Professional Documents
Culture Documents
Accounting Cycle Capturing Economic Events 22022023 034006pm
Accounting Cycle Capturing Economic Events 22022023 034006pm
3-1
Maintains evidence of
company’s business activities.
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003
Slide
3-3
The Ledger
Accounts are
Cash individual records
showing increases
Accounts
and decreases.
Payable
The entire group of
Capital accounts is kept
Stock together in an
accounting record
called a ledger.
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003
Slide
3-4
A = L + OE
ASSETS LIABILITIES EQUITIES
Debit Credit Debit Credit Debit Credit
for for for for for for
Increase Decrease Decrease Increase Decrease Increase
A = L + OE
=
Debit Credit
balances balances
Let’s record
selected
transactions for
JJ’s Lawn Care
Service in the
accounts.
Capital Stock
Cash increases
increases $8,000
$8,000 with a debit.
with a credit.
Cash decreases
$2,000 with a credit.
Truck increases
Notes Payable
$15,000 with a debit.
increases $13,000
with a credit.
Cash
5/1 8,000 5/2 2,500
Truck
5/8 2,000
5/8 15,000
Notes Payable
5/8 13,000
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003
Slide
3-16
May 11: JJ’s purchased some repair parts for
$300 on account.
The Journal
GENERAL JOURNAL
P
Date Account Titles and Explanation R Debit Credit
2003
May 1 Cash 8,000
Capital Stock 8,000
Owners invest cash in the business.
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003
Slide
3-21
Posting
involves
copying
information
from the
journal to the
ledger
accounts.
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003
Slide
3-22
A = L + OE
Increase Decrease Increase
Retained Earnings
A = L + OE
Capital Retained
Stock Earnings
The costs of
goods and Decreases
services used up owner’s equity.
in the process of
earning revenue.
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003
Slide
To Record Revenue
Realization Principle
Revenue should be
recognized at the
time goods are sold
and services are
rendered.
Record Expenses
Matching Principle
Expenses should be
recorded in the
period in which they
are used up.
Expense
Expenses EQUITIES Revenues
decrease Debit Credit increase
owner’s for for owner’s
equity. Decrease Increase equity.
EXPENSES REVENUES
Debit Credit Debit Credit
for for for for
Increase Decrease Decrease Increase
Sales Revenue
Cash increases
increases $750 with
$750 with a debit.
a credit.
Will Gasoline
Will Cash increase
Expense increase or
or decrease?
decrease?
Gasoline Expense
Cash decreases $50
increases $50 with a
with a credit.
debit.
Will Dividends
Will Cash increase
increase or
or decrease?
decrease?
Cash Dividends
5/1 8,000 5/2 2,500 5/31 200
5/29 750 5/8 2,000
5/31 50
5/31 200
Make end-of-
Journalize year
Post entries to Prepare trial
transactions. adjustments.
the ledger balance.
accounts.
End of Chapter 3