AR ACCOUNTING PRINCIPLES AMR

YEAR – ACCOUNTING PRINCIPLES P a g e |2

Chapter (2)
RECORDING PROCESS
 R E M E M B E R : Three Activities of Accounting:
1- Identify 2- Record 3- Communicate Transactions.

2- Recording
The Recording Process

Journalizing Posting Trial Balance

THE ACCOUNT:
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- What is The Account?
An account is an individual accounting record of increases and decreases in a specific asset, liability,
or owner’s equity item.

For example, Jordi Soft (the company discussed in Part 2) would have separate accounts for Cash, Accounts
Receivable, Accounts Payable, Service Revenue, and Salaries Expense.
In its simplest form.

- What is The Form of The Account?

Dr. Means Left

Cr. Means Right

Because the format of an account resembles the letter T,

we refer to it as a T-account.

DEBIT NATURE CREDIT NATURE

EXPENSES,ASSETS,DRAWINGS REVENUES,CAPITAL,LIABILITIES

Dr. Cr. Dr. Cr.

+ - - +
INC. DEC. DEC. INC.

A- Journalizing
Right way to Analyze business transactions is to write a General Journal Entry.
Each general journal entry lists the date, the account title to be debited and the corresponding
amount followed by the account title to be credited and the corresponding amount.
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-Double-Entry Accounting System:
Because every business transaction affects at least two accounts, our accounting system is known as a
double-entry system to Keep the basic Accounting Equation in Balance.
- How to Make a General Journal Entry?
1- Analyze Transaction Effect. (PART 2)
2- Determine the Nature of Account is Debit or Credit.
3- The two sides must be equal in amount to be balanced.
4- Make Entry in The General Journal Book Form.

GENERAL JOURNAL FORM

Date Account Name Ref. Dr. Cr.
Account Debited …. xxx
…/…/…
Account Credited …. xxx

COURSE EXERCISE
- Journalize The Following Transactions: (EFFECTS IF REQUIRED
ONLY)
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1- Jordi Seika decides to open a computer programming service which he names “Jordi
soft” On October 1, 2017, he invests $150,000 cash in the business.

Assets = Liabilities + Owner’s Equity

Cash Capital
15,000$ 15,000$
Date Account Name Ref. Dr. Cr.
Cash 15,000
Oct 1.
Capital 15,000

2-on October 2, 2016 “Jordi Soft” purchases computer equipment for $7,000 cash.
Assets = Liabilities + Owner’s Equity
Cash
7,000$
Computer/Equipment
7,000$
Date Account Name Ref. Dr. Cr.
Equipment 7,000
Oct 2.
Cash 7,000

3- on October 5,2016 “Jordi Soft” purchases for $1,600 Supplies from Samir&Ali Supplies Store
on Account
Assets = Liabilities + Owner’s Equity
Supplies Accounts Payable (AP)
1,600$ 1,600$
Date Account Name Ref. Dr. Cr.
Supplies 1,600
Oct 5.
AP 1,600

4- on October 10,2016 “Jordi Soft” Fixed “Abo Rabie3” Delivery System for $1,200 & Received
Cash.

Assets = Liabilities + Owner’s Equity

Cash Service Revenue
1,200$ 1,200$
Date Account Name Ref. Dr. Cr.
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Cash 1,200
Oct 10.
Service Revenue 1,200

5- on October 11,2016 “Jordi Soft” Rendered Service for $2,500 to McDonald’s on Account.

Assets = Liabilities + Owner’s Equity

Accounts Receivable (AR) Service Revenue
2,500$ 2,500$

Remember: REVENUE RECOGNTION PRINCIPLE:

The Revenue will recorded regardless cash is reccived or not.

Date Account Name Ref. Dr. Cr.

AR 2,500
Oct 11.
Service Revenue 2,500

6- on October 12,2016 “Jordi Soft” Paid $1,600 to Samir & Ali “Creditors”.

Assets = Liabilities + Owner’s Equity

Cash Accounts Payable (AP)
1,600$ 1,600$
Date Account Name Ref. Dr. Cr.
AP 1,600
Oct 12.
Cash 1,600

7- on October 14,2016 “ Jordi Soft” Received Cash of Service was previously provided from
McDonald’s

Assets = Liabilities + Owner’s Equity

Cash
2,500$
AR
2,500$

NOTE: No Service Revenue will Record again Because this account was recorded previously
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Date Account Name Ref. Dr. Cr.
Cash 2,500
Oct 14.
AR 2,500

8- on October 15,2016 “Jordi Soft” Make a Advertising for a month in “Youm 7” News
Paper for $12,000 & Signed a Note .

Assets = Liabilities + Owner’s Equity

Note Payable (NP) Advertising Expense
$12,000 $12,000

Remember: MATCHING “EXPENSE” PRINCIPLE:

The Expenses will recorded regardless cash is paid or not.

Date Account Name Ref. Dr. Cr.

Adv. Expense 12,000
Oct 15.
NP 12,000

When Company Pay Expenses in Recording it’s means the Expenses is Increased but in
Effects of Transactions (Part 2) that’s means Expenses is Decreased Owner Equity.

9- on October 19,2016 “ PAW Store” Fixed Computer System for $5,000 , “Jordi Soft”
Received $3,000 & $2,000 will be received on October 28,2016

Assets = Liabilities + Owner’s Equity

Cash Revenue
3,000$ 5,000$
AR
2,000$

Date Account Name Ref. Dr. Cr.

Cash 3,000
Oct 19. AR 2,000
Revenue 5,000
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10- on October 21,2016 The Owner withdraw $1,500 to gift his friend Amr Youssef in his
Birthday.

Assets = Liabilities + Owner’s Equity

Cash Drawings
1,500$ 1,500$
Date Account Name Ref. Dr. Cr.
Drawings 1,500
Oct 21.
Cash 1,500

11- on October 23,2016 The Owner Invest $3,500 Cash in Business

Assets = Liabilities + Owner’s Equity
Cash Add. Capital
3,500$ 3,500$
Date Account Name Ref. Dr. Cr.
Cash 3,500
Oct 23.
Capital 3,500

13- on October 26,2016 “Jordi Soft” Paid $4,500 Salaries to workers.

Assets = Liabilities + Owner’s Equity

Cash Salaries Expenses
4,500$ 4,500$
Date Account Name Ref. Dr. Cr.
Salaries Expenses 4,500
Oct 26.
Cash 4,500

14- on October 28,2016 “Paw Store” Paid the Remaining Balance to “Jordi Soft”

Assets = Liabilities + Owner’s Equity

Cash
2,000$
AR
2,000$
Date Account Name Ref. Dr. Cr.
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Cash 2,000
Oct 28.
AR 2,000

15- on October 29,2016 “Jordi Soft” Paid $5,000 Rent Expense & $6,000 Utilities Expense

Assets = Liabilities + Owner’s Equity

Cash Rent Expenses
11,000$ 5,000$
Utilities Expenses
6,000$
Date Account Name Ref. Dr. Cr.
Rent Expense 5,000
Oct 29. Utilities Expense 3,000
Cash 11,000

EX1: Selected transactions for D. Reyes, an interior decorator, in her first month
of business are as follows:
January 2018
2 Invested $10,000 cash in business.
3 Purchased used car for $4,000 cash for use in business.
9 Purchased supplies on account for $500.
11 Performed Service for 1,800 on Account.
16 Paid $200 cash for advertising.
20 Received $700 cash from customers on January 11.
23 Paid creditor $300 cash on balance owed.
28 Withdrew $1,000 cash for personal use by owner.

REQ: - - Journalize the above transactions.

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Date Account Name Ref. Dr. Cr.

Cash 10,000
Jan 1
Capital 10,000
Car 4,000
2
Cash 4,000
Supplies 500
9
AP 500
AR 1,800
11
Service Revenue 1,800
Advertising Expense 200
16
Cash 200
Cash 700
20
AR 700
AP 300
23
Cash 300
Drawings 1,000
28
Cash 1,000
TOTA 18500 0
L
B- Posting
Posting refers to the process of transferring entries in the journal into the accounts in
The General Ledger.

- How to Post the Account?

1- Make T-Account Form.
2- Determine the Nature of Account is Debit or Credit.
3- Post to The Debit account – date & Account.
4- Post to The Credit account – date & Account.

Date Account Name Ref. Dr. Cr.

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Cash 10,000
1/1
Capital 10,000

CASH Capital
1/1 50,000 1/1 10,000

EX2: Same Transactions as Exercise 1 (page 10)

REQ: - - Post the above transactions.

CAPITAL CASH
10,000
10,000
End Balance 4,000
10,000 200
700
300
CAR
1,000
4,000
End Balance End Balance
4,000 7,200

AP Supplies
500 500
300 End Balance
End Balance 500
200
Service Revenue AR
1,800 1,800
700
End Balance End Balance
1,800 1,100
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Drawings Advertising Expense

1,000 200
End Balance End Balance
1,000 200

HOME TRAINING
Amr Started his new Business “AY Company” on October 2016 , During October:

1- Amr Invest 500,000$ Cash in his new Business “AY Company”

2- “AY Company” Purchased Equipment for 20,000$.
3- “AY Company” Purchased Supplies for 10,000$ on Account.
4- “AY Company” Borrowed 15,000$ from “CIB Bank” & Signed a Note.
5- Amr Withdrew 3,000$ from the Business on Oct. 21 for his birthday.
6- The Company Paid 7,000$ Rent in Advance.
7- The Company Provide services for 50,000$.
8- The Company Rendered Services to Customers for 17,000$ on Account.
9- Hired a Security for the office to started next month for 4,000$ Salary for Month.
10- Collect Receivables from Customers.
11- The Company Purchased a Car for 35,000$.
12- The Owner Invest 150,000$ in Business
13- Paid 40,000$ Salaries to Employees
14- Paid 5,000 to “CIB BANK”.
15- The Company Received 12,000$ for service will be provided next month
16- Paid 3,000$ Utilities, Advertising 2,000$ , Insurance 2,000$.
REQ: - Journalize & Post Above Transactions.

Quote of the Part:

Oh yes, the past can hurt. But you can either
.run from it, or learn from it
Rafiki - The Lion King

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END OF PART 3
Next Lecture: PART 4
Thursday:
Monday:
Tuesday:
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