CHAPTER 3

PROCESSING BUSINESS
TRANSACTIONS

©Imperia College of Hospitality

 Topic:
 Business Transactions: The Raw Material of the
Accounting Process
 The Accounting Cycle
 Identification of Business Transactions
 Values Received (Debits) and Values Given (Credits)
 Transactional Analysis
 An Introduction to Journalizing

Accounting for Hospitality Industry Imperia College of Hospitality

 ACCOUNTING AS
INFORMATION SYSTEM

INPUT ---- PROCESS ---- OUTPUT

SOURCE ACCOUNTING INFORMATION

DOCUMENTS CYCLE TO MANAGEMENT

Business Transactions Financial Statements

Principles of Accounting (ACC 103) Imperia College of Hospitality

 Business Transactions
 Raw Material of the
accounting process

 Like crude oil or food

supplies transactions must
be processed in order to
get the end product

Principles of Accounting (ACC 103) Imperia College of Hospitality

 Accounting Cycle
 Processing of the accounting raw material
(business transactions) in order to get the final
product-Information to Management in the form of
Financial Statements

Principles of Accounting (ACC 103) Imperia College of Hospitality

 Accounting cycle-first four steps

1. Identification of Business Transactions

2. Journalizing-recording the business transactions
in chronological order in a Journal
3. Posting to the General Ledger
4. Taking a Trial Balance

Principles of Accounting (ACC 103) Imperia College of Hospitality

 The Accounting Cycle
STEP ONE
ANALYZING BUSINESS
TRANSACTIONS

STEP TWO STEP THREE

JOURNALIZING POSTING

Principles of Accounting (ACC 103) Imperia College of Hospitality

 STEP ONE- ACCOUNTING CYCLE

 Identification of Business
Transactions
 Values Received = Values Given
 VR = VG
 Debits = Credits
 Dr = Cr

Principles of Accounting (ACC 103) Imperia College of Hospitality

 RULES OF DEBITS AND CREDITS

DEBIT CREDIT
ASSETS INCREASE DECREASE
LIABILITIES DECREASE INCREASE
OWNERS’ EQUITY DECREASE INCREASE

REVENUE DECREASE INCREASE

EXPENSE INCREASE DECREASE

Principles of Accounting (ACC 103) Imperia College of Hospitality

 Illustrate Step 2- Journalizing

Principles of Accounting (ACC 103) Imperia College of Hospitality

 Journal
 A book of original entry

 Transactions are recorded in chronological order

 Used to complete Step 2 of the Accounting Cycle

Principles of Accounting (ACC 103) Imperia College of Hospitality

 The General Journal
Date Account Names Ref Dr Cr

Principles of Accounting (ACC 103) Imperia College of Hospitality

 Recording transactions in the
General Journal –Step 2 of the
accounting cycle

1. Mr. Carlton invests $30,000 in a new travel agency

2. The business borrows $50,000 at 8% APR
3. First month rent is paid, $1,000.

Principles of Accounting (ACC 103) Imperia College of Hospitality

 Transactional Analysis-3 transactions

1. Value Received by the Travel Agency is $30,000 in Cash-

Debit Cash; Value Given by the Travel Agency is
ownership interest in the amount of $30,000- Credit M.
Carlton, Capital
2. Value Received is $50,000 in Cash- Debit Cash; Value
given is the promise to pay $50,000 in the future- Credit
notes payable
3. Value Received is the use of the premises rented worth
$1,000- Debit Rent Expense; Value Given is a payment of
$1,000 in Cash- Credit Cash

Principles of Accounting (ACC 103) Imperia College of Hospitality

 The General Journal-Illustration

Date Account Names Ref Dr. Cr.

Sep. 1 Cash 30,000-

M.Carlton, Capital 30,000-
Owner’s investment
Sep. 2 Cash 50,000-
Notes Payable 50,000-
Company borrows money at 12% APR
Sep. 3 Rent Expense 1,000-
Cash 1,000-
Rent is paid

Principles of Accounting (ACC 103) Imperia College of Hospitality