WILEY

IFRS EDITION

Prepared by
Coby Harmon
2-1
University of California, Santa Barbara
Westmont College
 PREVIEW OF CHAPTER 2

Financial Accounting
IFRS 3rd Edition
Weygandt ● Kimmel ● Kieso
2-2
 Learning Objective 4
The Accounting Cycle State the required steps in
the accounting cycle.

1.
1. Analyze
Analyze business
business transactions
transactions

9.
9. Prepare
Prepare aa post-closing
post-closing 2.
2. Journalize
Journalize the
the
trial
trial balance
balance transactions
transactions

8.
8. Journalize
Journalize and
and post
post 3.
3. Post
Post to
to ledger
ledger accounts
accounts
closing
closing entries
entries

7.
7. Prepare
Prepare financial
financial 4.
4. Prepare
Prepare aa trial
trial balance
balance
statements
statements

6.
6. Prepare
Prepare an
an adjusted
adjusted trial
trial 5.
5. Journalize
Journalize and
and post
post
balance
balance adjusting
adjusting entries
entries

Illustration 4-11
2-3
Steps in the accounting cycle
LO 4
 Akun
 Mencatat kenaikan dan penurunan dari jenis-jenis
dari asset, liabilitas, ekuitas, pendapatan (revenue),
atau beban-beban (expense).
 Debit = “Left”
 Credit = “Right”

An account can
be illustrated in a
T-account form.

2-4 LO 1
 The
The Basic
Basic Accounting
Accounting Equation
Equation

Aset/ Liabilitas/
= + Ekuitas/ MODAL
Harta Kewajiban Pemilik

2-5
 Debits and Credits

Assets
 Assets - Debits should exceed
Debit / Dr. Credit / Cr.
credits.
 Liabilities – Credits should
Normal Balance exceed debits.
Chapter
3-23
 Normal balance is on the
increase side.
Liabilities
Debit / Dr. Credit / Cr.

Normal Balance

Chapter
3-24

2-6 LO 2
 Debits and Credits

 Issuance of share capital and

revenues increase equity (credit).
 Dividends and expenses decrease
equity (debit).

Share Capital-Ordinary Retained Earnings Dividends

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

Normal Balance Normal Balance Normal Balance

Chapter Chapter Chapter

3-25 3-25 3-23

2-7 LO 2
 Debits and Credits

Revenues  The purpose of earning revenues

Debit / Dr. Credit / Cr.
is to benefit the shareholders.
 The effect of debits and credits on
Normal Balance
revenue accounts is the same as
Chapter
3-26 their effect on equity.
 Expenses have the opposite
Expenses
Debit / Dr. Credit / Cr.
effect: expenses decrease equity.

Normal Balance

Chapter
3-27

2-8 LO 2
 Debits and Credits
Liabilities
Debit / Dr. Credit / Cr.
Normal
Normal Normal
Normal
Balance
Balance Balance
Balance
Debit
Debit Credit
Credit Normal Balance

Assets Chapter
3-24

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

Normal Balance
Normal Balance

Chapter
3-23

Expenses Chapter
3-25
Revenues
Debit / Dr. Credit / Cr.
Debit / Dr. Credit / Cr.

Normal Balance
Normal Balance

Chapter
3-27 Chapter
3-26

2-9
LO 2
 Summary of Debit/Credit Rules

Statement of
Financial Position Income Statement
Asset = Liability + Equity Revenue - Expense

Debit

Credit

2-10 LO 2
 Summary of Debit/Credit Rules

Relationship among the assets, liabilities, and equity of a

business:
Illustration 2-12
Summary of debit/credit rules

The equation must be in balance after every transaction.

Total Debits must equal total Credits.

2-11 LO 2
 The Journal

JOURNALIZING - Entering transaction data in the journal.

Illustration: On September 1, shareholders invested €15,000 cash
in the corporation in exchange for ordinary shares, and Softbyte
purchased computer equipment for €7,000 cash.
Illustration 2-14

GENERAL JOURNAL
Date Account Title Ref. Debit Credit
Sept. 1 Cash 15,000
Share Capital—Ordinary 15,000

Equipment 7,000
Cash 7,000
2-12 LO 4
 The Journal

SIMPLE AND COMPOUND ENTRIES

Illustration: On July 1, Tsai Company purchases a delivery truck
costing NT$420,000. It pays NT$240,000 cash now and agrees to
pay the remaining NT$180,000 on account. Illustration 2-15
Compound journal entry

GENERAL JOURNAL

July 1 Equipment 420,000

Cash 240,000
Accounts Payable 180,000

2-13 LO 4
 Steps in the Recording Process
Learning
The Ledger Objective 5
Explain what a
ledger is and
 General Ledger contains all the asset, how it helps in
liability, and equity accounts. the recording
process.

Illustration 2-16
The general ledger
2-14 LO 5
 The Ledger

STANDARD FORM OF ACCOUNT Illustration 2-17

Three-column form
of account

2-15 LO 5
 Posting
Learning
Objective 6
Explain what
posting is and
how it helps in
the recording
process.

Transferring
journal entries
to the ledger
accounts.

Illustration 2-18
Posting a journal
entry

2-16 LO 6
 Illustration 2-19
Chart of accounts for Yazici Advertising A.S¸ .

2-17 LO 6
 The Recording Process Illustrated

Follow these steps:

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.
Illustration 2-20
Investment of cash
by shareholders

2-18 LO 6
 Illustration 2-21
2-19 Purchase of office equipment LO 6
 Illustration 2-22
Receipt of cash
for future service

2-20 LO 6
2-21 Illustration 2-23
Payment of monthly rent LO 6
 Illustration 2-24
Payment for
insurance

2-22 LO 6
2-23 Illustration 2-25
Purchase of supplies on credit LO 6
 The Recording Process Illustrated

Illustration 2-26
Hiring of employees

2-24 LO 6
 Illustration 2-27
2-25 Declaration and payment of dividend LO 6
 Illustration 2-28
2-26
Payment of salaries LO 6
2-27 Illustration 2-29
Receipt of cash for services performed LO 6
 Trial Balance
Illustration 2-32
A trial balance

2-28 LO 7