Review based on Accounting Principles (Part 1) by Weygandt, Kieso, Kimmel, Trenholm and Kinnear

The Recording Process Chapter 2 Review

Accounts
Assets = Liabilities + Owner's Equity

Assets Dr. Cr.

Liabilities Dr. Cr.

Investments Dr. Cr.

Drawings Dr. Cr.

Revenues Dr. Cr.

Expenses Dr. Cr.

Examples Assets Cash Accounts Receivable Prepaid Assets Supplies Machinery Building Inventory Liabilities Accounts Payable Notes Payable Interest Payable Mortgage Payable Bank Loan Unearned Revenue Equity Capital Drawings Revenues Sales Revenue Services Revenue Interest Revenue Expenses Cost of Goods Sold Utilities Expense Rent Expense Salaries Expense Advertising Expense

Accounting Cycle (Page 172)

Journalizing
Double-entry system: 1 transaction = 2 accounts affected

Example 1: Date June 17

On June 17, Crystals Co. sold crystals for cash, $3900. Account Cash Sales Revenue Dr. 3,900 3,900 Cr.

Example 2: Date June 28

On June 28, Crystals Co. purchased computer equipment for $ 2,300. Account Computer Equipment Cash Dr. 2,300 2,300 Cr.

ACCT 112 Financial Accounting 1

The Recording Process Chapter 2 Review

Posting to General Ledger

General Ledger Cash Ref.

Date June 17 June 28

Explanation Starting Balance Sale of crystals Purchase of Computer Equipment

Debit 3,900

Credit

2,300

Balance $0 3,900 1,600

Date June 28

General Ledger Computer Equipment Explanation Ref. Debit Starting Balance Purchase of Computer Equipment 2,300

Credit

Balance $0 2,300

Date June 17

Explanation Starting Balance Sale of crystals

General Ledger Sales Revenue Ref.

Debit

Credit 3,900

Balance $0 3,900

Preparing a Trial Balance (Page 70)

Trial Balance list of accounts and their balances at a specific time; its purpose is to check that debits equal credits after posting Crystals Co. Trial Balance 10/31/2008 Cash Computer Equipment Sales Revenue Totals Debits 1,600 2,300 3,900 Credits

3,900 3,900

ACCT 112 Financial Accounting 1