Professional Documents
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Act 201 Chap 2
Act 201 Chap 2
Act 201 Chap 2
CHAPTER 2
ACT 201
2-1
Learning Objectives
After studying this chapter, you should be able to:
[1] Explain what an account is and how it helps in the recording process.
[2] Define debits and credits and explain their use in recording business
transactions.
[3] Identify the basic steps in the recording process.
[4] Explain what a journal is and how it helps in the recording process.
[5] Explain what a ledger is and how it helps in the recording process.
[6] Explain what posting is and how it helps in the recording process.
[7] Prepare a trial balance and explain its purposes.
2-2
The Account
2-3
An owner makes an initial investment of
$15000 to start a business
Monthly rent of $7000 is paid.
cash Cash
Cash
15000 7000 15000 7000
8000
2-4
The Account
2-5
Debits and Credits
Account Name
Debit / Dr. Credit / Cr.
Balance $15,000
2-6
Debits and Credits
Account Name
Debit / Dr. Credit / Cr.
Balance $1,000
2-7
Debits and Credits
increase side.
Liabilities
Debit / Dr. Credit / Cr.
Normal Balance
Chapter
3-24
2-8
Debits and Credits
2-9
Debits and Credits
Normal Balance
Chapter
3-27
2-10
Debits/Credits Rules
Liabilities
Debit / Dr. Credit / Cr.
Normal
Normal Normal
Normal
Balance
Balance Balance
Balance
Debit
Debit Credit
Credit Normal Balance
Assets Chapter
3-24
Owner’s Equity
Debit / Dr. Credit / Cr.
Debit / Dr. Credit / Cr.
Normal Balance
Normal Balance
Chapter
3-23
Expense Chapter
3-25
Revenue
Debit / Dr. Credit / Cr.
Debit / Dr. Credit / Cr.
Normal Balance
Normal Balance
Chapter
3-27 Chapter
3-26
2-11
LO 2
Debits/Credits Rules
Debit
Credit
2-12
Debits/Credits Rules
Question
Debits:
2-13
Debits/Credits Rules
Question
Accounts that normally have debit balances are:
2-14
Summary of Debits/Credits Rules
Basic
Assets = Liabilities + Owner’s Equity
Equation
Expanded
Basic
Equation
2-15
Steps in the Recording Process
Illustration 2-12
2-16
Steps in the Recording Process
The Journal
Book of original entry.
Transactions recorded in chronological order.
Contributions to the recording process:
1. Discloses the complete effects of a transaction.
2-17
Steps in the Recording Process
General Journal
Equipment 7,000
Cash 7,000
2-18
Steps in the Recording Process
General Journal
2-19
Steps in the Recording Process
The Ledger
General Ledger contains the entire group of accounts
maintained by a company.
Illustration 2-15
2-20
Steps in the Recording Process
2-21
Steps
Posting –
process of
transferring
amounts from
the journal to
the ledger
accounts.
Illustration 2-17
2-22
Posting
Question
Posting:
a. normally occurs before journalizing.
b. transfers ledger transaction data to the journal.
c. is an optional step in the recording process.
d. transfers journal entries to ledger accounts.
2-23
Chart of Accounts
Accounts and account numbers arranged in sequence in which
they are presented in the financial statements.
Illustration 2-18
2-24
The Recording Process Illustrated
Illustration 2-19
2-25
LO 6
The Recording Process Illustrated
Illustration 2-20
2-26
LO 6
The Recording Process Illustrated
Illustration 2-21
2-27
LO 6
The Recording Process Illustrated
Illustration 2-22
2-28
LO 6
The Recording Process Illustrated
Illustration 2-23
2-29
LO 6
The Recording Process Illustrated
Illustration 2-24
2-30
LO 6
The Recording Process Illustrated
Illustration 2-25
2-31
LO 6
The Recording Process Illustrated
Illustration 2-26
2-32
LO 6
The Recording Process Illustrated
Illustration 2-27
2-33
LO 6
The Recording Process Illustrated
Illustration 2-28
2-34
LO 6
> DO IT!
Kate Brown recorded the following transactions in a general journal
during the month of March. Post these entries to the Cash account.
2-35
LO 6
Summary of
Journalizing
and Posting
Illustration 2-29
2-36
LO 6
Illustration 2-30
2-37
LO 6
Trial Balance
Illustration 2-31
2-38
Trial Balance
2-39
Trial Balance
Question
A trial balance will not balance if:
a. a correct journal entry is posted twice.
b. the purchase of supplies on account is debited to Supplies
and credited to Cash.
c. a $100 cash drawing by the owner is debited to Owner’s
Drawing for $1,000 and credited to Cash for $100.
d. a $450 payment on account is debited to Accounts
Payable for $45 and credited to Cash for $45.
2-40