Analyzing

Transactions
SUMBER : FEES AND WARREN
 2
Analyzing
Transactions
After studying this chapter, you should be able to:
1. Describe the characteristics of an account and
record transactions using a chart of accounts
and journal.
2. Describe and illustrate the posting of journal
entries to accounts.
3. Prepare an unadjusted trial balance and explain
how it can be used to discover errors.
4. Discover and correct errors in recording
transactions.
 2-1

Objective
Objective 11
Describe the characteristics of
an account and record
transactions using a chart of
accounts and journal.
 2-1

Accounting systems are

designed to show the increases
and decreases in each financial
statement item as a separate
record. This record is called an
account.
The T Account 2-1

Title

The T account has

a title.

5
 2-1

Title
Debit
The left side of
the account is
called the debit
side.

6
 2-1

Title
Debit Credit
The right side of the
account is called the
credit side.

7
 2-1

Title
Debit Credit

Amounts
entered on the
left side are
debits.
8
 2-1

Title
Debit Credit

Amounts
entered on the
right side are
credits.
9
 2-1
(In Rp 000)
Cash
(a) 25,000 (b) 20,000
(d) 7,500 (e) 3,650
(f) 950
(h) 2,000
Balance 5,900
Balance
Balanceof
ofthe
theaccount
account
10
 2-1

A group of accounts
for a business entity is
called a ledger.
 2-1

A list of the accounts

in a ledger is called a
chart of accounts.
 2-1

Assets are resources owned

by the business entity.
• Cash
• Supplies
• Prepaid expenses
• Buildings
 2-1

Liabilities are debts owed to

outsiders (creditors).
• Accounts payable
• Notes payable
• Wages payable
 2-1

Owner’s equity is the owner’s

right to the assets of the
business. A drawing account
represents the amount of
withdrawals by the owner.
 2-1

Revenues are increases in

owner’s equity as a result
of selling services or
products to customers.
• Fees earned
• Commission revenue
• Rent revenue
 2-1

The using up of assets or

consuming services in the
process of generating
revenues results in expenses.
• Wages expense
• Rent expense
• Miscellaneous expense
 2-1

Every transaction affects

at least two accounts.
Journalizing 2-1

This transaction is initially

entered in a record called a
journal. The process of
recording a transaction in the
journal is called journalizing.
 2-1

Journalizing requires the following steps:

1. Record the date. If this is the first entry on
the page, the year is inserted above the
month. As long as the month does not
change, the rest of the journal entries on
the require on the day be recorded.
2. The title of the account debited is listed in
the Description column.

(Continued)
 2-1

3. Enter the amount in the Debit column.

4. Record the credit account in the
Description column.
5. Enter the amount in the Credit column.

Watch these steps take place as the entry

to record Chris Clark’s deposit is
presented in the next slide.
Balance Sheet Accounts 2-1

@solusinet

(a) On November 1, Cita Cinta opens a

new business and deposits Rp.
25,000,000 in a bank account in the
name of SolusiNet.
 2-1

JOURNAL Page 1

Date Description P.R. Debit Credit

2007
1 Nov. 1 Cash 25 000 000
2 Cita Cinta, Capital 25 000 000
3 Invested cash in SolusiNet.
4

23
 2-1

The effect of this entry is shown in the

accounts of SolusiNet as follows:
Cash Cita Cinta, Capital
Nov. 1 25,000 Nov. 1 25,000

(In Rp 000)
 2-1

@solusinet

(b) On November 5,
SolusiNet bought land
for Rp 20,000,000
paying cash.
 2-1

5 Land 20 000 000

Cash 20 000 000
Purchased land for
building site.

26
 2-1

@solusinet

(c) On November 10,

SolusiNet purchased
supplies on account for
Rp1,350,000
 2-1

10 Supplies 1 350 000

Accounts Payable 1 350 000
Purchased supplies on
account.

28
 2-1

@solusinet

(f) On November 30,

SolusiNet paid
creditors on account,
Rp. 950,000
 2-1

30 Accounts Payable 950 000

Cash 950 000
Paid creditors on
account.

30
 2-1

Balance Sheet Accounts

Debits Credits
Asset accounts……. Increase (+) Decrease (-)
Liability accounts.… Decrease (-) Increase (+)
Owner’s equity (capital) accounts…
Decrease (-) Increase (+)

31
 2-1

Balance Sheet Accounts

Asset Accounts Liability Accounts
Debit for Credit for Debit for Credit for
increases decreases decreases increases
(+) (–) (–) (+)
Owner’s Equity Accounts
Debit for Credit for
decreases increases
(–) (+)
32
 2-1

Example Exercise 2-1

Prepare a journal entry for the purchase of a truck on June 3

for Rp.42,500, 000 paying Rp.8,500,000 cash and the
remainder on account.

Follow My Example 2-1

June 3 Truck Rp. 42,500,000

Cash 8,500,000
Accounts Payable 34,000,000

33
For Practice: PE 2-1A, PE 2-1B
Income Statement Accounts 2-1

@solusinet

(d) On November 18, SolusiNet

received fees of Rp7,500,000 from
customers for services provided.
 2-1

30 Cash 7 500 000

Fees Earned 7 500 000
Received fees from
customers.

35
 2-1

@solusinet

(e) Throughout the month, SolusiNet

incurred the following expenses:
wages, Rp. 2,125,000; rent Rp.
800,000; utilities, Rp. 450,000; and
miscellaneous, Rp.275,000.
 2-1

30 Wages Expense 2 125 000

Rent Expense 800 000
Utilities Expense 450 000
Miscellaneous Expense 275 000

Cash 3 650000
Paid expenses.

37
 2-1

@solusinet

(g) On November 30, a count

revealed that Rp.800,000 of
the supplies inventory had
been used during the month.
 2-1

30 Supplies Expense 800 000

Supplies 800 000
Supplies used during
November.

39
Income Statement Accounts 2-1

Debits Credits
Revenue accounts… Decrease (-) Increase (+)
Expense accounts… Increase (+) Decrease (-)

40
 2-1

Income Statement Accounts

Revenue Accounts
Debit for Credit for
decreases increases
(–) (+)
Less
Expense Accounts
Debit for Credit for
increases decreases
(+) (–)
41
Continued
 2-1

Equals

Net Income (credit > debits)

increases owners’ equity (capital)

Net Loss (debits > credits) decreases

owners’ equity (capital)

42
 2-1

Example Exercise 2-2

Prepare a journal entry on August 7 for the fees earned on

account, Rp.115,000,000.

Follow My Example 2-2

Aug. 7 Accounts Receivable 115,000,000
Fees Earned 115,000,000

43
For Practice: PE 2-2A, PE 2-2B
Drawing Account 2-1

The owner of a proprietorship may

withdraw cash from the business for
personal use. Such withdrawals have the
effect of decreasing owner’s equity.
 2-1

@solusinet

(h) On November 30, Cita Cinta

withdrew Rp.2,000,000 in cash
from SolusiNet for personal use.
 2-1

2007
Nov 30 Cita Cinta, Drawing 2 000 000
Cash 2 000 000
Cita Cinta withdrew
cash for personal use.

46
 2-1

Example Exercise 2-3

Prepare a journal entry on December 29 for the payment of

Rp.12,000,000 to the owner of Smartstaff Consulting
Services, Dominique Walsh, for personal use.

Follow My Example 2-3

Dec. 29 Dominique Walsh, Drawing 12,000,000
Cash 12,000,000

47
For Practice: PE 2-3A, PE 2-3B
 2-1

Increase
(Normal Bal.) Decreases
Balance sheet accounts:
Asset Debit Credit
Liability Credit Debit
Owner’s Equity:
Capital Credit Debit
Drawing Debit Credit
Income statement accounts:
Revenue Credit Debit
Expense Debit Credit
48
 2-1

Example Exercise 2-4

State for each account whether it is likely to have (a)
debit entries only, (b) credit entries only, or (c) both
debit and credit entries. Also, indicate its normal
balance.
1. Ambarwati, Drawing
2. Accounts Payable
3. Cash
4. Fees Earned
5. Supplies
6. Utilities Expense
49
 2-1

Follow My Example 2-4

1. Debit entries only; normal debit balance

2. Debit and credit entries; normal credit balance
3. Debit and credit entries; normal debit balance
4. Credit entries only; normal credit balance
5. Debit and credit entries; normal debit balance
6. Debit entries only; normal debit balance

50

For Practice: PE 2-4A, PE 2-4B

 2-1

The equality of debits and credits

for each transaction is built into the
accounting equation: Assets =
Liabilities + Owner’s Equity.
Because of this double equality,
this system is called the double-
entry accounting system.
Transaction Analysis 2-1

1. Determine whether an asset, liability,

owner’s equity, revenue, expense, or
drawing account is affected by the
transaction.
2. For each account affected by the transaction,
determine whether the account increases or
decreases.
3. Determine whether each increase or
decrease should be recorded as a debit or a
credit.
Continued
 2-1

4. Record the transaction using a journal

entry.
5. Periodically post journal entries to the
accounts in the ledger.
6. Prepare an unadjusted trial balance at
the end of the period.
 2-2

Objective
Objective 22
Describe and illustrate
the posting of journal
entries to the accounts.
 2-2

The process of transferring

the debits and credits from
the journal entries to the
accounts is called posting.
 2-2

@solusinet

Dec. 1 SolusiNet paid a premium of

Rp.2,400,000 for a
comprehensive insurance policy
covering liability, theft and fire.
The policy covers a one-year
period.
 2-2

(In Rp. 000)

57
 2-2

@solusinet
Dec. 1 SolusiNet paid rent for December,
Rp.800,000. The company from
which SolusiNet is renting its store
space requires the payment of rent
on the first of each month, rather
than at the end of the month.
 2-2

1 Rent Expense 52 800 000

Cash 11 800 000
Paid rent for
December.

59
 2-2

An alternative approach is to debit

Rent Expense for Rp.800,000 on
December 1. This avoids having to
transfer the balance to an expense
account at the end of the month.
 2-2

SolusiNet received an offer from a local

retailer to rent the land purchased on
November 5. The retailer plans to use
the land as a parking lot for its employees
and customers. SolusiNet agreed to rent
the land to the retailer for three months,
with the rent payable in advance.
 2-2

@solusinet
Dec. 1 SolusiNet receives Rp. 360,000
for three month’s rent for use of
its land beginning December 1.

1 Cash 11 360 000

Unearned Rent 23 360 000
Received advance
payment for three
months’ rent on land.
62
 2-2

@solusinet
Dec. 4 SolusiNet purchased office equipment
on account from PD.Tunas Jaya. for
Rp.1,800,000

4 Office Equipment 18 1 800 000

Accounts Payable 21 1 800 000
Purchased office
equipment on account.
63
 2-2

@solusinet
Dec. 6 SolusiNet paid Rp.180,000 for
a newspaper advertisement.

6 Miscellaneous Expense 59 180 000

Cash 11 180 000
Paid for newspaper ad.

64
 2-2

@solusinet
Dec. 11 SolusiNet paid
creditors Rp.400,000

11 Accounts Payable 21 400 000

Cash 11 400 000
Paid creditors on
account.

65
 2-2

@solusinet
Dec. 13 SolusiNet paid a receptionist and
part-time assistant Rp.950,000 for
two weeks’ wages.

13 Wages Expense 51 950 000

Cash 11 950 000
Paid two weeks’ wages.

66
 2-2

@solusinet
Dec. 16 SolusiNet received
Rp.3,100,000 from fees earned
for the first half of December.

16 Cash 11 3 100 00
Fees Earned 41 3 100 00
Received fees from
customers.

67
 2-2
@solusinet
Dec. 16 Fees earned on account
totaled Rp.1,750,000 for the
first half of December.

16 Accounts Receivable 12 1 750 000

Fees Earned 41 1 750 000
Recorded fees earned
on account.

68
 2-2
@solusinet

Dec. 20 SolusiNet paid Rp.900,000 to Executive

Supply Co. on the Rp.1,800,000 debt
owed from the December 4 transaction.
20 Accounts Payable 21 900 000
Cash 11 900 000
Paid part of amount
owed to Executive
Supply Co.

69
 2-2
@solusinet

Dec. 21 SolusiNet received

Rp.650,000 from customers
in payment of their accounts.

21 Cash 11 650 000

Accounts Receivable 12 650 000
Received fees from
customers on account.

70
 2-2
@solusinet

Dec. 23 SolusiNet paid Rp

1,450,000 for supplies.

23 Supplies 14 1 450 000

Cash 11 1 450 000
Purchased supplies.

71
 2-2
@solusinet

Dec. 27 SolusiNet paid the receptionist

and part-time assistant
Rp.1,200,000 for two weeks’
wages.
27 Wages Expense 51 1 200 000
Cash 11 1 200 000
Paid two weeks’ wages.

72
 2-2
@solusinet

Dec. 31 NetSolutions paid Rp.310,000

for telephone charges for the
month.
31 Utilities Expense 54 310 000
Cash 11 310 000
Paid telephone charges.

73
 2-2
@solusinet

Dec. 31 SolusiNet paid Rp.225,000 for

electric usage for the month.
JOURNAL Page 1
Post.
Date Description Debit Credit
2007
Ref.
Dec 31 Utilities Expense 54 225 000
Cash 11 225 000
Paid for electric usage.

74
 2-2
@solusinet

Dec. 31 SolusiNet received Rp.2,870,000

from fees earned for the second
half of December.

31 Cash 11 2 870 000

Fees Earned 41 2 870 000
Received fees from
customers.
75
 2-2
@solusinet

Dec. 31 NetSolutions earned

Rp.1,120,000 on account
for the second half of
December.
31 Accounts Receivable 12 1 120 000
Fees Earned 41 1 120 000
Recorded fees earned
on account.
76
 2-2
@solusinet

Dec. 31 Cita Cinta withdrew

Rp.2,000,000 for personal use.

31 Cita Cinta, Drawing 32 2 000 000

Cash 11 2 000 000
Cita Cinta withdrew
cash for personal use.

77
 2-2

Example Exercise 2-5

On March 1, the cash account balance was
Rp. 22,350,000. During March, cash
receipts totaled Rp.241,880,000 and the
March 31 balance was Rp.19,125,000.
Determine the cash payments made during
March.

78
 2-2

Follow My Example 2-5 In Rp.000

Using the following T-account solve for the amount of
cash payment (indicated by ? below).
Cash
Mar. 1 Bal 22,350 ? Cash payments
Cash receipts 241,880
Mar. 31 Bal. 19,125

Rp.19,125 = Rp.22,350 + Rp.241,880 – Cash payments

Cash payments = Rp.22,350 + Rp.241,880 –Rp.19,125 =
Rp.245,105
79
For Practice: PE 2-5A, PE 2-5B
 2-3

Objective
Objective 33
Prepare an unadjusted
trial balance and explain
how it can be used to
discover errors.
 2-3

The equality of debits and credits

in the ledger should be proved at
the end of each accounting period
by preparing a trial balance. The
heading should first list the name
of the company, the statement’s
title, and the date it is prepared.
 2-3
SolusiNet
Unadjusted Trial Balance
31-Dec-07
In Rp.
Debit Credit
Balances Balances
Cash 2 0 6 5 000
Account Receivable 2 2 2 0 000
Supplies 2 0 0 0 000
Prepaid Insurance 2 4 0 0 000
Land 20 0 0 0 000
Offi ce Equipment 1 8 0 0 000
Account Payable 9 0 0 000
Unearned Rent 3 6 0 000
Chris Clark, Capital 25 0 0 0 000
Chris Clark, Drawing 4 0 0 0 000
Fees Earned 16 3 4 0 000
Wages Expense 4 2 7 5 000
Rent Expense 1 6 0 0 000
Utilities Expense 9 8 5 000
Suppliexpense 8 0 0 000
Miscellaneous Expense 4 5 5 000 82
42 6 0 0 000 42 6 0 0 000
 2-4

Objective
Objective 44
Discover and correct
errors in recording
transactions.
 2-4

A transposition occurs when

the order of the digits is
changed mistakenly, such as
writing Rp.542,000 as
Rp.452,000 or Rp.524,000.
In a slide, the entire number is
mistakenly moved one or more
spaces to the right or the left, such
as writing RP.542.000 as $54,200.
 2-4

Another type of error is a posting

error. Assume that on May 5 a
Rp.12,500,000 purchase of office
equipment on account was
incorrectly journalized and posted
as a debit to Supplies and a credit
to Accounts Payable for
Rp.12,500,000.
Entry to Correct Error 2-4

May 31 Office Equipment 18 12 500 000

Supplies 14 12 500 000
To correct erroneous
debit to Supplies on
May 5. See invoice
from Bella Office
Equipment Company.

88
 2-4

Example Exercise 2-7

The following errors took place in journalizing and
posting transactions:
a. A withdrawal of Rp.6,000,000 by Roni Ahmad,
owner of the business, was recorded as a debit to
Office Salaries Expense and a credit to Cash.
b. Utilities Expense of Rp.4,500,000 paid for the
current month was recorded as a debit to
Miscellaneous Expense and a credit to Accounts
Payable.
Journalize the entries to correct the errors. Omit
explanations. 89
 2-4

Follow My Example 2-7 In Rp.000

a. Cheri Ramey, Drawing 6,000
Office Salaries Expense 6,000
b. Accounts Payable 4,500
Miscellaneous Expense 4,500
Utilities Expense 4,500
Cash 4,500
Note: The first entry in (b) reverses the incorrect
entry, and the second entry records the correct
entry. 90
For Practice: PE 2-7A, PE 2-7B