‫ الل عملتها لكل‬t- accounts ‫كدا لما بجمع كل ال‬

Prepare a trial balance

• Limitations of a Trial Balance:
Trial Balance may balance even when:
1. A transaction is not journalized.
2. A correct journal entry is not posted.
3. A journal entry is posted twice.
4. Incorrect accounts are used in journalizing or posting.
5. Offsetting errors are made in recording the amount of a transaction.

adjusting entries ‫هيبق ىف حاجة اسمها‬

‫ر‬ ‫ و عشان كده‬trial balance ‫دي المشاكل ال بتقابل ال‬
‫عشان تعدل و تظبط المشاكل دي و ر‬
.‫ ال هو متعدل‬adjusted trial balance ‫بيبق اسمها‬
- Details differ the trial balance and the financial statements from the journal and ledger:
Dollar Signs:
• Do not appear in journals or ledgers.
• Typically used only in the trial balance and the financial statements.
• Shown only for the first item in the column and for the total of that column.

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 FCES Students’ Council Financial Accounting Chapter 2

Underlining:
• A single line is placed under the column of figures to be added or subtracted.
• Totals are double-underlined.

Q: A trial balance will not balance if:

1- A correct journal entry is posted twice.
2- The percentage of supplies on account is debited to supplies and credited to cash.
3- 1 $100 cash drawing by the owner is debited to owner’s drawing for $1,000 and
credited to cash for $100.
4- A $450 payment on account is debited to accounts payable for @45 and credited to
cash for $45.

End of chapter 2
And here is a little training to test yourself.
https://www.classmarker.com/online-test/start/?quiz=gex5fc51b8119228

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