college accounting - mccchorowitk/documents/chapter04_003.pdf · ©2011 cengage learning. all...

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

College

Accounting

Heintz & Parry20th Edition


Journalizing

and Posting Transactions

4Chapter


1

Describe the flow of

data from source

documents through

the trial balance.


INPUT

Analyze transactions

using

SOURCE DOCUMENTS and

CHART OF ACCOUNTS

STEP #1


PROCESSING

Enter business

transactions in

the

GENERAL

JOURNAL

“Journalizing”

Post the entries

in the journal to

the

GENERAL

LEDGER

“Posting”

From the

general ledger,

prepare a

TRIAL

BALANCE


2

Describe the chart of

accounts as a means

of classifying

financial information.


• A list of ALL accounts used by a business

• In numeric order

• Used to determine which accounts are affected by a given transaction


Assets (100–199)

101 Cash

122 Accts. Rec.

141 Supplies

145 Prepaid Ins.

185 Delivery Eq.

Assets begin with 1


Assets (100–199)

101 Cash

122 Accts. Rec.

141 Supplies

145 Prepaid Ins.

185 Delivery Eq.

Liabilities (200–299)

202 Accts. Pay. Liabilities begin with 2


Assets (100–199)

101 Cash

122 Accts. Rec.

141 Supplies

145 Prepaid Ins.

185 Delivery Eq.


202 Accts Pay.

Owner’s Eq. (300–399)

311 Jessica Jane, Capital

312 Jessica Jane, Drawing


Assets (100–199) Revenues (400–499)

101 Cash 401 Delivery Fees

122 Accts. Rec.

141 Supplies

145 Prepaid Ins.

185 Delivery Eq.


202 Accts Pay.

Owner’s Eq. (300–399)




Assets (100–199) Revenues (400–499)

101 Cash 401 Delivery Fees

122 Accts. Rec.

141 Supplies Expenses (500–599)

145 Prepaid Ins. 511 Wages Exp.

185 Delivery Eq. 521 Rent Exp.

525 Tele. Exp.


202 Accts Pay.

Owner’s Eq. (300–399)




3

Describe and

explain the

purpose of source

documents.


• Trigger the analysis of what happened

• Begin the process of entering transactions in

the accounting system

• Serve as objective evidence of business

transactions

• Filed for possible future reference


1. Check stubs

or copies of

checks Cash payments

EXAMPLE

2. Receipt stubs,

copies of receipts,

cash register tapes,

or memos of cash

register totals

Cash receipts

PROVIDES

INFORMATION ABOUT


1. Copies of

sales tickets

or sales

invoices

issued to

customers or

clients

Sales of goods or services

2. Purchases

invoices received

from suppliers

Purchases of goods or

services

EXAMPLE PROVIDES

INFORMATION ABOUT


4

Journalize

transactions.


• A day-by-day listing of transactions

• Purpose: To provide a record of all transactions

completed by the business

• Commonly referred to as a book of original entry

• The simplest journal form is a two-column general

journal

• The act of entering transactions in a journal is called

journalizing


Jessie invested $2,000 in the

business on June 1, 20--.

NEW!

DATED TRANSACTIONS


DR.

J. JANE, CAPITAL

2,000

CR.

CASH

DR. CR.

2,000

NOW WE WILL“JOURNALIZE”

THIS TRANSACTION

+ +– –

20--JUNE 1

DATE DESCRIPTION PR DEBIT CREDIT

1

2

Step #1ENTER THE DATE

The year and month are only written on the first line of each page.


CASH20--

JUNE 1


1

2

Step #2aENTER THE NAME OF THE ACCOUNT BEING DEBITEDAlign with the left margin


2000 00CASH20--

JUNE 1


1

2

Step #2bENTER THE AMOUNT

OF THE DEBIT


DATE DESCRIPTION PR DEBIT CREDIT20--JUNE 1 CASH

J. JANE, CAPITAL 2000 00

2000 001

2

Step #3ENTER THE ACCOUNT

NAME AND THE AMOUNTOF THE CREDIT




2000 00

Owner’s original

investment in business

Step #4 ENTER THE EXPLANATION

Indent even further

1

2

3

4




2000 00

Owner’s original


Step #5SKIP A LINE

Leave a blank line between transactions

1

2

3

4

5



• An entry requiring more than one debit

and/or more than one credit

• All debits come before any credits


On June 10, 20--,

purchased a $1,500

scooter for $300 cash

and $1,200 on

account.


CASH DELIVERY EQUIP.

Both are asset accounts

DR. CR. DR. CR.

+ +– –


ACCOUNTS PAYABLE

DR. CR.

A liability account

+–


Eachaccount?

Increase orDecrease?

On June 10,

20--,

purchased a

$1,500

scooter for

$300 cash

and $1,200

on account.


On June 10, 20--, purchased a $1,500 scooter for $300 cash and $1,200 on

account.

DELIVERY EQUIPMENT

DR. CR.

INCREASED

1,500+ –


On June 10, 20--, purchased a $1,500

scooter for $300 cash and $1,200 on

account.

CASH

DR. CR.

DECREASED

300+ –


On June 10, 20--, purchased a $1,500

scooter for $300 cash and $1,200 on

account.ACCOUNTS PAYABLE

DR. CR.

INCREASED

1,200– +


DELIVERY EQUIP. CASH

ACCOUNTS PAYABLE

DR. CR.

DR. CR.

DR. CR.

1,500 300

1,200

+ +– –

– +

DATE DESCRIPTION PR DEBIT CREDIT20--JUNE 10 DELIVERY EQUIPMENT

ACCOUNTS PAYABLE

1500 00

CASH

Purchased scooter with

down payment; balance

on account

The order of the credits does not matter, but ALL credits must

come after any debits

1

2

3

4

5

300 00

1200 00



5

Post to the general

ledger and prepare

a trial balance.


• A complete set of all accounts used by a

business

• Similar to T accounts

• Used to keep a complete record of the

debits and credits made to each account as

a result of entries made in the journal

• Numbered and arranged in the same order

as the chart of accounts


• The process of copying debits and credits

from the journal to the ledger accounts

• Done daily or at frequent intervals

• Five-step process


20--JUNE 1 CASH


2000 00

Owner’s original


LET’S POST THE DEBIT PORTION OF THIS ENTRY

TO THE GENERAL LEDGER

1

2

3

4

5


Account: Account No.

DATE ITEM PR DR. CR.BALANCE

DR. CR.

CASH 101

ACCOUNTNAME

EACH ACCOUNTIS NUMBERED




DR. CR.

CASH 101

20--

June 1

STEP #1 RECORD THE DATEThe year and month are only written for

the first entry




DR. CR.

CASH 101

20--

LEAVE “ITEM”COLUMN BLANKUsed for special transactions only

June 1




DR. CR.

CASH 101

20--

STEP #2 ENTER THE

DEBIT AMOUNT

2,000June 1




DR. CR.

CASH 101

20--

STEP #3 ENTER THE NEW BALANCE OF THE

ACCOUNT

2,000 2,000June 1




DR. CR.

CASH 101

20--

STEP #4ENTER THE JOURNAL

PAGE NUMBER“J” for journal and “1” for page 1

2,000 2,000J1June 1



20--JUNE 1 CASH


2000 00

Owner’s original


STEP #5ENTER THE LEDGER

ACCOUNT NUMBER IN THE GENERAL JOURNAL

1

2

3

4

5

101



• Used to prove the equality of the debits and credits

in the ledger accounts

• Can be prepared daily, weekly, monthly, or

whenever desired

• Prepared after all transactions have been

journalized and posted

Jessie Jane’s Campus Delivery

Trial Balance

June 30, 20--

Account Title Acct No. Debit Balance Credit BalanceCash

Accounts Receivable

Supplies

Prepaid Insurance

Delivery Equipment

Accounts Payable

Jessica Jane, Capital

Jessica Jane, Drawing

Delivery Fees

Wages Expense

Rent Expense

Telephone Expense

101

122

141

145

185

202

311

312

401

511

521

525

370 00

650 00

200 00

3600 00

1800 00

2000 00

80 00

150 00

2150 00

650 00

200 00

50 00

5950 00 5950 00©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.


6

Explain how to find

and correct errors.

Sloppy Steve’s Trial Balance

December 31, 20--

Account Title Acct No. Debit Balance Credit BalanceCash

Accounts Receivable

Supplies

Prepaid Insurance

Office Equipment

Accounts Payable

Steve, Capital

Steve, Drawing

Delivery Fees

Wages Expense

Rent Expense

Telephone Expense

101

122

141

145

185

202

311

312

401

511

521

525

850 00

1650 00

600 00

6300 00

1800 00

3500 00

230 00

500 00

5550 00

450 00

200 00

70 00

10580 00 10700 00

Help!! My Trial Balance Doesn’t

Balance



• Double check your addition

Review balances:

o See if any are too large or small, relative to

other accounts, or entered in the wrong column


• Find the difference between the debits and

the credits

Is the difference the amount

of a specific transaction?

Perhaps I forgot to post the debit or credit part of that

transaction?


• Divide the difference by 2

Is this number the amount of a specific

transaction?


Did I post the debit or credit twice, OR post the debit as a credit or vice

versa?


• Divide the difference by 9

If the difference is evenly divisible by 9,

you could have a slide error or a

transposition error


• Occur when the decimal point is “slid”

a digit or two to the right or left

• For example:

The amount was $250, but recorded as $25

The difference is $225 ($250 ÷ $25)

The difference is evenly divisible by 9

($225 ÷ 9 = 25)


• Occur when two digits are reversed

• For example:

The amount was $520, but recorded as

$250

The difference is $270 ($520 – $250)

The difference is evenly divisible by 9

($270 ÷ 9 = 30)


• If steps #1 and #2 don’t work:

Double check your addition for the

ledger accounts

Trace all postings


• Two methods:

Ruling method

Correcting entry method

• Erasing is NOT acceptable

It may suggest that you are trying to

hide something


• Used for two types of errors:

When an incorrect journal entry has been

made, but not yet posted

When a proper entry has been made but

posted to the wrong account or for the

wrong amount


20--SEPT 17 Entertainment Expense

Cash 650 00

650 00

Paid employees

1

2

3

4

5 18

6

Prepaid Insurance

Cash7 Paid premium for

8 eight-month insurance

9 policy

Wages Expense



• Used when an incorrect entry has been:

Journalized and

Posted to the wrong account

• A whole new entry must be made to correct

the accounts


Assume that a $400 payment

for rent was incorrectly debited

to Repair Expense but correctly

credited to Cash.


I need to get $400 out of

Repair Expense and

into Rent Expense

DATE DESCRIPTION PR DEBIT CREDIT20--Sept. 25 Rent Expense 400 001

2

3

4

5

6

7

8

9

To put the $400 spenton rent into the

proper account



20--Sept. 25 Rent Expense

Repair Expense 400 00

400 001

2

3

4

5

6

7

8

9

To remove the $400 put in Repair Expense

by error



20--Sept. 25 Rent Expense

Repair Expense 400 00

400 00

To correct error in which

1

2

3

4

5

6

7

8

9

payment for rent was

debited to Repair Expense

To explain that this entry was made to correct an error in a prior transaction




DR. CR.

Rent Expense 521

20--Sept. 25 400 400J6Correcting

Indicates this came froma correcting entry in the

general journal




DR. CR.

Repair Expense 537

20--

Sept. 10 50 50J5

Correcting

15

25

J5

J6

400 450

400 50

The balance is now correct;the $400 error has been

removed©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

college accounting - mccchorowitk/documents/chapter04_003.pdf · ©2011 cengage learning. all...

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