TOPIC THREE :

THE RECORDING
PROCESS
Topic 3
THE RECORDING PROCESS

Outline

• Characteristics of an account

• The rules of Debit and Credit

• The steps in recording process

• The preparation of Trial Balance

T3
 The Books of Entry

• Journal : Prime entry book

• Account : Individual accounting record of
increases or decreases in a specific item.
• Ledger : Group of accounts
– General Ledger
– Creditors Ledger / Accounts Payable
– Debtors Ledger / Accounts Receivable

• Chart of Account : List of accounts

 The Recording Process

Documents
Documents
Source
Documents Trial Balance
Documents

Journal Ledger
 Journal

Date Description Ref Debit Credit

 Account
T-Account
Cash 110
Date Item Amount Date Item Amount

Debit Side Credit Side

Three Columns Account

ACCOUNT Cash ACCOUNT NO. 110

Date Item Ref Debit Credit Balance
Debit Credit
 Double-Entry
Double-Entry Accounting
Accounting
“ Double-entry accounting is based on a
simple concept: each party in a business
transaction will receive something and give
something in return. The T account is a
representation of a scale or balance.”

Scale or Balance T account

Left Side Right Side

DEBIT CREDIT
Luca Pacioli
Developer of
Double-Entry
Accounting DEBIT CREDIT
 The Rules of Debit and Credit
• Assets, Drawings & Expenses (Debit
items) :
• Debit => Increase
• Credit => Decrease

• Liabilities, Capital & Revenue (Credit

items) :
• Debit => Decrease
• Credit => Increase
Types of Accounts & Normal Balance

Account Normal Bal. Debit Credit

Assets Debit
Drawings Debit
Expenses Debit
Liabilities Credit
O. Equity Credit
Revenues Credit
 The Rules of Debit and Credit

Assets = Liabilities + Owner’s Equity

Assets Liabilities Capital Drawings

Revenue Expenses
 NetSolutions
NetSolutions
A
A Sole
Sole Proprietorship
Proprietorship

“ On November 1, 2022, I started a sole

proprietorship called NetSolutions. I plan to
use my knowledge of microcomputers and
offer computer consulting services for a fee.
The following double-entry transactions show
how amounts received (debits) always equal
amounts given (credits).”

Chris Clark,
Owner
 Business Transactions
Entry A.

Chris Clark Accounting Equation

deposits $25,000
in a cash account Cash
Cash OE
OE(Cap)
(Cap)
for NetSolutions. 25,000
25,000 25,000
25,000

General Journal
Date Description Debit Credit

Nov1 Cash 25,000

 Business Transactions
Entry A.

Chris Clark Accounting Equation

deposits $25,000
in a cash account Cash
Cash OE
OE(Cap)
(Cap)
for NetSolutions. 25,000
25,000 25,000
25,000

General Journal
Date Description Debit Credit

Nov1 Cash 25,000

Chris Clark, Capital 25,000

(Invested cash in NetSolutions)

 Business Transactions
Entry B.

NetSolutions buys Accounting Equation

land for $20,000
with cash. Land
Land Cash
Cash
20,000
20,000 (20,000)
(20,000)

General Journal
Date Description Debit Credit

Nov5 Land 20,000

 Business Transactions
Entry B.

NetSolutions buys Accounting Equation

land for $20,000
with cash. Land
Land Cash
Cash
20,000
20,000 (20,000)
(20,000)

General Journal
Date Description Debit Credit

Nov5 Land 20,000

Cash 20,000

(Purchased land for building site)

 Business Transactions
Entry C.

NetSolutions buys
Accounting Equation
supplies for
$1,350, agreeing to Supplies
Supplies AP
AP
pay in the near 1,350
1,350 1,350
1,350
future.

General Journal
Date Description Debit Credit

Nov10 Supplies 1,350

 Business Transactions
Entry C.

NetSolutions buys
Accounting Equation
supplies for
$1,350, agreeing to Supplies
Supplies AP
AP
pay in the near 1,350
1,350 1,350
1,350
future.

General Journal
Date Description Debit Credit

Nov10 Supplies 1,350

Accounts Payable 1,350

(Purchased supplies on account)

 Business Transactions
Entry D.

NetSolutions
Accounting Equation
earns fees of
$7,500, receiving Cash
Cash OE
OE(Rev)
(Rev)
cash. 7,500
7,500 7,500
7,500

General Journal
Date Description Debit Credit

Nov18 Cash 7,500

 Business Transactions
Entry D.

NetSolutions
Accounting Equation
earns fees of
$7,500, receiving Cash
Cash OE
OE(Rev)
(Rev)
cash. 7,500
7,500 7,500
7,500

General Journal
Date Description Debit Credit

Nov18 Cash 7,500

Fees Earned 7,500

(Received fees from customers)

 Business Transactions
Entry E.

NetSolutions paid:
Accounting Equation
wages, $2,125; rent,
$800; utilities, $450; Cash
Cash OE
OE(Exp)
(Exp)
and miscellaneous, (3,650)
(3,650) (3,650)
(3,650)
$275.

General Journal
Date Description Debit Credit
Nov30 Wages Expense 2,125
Rent Expense 800
Utilities Expense 450
Misc. Expense 275
 Business Transactions
Entry E.

NetSolutions paid:
Accounting Equation
wages, $2,125; rent,
$800; utilities, $450; Cash
Cash OE
OE(Exp)
(Exp)
and miscellaneous, (3,650)
(3,650) (3,650)
(3,650)
$275.

General Journal
Date Description Debit Credit
Nov30 Wages Expense 2,125
Rent Expense 800
Utilities Expense 450
Misc. Expense 275
Cash 3,650

(Paid expenses)
 Business Transactions
Entry F.

NetSolutions pays
Accounting Equation
$950 to creditors
on account. Cash
Cash AP
AP
(950)
(950) (950)
(950)

General Journal
Date Description Debit Credit

Nov30 Accounts Payable 950

 Business Transactions
Entry F.

NetSolutions pays
Accounting Equation
$950 to creditors
on account. Cash
Cash AP
AP
(950)
(950) (950)
(950)

General Journal
Date Description Debit Credit

Nov30 Accounts Payable 950

Cash 950

(Paid creditors amounts owing)

 Business Transactions
Entry G.

At the end of the

Accounting Equation
month, the cost of
supplies on hand Supplies
Supplies OE
OE(Exp)
(Exp)
is $550. (800)
(800) (800)
(800)

General Journal
Date Description Debit Credit

Nov30 Supplies Expense 800

Balance of Supplies account $1,350 less $550 on hand = $800 used

 Business Transactions
Entry G.

At the end of the

Accounting Equation
month, the cost of
supplies on hand Supplies
Supplies OE
OE(Exp)
(Exp)
is $550. (800)
(800) (800)
(800)

General Journal
Date Description Debit Credit

Nov30 Supplies Expense 800

Supplies 800
(Recorded supplies used during November)

Balance of Supplies account $1,350 less $550 on hand = $800 used

 Business Transactions
Entry H.

Chris Clark
Accounting Equation
withdraws $2,000
in cash. Cash
Cash OE
OE(Drawing)
(Drawing)
(2,000)
(2,000) (2,000)
(2,000)

General Journal
Date Description Debit Credit

Nov30 Chris Clark, Drawing 2,000

 Business Transactions
Entry H.

Chris Clark
Accounting Equation
withdraws $2,000
in cash. Cash
Cash OE
OE(Drawing)
(Drawing)
(2,000)
(2,000) (2,000)
(2,000)

General Journal
Date Description Debit Credit

Nov30 Chris Clark, Drawing 2,000

Cash 2,000

(Chris Clark withdrew cash for personal use)

Posting From Journal To Ledger

Journal Ledger

1 or 2

Three
ThreeColums
Colums
T-Account
T-Account Account
Account
 General Ledger

Cash

Date Item Debit Date Item Credit

Nov 1 Capital 25,000 Nov 5 Land 20,000
18 Fees earned 7,500 30 Wages exp 2,125
Rent exp 800
Utilities exp 450
Misc. exp 275
Account payable 950
Drawing 2,000

Balance c/f 5,900

T-Account
 General Ledger

ACCOUNT Cash Three Columns ACCOUNT NO. 11

Date Item Ref Debit Credit Balance
Debit Credit
Nov1 Capital 25,000 25,000
5 Land 20,000 5,000
18 Fees earned 7,500 12,500
30 Wages exp 2,125 10,375
30 Rent exp 800 9,575
30 Utilities exp 450 9,125
30 Misc. exp 275 8,850
30 Acc. Payable 950 7,900
30 Drawing 2,000 5,900
 General Ledger
Supplies

Date Item Debit Date Item Credit

Nov 10 Accounts payable 1,350 Nov 30 Supplies exp 800
30 Balance c/f 550

T-Account

Three Columns
ACCOUNT Supplies ACCOUNT NO. 14
Date Item Ref Debit Credit Balance
Debit Credit
Nov10 Acc. Payable 1,350 1,350
30 Supplies exp 800 550
 General Ledger
Land

Date Item Debit Date Item Credit

Nov 5 Cash 20,000 Nov 30 Balance c/f 20,000

T-Account

Three Columns
ACCOUNT Land ACCOUNT NO. 17
Date Item Ref Debit Credit Balance
Debit Credit
Nov5 Cash 20,000 20,000
 General Ledger
Accounts Payable

Date Item Debit Date Item Credit

Nov 30 Cash 950 Nov 10 Supplies 1,350
Balance c/f 400

T-Account

Three Columns
ACCOUNT Accounts Payable ACCOUNT NO. 21
Date Item Ref Debit Credit Balance
Debit Credit
Nov10 Supplies 1,350 1,350
30 Cash 950 400
 General Ledger
Capital

Date Item Debit Date Item Credit

Nov 30 Balance c/f 25,000 Nov 1 Cash 25,000

T-Account

Three Columns
ACCOUNT Chris Clark, Capital ACCOUNT NO. 31
Date Item Ref Debit Credit Balance
Debit Credit
Nov1 Cash 25,000 25,000
 General Ledger
Drawing

Date Item Debit Date Item Credit

Nov 1 Cash 2,000 Nov 30 Balance c/f 2,000

T-Account

Three Columns
ACCOUNT Chris Clark, Drawing ACCOUNT NO. 32
Date Item Ref Debit Credit Balance
Debit Credit
Nov1 Cash 2,000 2,000
 General Ledger
Fees Earned

Date Item Debit Date Item Credit

Nov 30 Balance c/f 7,500 Nov 18 Cash 7,500

T-Account

Three Columns
ACCOUNT Fees Earned ACCOUNT NO. 41
Date Item Ref Debit Credit Balance
Debit Credit
Nov18 Cash 7,500 7,500
 General Ledger
Wages Expense

Date Item Debit Date Item Credit

Nov 30 Cash 2,125 Nov 30 Balance c/f 2,125

T-Account

Three Columns
ACCOUNT Wages Expense ACCOUNT NO. 51
Date Item Ref Debit Credit Balance
Debit Credit
Nov30 Cash 2,125 2,125
 General Ledger
Rent Expense

Date Item Debit Date Item Credit

Nov 30 Cash 800 Nov 30 Balance c/f 800

T-Account

Three Columns
ACCOUNT Rent Expense ACCOUNT NO. 52
Date Item Ref Debit Credit Balance
Debit Credit
Nov30 Cash 800 800
 General Ledger
Utilities Expense

Date Item Debit Date Item Credit

Nov 30 Cash 450 Nov 30 Balance c/f 450

T-Account

Three Columns
ACCOUNT Utilities Expense ACCOUNT NO. 54
Date Item Ref Debit Credit Balance
Debit Credit
Nov30 Cash 450 450
 General Ledger
Supplies Expense

Date Item Debit Date Item Credit

Nov 30 Cash 800 Nov 30 Balance c/f 800

T-Account

Three Columns
ACCOUNT Supplies Expense ACCOUNT NO. 55
Date Item Ref Debit Credit Balance
Debit Credit
Nov30 Cash 800 800
 General Ledger
Miscellaneous Expense

Date Item Debit Date Item Credit

Nov 30 Cash 275 Nov 30 Balance c/f 275

T-Account

Three Columns
ACCOUNT Miscellaneous Expense ACCOUNT NO. 59
Date Item Ref Debit Credit Balance
Debit Credit
Nov30 Cash 275 275
 NetSolutions
Chart of Accounts

Balance Sheet Income Statement

1. Assets 4. Revenue
11 Cash 41 Fees Earned
14 Supplies
17 Land 5. Expenses
51 Wages Expense
2. Liabilities 52 Rent Expense
21 Accounts Payable 54 Utilities Expense
55 Supplies Expense
3. Owner’s Equity 59 Miscellaneous
31 Chris Clark, Capital Expense
32 Chris Clark, Drawing
 NetSolutions
Trial Balance
November 30, 2022
11 Cash 5,900
14 Supplies 550
17 Land 20,000
21 Accounts Payable 400
31 Chris Clark, Capital 25,000
32 Chris Clark, Drawing 2,000
41 Fees Earned 7,500
51 Wages Expense 2,125
52 Rent Expense 800
54 Utilities Expense 450
55 Supplies Expense 800
59 Miscellaneous Expense 275
32,900 32,900
 NetSolutions
Trial Balance
November 30, 2022
11 Cash 5,900
14 Supplies 550
Balance 17 Land 20,000
Sheet 21 Accounts Payable 400
31 Chris Clark, Capital 25,000
32 Chris Clark, Drawing 2,000
41 Fees Earned 7,500
51 Wages Expense 2,125
52 Rent Expense 800
54 Utilities Expense 450
55 Supplies Expense 800
59 Miscellaneous Expense 275
32,900 32,900
 NetSolutions
Trial Balance
November 30, 2022
11 Cash 5,900
14 Supplies 550
17 Land 20,000
21 Accounts Payable 400
31 Chris Clark, Capital 25,000
32 Chris Clark, Drawing 2,000
41 Fees Earned 7,500
51 Wages Expense 2,125
Income 52 Rent Expense 800
Statement 54 Utilities Expense 450
55 Supplies Expense 800
59 Miscellaneous Expense 275
32,900 32,900
 Journal, Ledger, Trial Balance

1. Transactions are analyzed

and recorded in journal.
Documents
Journal
 Journal, Ledger, Trial Balance

1. Transactions are analyzed

and recorded in journal.
Documents
Journal

2. Transactions are posted

from journal to ledger.
Journal Ledger
 Journal, Ledger, Trial Balance

1. Transactions are analyzed

and recorded in journal.
Documents
Journal

2. Transactions are posted

from journal to ledger.
Journal Ledger

3. Trial balance is prepared.

Trial Balance