2-1
CHAPTER 2
THE RECORDING
PROCESS
Chapter
2-4
The
The Account
Account
Record of increases and decreases
Account in a specific asset, liability, equity,
revenue, or expense item.
Debit = “Left”
Credit = “Right”
Chapter
2-5 LO 1 Explain what an account is and how it helps in the recording process.
Debits
Debits and
and Credits
Credits
Account Name
Debit / Dr. Credit / Cr.
Balance $15,000
Account Name
Debit / Dr. Credit / Cr.
Balance $1,000
Normal
Debit / Dr. Credit / Cr.
Normal Normal
Normal
Balance
Balance Balance
Balance
Debit
Debit Credit
Credit Normal Balance
Assets Chapter
Owner’s Equity
3-24
Normal Balance
Normal Balance
Chapter
Expense
3-23
Revenue
Chapter
3-25
Normal Balance
Normal Balance
Chapter
3-27 Chapter
3-26
Chapter
2-9 LO 2
Debits
Debits and
and Credits
Credits Summary
Summary
Balance Sheet Income Statement
Debit
Credit
Review Question
Debits:
a. increase both assets and liabilities.
b. decrease both assets and liabilities.
c. increase assets and decrease liabilities.
d. decrease assets and increase liabilities.
Discussion Question
Q4. Maria Alvarez, a beginning accounting
student, believes debit balances are favorable
and credit balances are unfavorable. Is Maria
correct? Discuss.
exceed credits.
Normal Balance
Chapter
3-23
Liabilities – Credits
should exceed debits.
Liabilities
Chapter
3-24
equity (credit).
Chapter
3-25
decrease owner’s equity (debit).
Chapter Chapter
3-25 3-23
Expense
is the same as their effect
Debit / Dr. Credit / Cr.
on Owner’s Capital.
Chapter
3-27
owner’s equity.
Chapter LO 2 Define debits and credits and explain their
2-15
use in recording business transactions.
Debits
Debits and
and Credits
Credits Summary
Summary
Review Question
Accounts that normally have debit balances are:
a. assets, expenses, and revenues.
b. assets, expenses, and owner’s capital.
c. assets, liabilities, and owner’s drawings.
d. assets, owner’s drawings, and expenses.
Expanded
Basic
Equation
Chapter
2-18 LO 3 Identify the basic steps in the recording process.
The
The Journal
Journal
Chapter
2-19 LO 3 Identify the basic steps in the recording process.
Journalizing
Journalizing
Journalizing - Entering transaction data in the journal.
E2-4 (Facts) Presented below is information related to
Hanshew Real Estate Agency.
General Journal
Date Account Title Ref. Debit Credit
Oct. 1 Cash 15,000
Hanshew, Capital 15,000
(Owners investment)
Chapter
2-21 LO 4 Explain what a journal is and how it helps in the recording process.
Journalizing
Journalizing
E2-4 (Facts) Presented below is information related
to Hanshew Real Estate Agency.
Oct. 3 Purchases office furniture for $1,900, on
account.
General Journal
Date A c c ount T itle Ref . Deb it Cred it
O c t. 3 Off ic e Furniture 1,9 00
Ac coun ts Pa ya b le 1,90 0
(Purcha se f urniture)
Chapter
2-22 LO 4 Explain what a journal is and how it helps in the recording process.
Journalizing
Journalizing
E2-4 (Facts) Presented below is information related
to Hanshew Real Estate Agency.
Oct. 6 Sells a house and lot for B. Kidman; bills B.
Kidman $3,200 for realty services provided.
General Journal
Date A c c ount T itle Ref . Deb it Cred it
Oc t. 6 Ac c ounts Rec eiva b le 3,2 00
S ervic e Revenue 3 ,200
(Rea lty servic es provid ed )
Chapter
2-23 LO 4 Explain what a journal is and how it helps in the recording process.
Journalizing
Journalizing
E2-4 (Facts) Presented below is information related
to Hanshew Real Estate Agency.
Oct. 27 Pays $700 on balance related to transaction of
Oct. 3.
General Journal
Date A c c ount T itle Ref . Deb it Cred it
Oc t. 27 Ac c ounts Pa ya b le 700
C a sh 70 0
(Pa yment on a cc ount)
Chapter
2-24 LO 4 Explain what a journal is and how it helps in the recording process.
Journalizing
Journalizing
E2-4 (Facts) Presented below is information related
to Hanshew Real Estate Agency.
Oct. 30 Pays the administrative assistant $2,500
salary for Oct.
General Journal
Date A c c ount T itle Ref . Deb it Cred it
Oc t. 30 S a la ry Ex pense 2 ,50 0
C a sh 2,500
(Pa yment f or sa la ries)
Chapter
2-25 LO 4 Explain what a journal is and how it helps in the recording process.
Journalizing
Journalizing
Simple Entry – Two accounts, one debit and one credit.
Compound Entry – Three or more accounts.
Example – On June 15, H. Burns, purchased equipment
for $15,000 by paying cash of $10,000 and the balance
on account (to be paid within 30 days).
General Journal
Date A c count Title Ref . Deb it Cred it
J une 15 Eq uipment 15,000
C ash 10,00 0
Ac c ounts Pa yab le 5,0 00
(Purc ha sed equipment)
Chapter
2-26 LO 4 Explain what a journal is and how it helps in the recording process.
The
The Ledger
Ledger
Chapter
2-27 LO 5 Explain what a ledger is and how it helps in the recording process.
Chart
Chart of
of Accounts
Accounts
Accounts and account numbers arranged in sequence in
which they are presented in the financial statements.
Hanshew Real Estate Agency
Chart of Accounts
Assets Owner's Equity
101 Cash 300 Hanshew, Capital
112 Accounts receivable 306 Hanshew, Drawing
126 Advertising supplies 350 Income summary
130 Prepaid insurance
150 Office equipment Revenues
158 Accumulated depreciation 400 Service revenue
Liabilities Expenses
200 Accounts payable 631 Advertising supplies expense
201 Notes payable 711 Depreciation expense
209 Unearned revenue 722 Insurance expense
212 Salaries payable 726 Salaries expense
230 Interest payable 729 Rent expense
905 Interest expense
Chapter
2-28 LO 6 Explain what posting is and how it helps in the recording process.
Standard
Standard Form
Form of
of Account
Account
Chapter
2-29 LO 5 Explain what a ledger is and how it helps in the recording process.
Posting
Posting
Posting – the process of transferring amounts from the
journal to the ledger accounts.
General Journal J1
Date Account Title Ref. Debit Credit
Oct. 1 Cash 101 15,000
Hanshew, Capital 15,000
(Owner's investment in business)
General Ledger
Cash Acct. No. 101
Date Explanation Ref. Debit Credit Balance
Oct. 1 J1 15,000 15,000
Chapter
2-30 LO 6 Explain what posting is and how it helps in the recording process.
Posting
Posting
Review 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.
Chapter
2-31 LO 6 Explain what posting is and how it helps in the recording process.
The
The Recording
Recording Process
Process Illustrated
Illustrated
Illustration 2-19
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.
Chapter
2-32 LO 6 Explain what posting is and how it helps in the recording process.
The
The Trial
Trial Balance
Balance
Chapter
2-33 LO 7 Prepare a trial balance and explain its purposes.
The
The Trial
Trial Balance
Balance
Chapter
2-34 LO 7 Prepare a trial balance and explain its purposes.
The
The Trial
Trial Balance
Balance
Review 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.
Chapter
2-35 LO 7 Prepare a trial balance and explain its purposes.
Recording
Recording Process
Process
Discussion Question
Q2-19. Jim Benes is confused about how accounting
information flows through the accounting system. He
believes the flow of information is as follows.
a. Debits and credits posted to the ledger.
b. Business transaction occurs.
c. Information entered in the journal.
d. Financial statements are prepared.
e. Trial balance is prepared.
Is Jim correct? If not, indicate to Jim the proper flow
of the information.
See notes page for discussion
Chapter
2-36 LO 7 Prepare a trial balance and explain its purposes.
Copyright
Copyright
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information contained herein.
Chapter
2-37