First year accounting

Chapter 2

The recording process

:Apply accounting system depend on 3 steps

Step 1: preparing journal

Step 2: posting ledger

Step 3: preparing trial balance

The recording process across the 3 steps depends on the understanding the answer of two
:questions

?What is account -1

Debit (D r) Credit (Cr)

‫مدين‬ ‫دائن‬
‫كل الديون للشركه‬ ‫كل الديون اللي علي الشركه‬
Left side Right side
Refers to all accounts that the company own Refers to all accounts that credited to the
company

Note: left side (Dr) must equal the right side (Cr)

?What is normal balance -2

Any account variable has a normal balance may be (Dr) OR (Cr)

Each accounting variable increase + in the normal side and decrease - in the other side

Basic equation Assets = liabilities + owner`s equity

Expanded equation assets = liabilities +( owner`s capital – owner`s drawing + revenues –expenses )

Credit / debit effects Dr cr Dr cr Dr cr Dr cr Dr cr Dr cr

- - + + - + - - +
+ - +

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Preparing journal -1

:The journal form as follows

Date Explanation Dr Cr

:Example1

:The following transactions are related to Sam accounting services

Oct 1 Sam begins business as accounting services office with a cash investment of 15.000$

Oct 3 purchases office equipment furniture for 1.900$ on account

Oct 6 bills a customer 3.200$ for accounting services provided

Oct 27 pays 700$ on balance related to transaction of Oct 3

Oct 30 pays the administrative assistant 2.500$ salary for Oct

:Required

Journalize the above transactions

Answer

Date Explanation Dr Cr
Oct 1 Cash 15000
Sam, capital 15000
Oct 3 Office furniture 1900
Accounts 1900
payable
Oct 6 Accounts receivable 3200
Service 3200
revenue
Oct27 Accounts payable 700
Cash 700
Oct 30 Salary expense 2500
Cash 2500

:Note: journalizing may be

Simple entry: two accounts, one debit and one credit )1

Or

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Compound entry: three or more accounts )2

:Example2

On June 15 Alex co. Purchased equipment for 15.000$ by paying cash of 10.000$ and the
balance on account

:Answer

Date Explanation Dr Cr
June 15 Equipment 15.000
Cash 10.000
Accounts payable 5.000

Posting ledger -2

Depends on the data transferred from journal

Is used to determine the ending balance for each accounting variable

Ledger is prepared in T-Account form

.Debit side accounting title credit side

left side Right side

From example 2 prepare ledger account for all the accounts

Dr Dr Samcash
capital cr cr Dr account payable cr
15000 700
15000
2500 700 1900
Ending Ending Ending
balance balance balance
15000 11.800 1200

Dr salary expense cr Dr accounts receivable

office furniture cr cr

2500 3200
1900
Ending Ending
balance balance 3200
2500 1900

Dr service revenue cr

3200

Mohammed safwat Ending balance Mob/01099114517

3200
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Trial balance -3

.Is the list of accounting variables and their ending balances transferred from ledger

:It depends on the ending balances and its form is

Explanation Dr Cr

Total

From example 2 prepare the trial balance

Sam accounting services office

Trial balance
October 31.2008
Dr Cr
11.800$
Cash
3.200$
Account receivable 1.900$
Office furniture
1.200$
Accounts payable
15.000$
Sam, capital 3.200$
Service revenue
Salaries expense

Total 19.400$ 19.400$

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