2. 2 - 2
Analyze each transaction and
event from source documents
ANALYZING AND RECORDING
PROCESS
Record relevant transactions
and events in a journal
Post journal information
to ledger accounts
Prepare and analyze
the trial balance
C 1
4. 2 - 4
JOURNALIZING &
POSTING TRANSACTIONS
Step 1: Analyze
transactions and source
documents.
LiabilitiesLiabilities EquityEquityAssetsAssets = +
Step 2: Apply double-
entry accounting
(Left side) (Right side)
Debit Credit
T- Account
ACCOUNT NAME: ACCOUNT No.
Date Description PR Debit Credit Balance
Step 4: Post entry to ledger Step 3: Record journal entry
P 1
5. 2 - 5
LEDGER AND CHART OF
ACCOUNTS
The ledger is a collection of all accounts for anThe ledger is a collection of all accounts for an
information system. A companyâs size and diversityinformation system. A companyâs size and diversity
of operations affect the number of accounts needed.of operations affect the number of accounts needed.
The ledger is a collection of all accounts for anThe ledger is a collection of all accounts for an
information system. A companyâs size and diversityinformation system. A companyâs size and diversity
of operations affect the number of accounts needed.of operations affect the number of accounts needed.
The chart of accounts is a list of all accounts and includes an
identifying number for each account.
The chart of accounts is a list of all accounts and includes an
identifying number for each account.
Account Number Account Name Account Number Account Name
101 Cash 302 C. Taylor, Withdrawals
106 Accounts receivable 403 Revenues
126 Supplies 406 Rental revenue
128 Prepaid insurance 622 Salaries expense
167 Equipment 637 Insurance expense
201 Accounts payable 640 Rent expense
236 Unearned revenue 652 Supplies expense
301 C. Taylor, Capital 690 Utilities expense
C 3
6. 2 - 6
An account is a
record of
increases and
decreases in a
specific asset,
liability, equity,
revenue, or
expense item.
An account is a
record of
increases and
decreases in a
specific asset,
liability, equity,
revenue, or
expense item.
THE ACCOUNT AND ITS
ANALYSIS
The general
ledger is a record
containing all
accounts used by
the company.
The general
ledger is a record
containing all
accounts used by
the company.
C 2
7. 2 - 7
DEBITS AND CREDITS
A T-account represents a ledger account andA T-account represents a ledger account and
is a tool used to understand the effects ofis a tool used to understand the effects of
one or more transactions.one or more transactions.
(Left side) (Right side)
Debit Credit
Account Title
C 4
10. 2 - 10
ANALYZING TRANSACTIONS
Analysis:
(1) Cash 101 30,000
C. Taylor, Capital 301 30,000
Double entry:
(1) 30,000
Cash 101 301
(1) 30,000
C. Taylor, Capital 301
Posting:
A1
11. 2 - 11
DOUBLE-ENTRY ACCOUNTING
An account balance is the difference between the increases
and decreases in an account. Notice the T-Account.
C 4
12. 2 - 12
After processing its remaining transactions for
December, FastForwardâs Trial Balance is prepared.
After processing its remaining transactions for
December, FastForwardâs Trial Balance is prepared.
Debits Credits
Cash 4,350$
Accounts receivable -
Supplies 9,720
Prepaid Insurance 2,400
Equipment 26,000
Accounts payable 6,200$
Unearned consulting revenue 3,000
C. Taylor, Capital 30,000
Owner's Withdrawals 200
Consulting revenue 5,800
Rental revenue 300
Salaries expense 1,400
Rent expense 1,000
Utilities expense 230
Total 45,300$ 45,300$
FastForward
Trial Balance
December 31, 2009
The trial balance
lists all account
balances in the
general ledger. If
the books are in
balance, the total
debits will equal the
total credits.
The trial balance
lists all account
balances in the
general ledger. If
the books are in
balance, the total
debits will equal the
total credits.
P2
Part I Letâs see if we can analyze transactions and get them into the proper form for double-entry accounting. This will be helpful when you turn to your homework. In the first transaction, on December first, the owner invests $30,000 to start a company called FastForward. From our previous work we know that the cash account and the C. Taylor, Capital account will increase. Part II We record this information in the general journal with a debit, increase, to cash, and a credit, increase, to C. Taylor, Capital. Notice that the account number for the cash account is 101 and C. Taylor, Capital is 301. We are going to post the information in the journal to the general ledger. We will use T-accounts to accomplish this. Part III We place the $30,000 on the left, or debit, side of the cash account and on the right, or credit, side of the C. Taylor, Capital account. Our books are in balance because total assets are equal to total liabilities plus equity. Letâs move to another transaction.
On the trial balance we list all the accounts in our general ledger and their related balances. The total of all our debit account balances must equal all our credit account balances. If this is not the case, we may have made an error posting the journal entry into the ledger. We cannot prepare the financial statement until the books are in balance as determined by the trial balance.
