The Recording Process

Chapter

2
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 Analyzing and Recording Process

Analyze each transaction and Record relevant transactions

event form Source documents and events in a Journal

Post Journal
Prepare and analyze information to General
the Trial Balance Ledger Accounts
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 Source Documents
Bills from
Cheques Suppliers Purchase
Orders
Employee
Earnings
Record Bank
Statement

Sales
Tickets

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 Journalizing Transactions
 Transaction  Titles of Affected
Date Accounts

 Transaction  Dollar amount of

explanation debits and credits
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 The Account and its Analysis

An Account is a
record of
increases and The General
decreases in a Ledger is a record
specific asset, containing all
liability, equity, accounts used by
revenue, or the company.
expense item.

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The Account and its Analysis

Assets Liabilities Equity

Accounts = Accounts + Accounts

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 The Account and its Analysis

Assets = Liabilities + Equity

+ – + –
Owner’s Owner’s
Revenues Expenses
Capital Withdrawals

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 Debits and Credits
A T-account represents a ledger account and is a tool
used to understand the effects of one or more
transactions.

T- Account
(Left side) (Right side)
Debit Credit

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 Double-Entry Accounting

Assets = Liabilities + Equity

ASSETS LIABILITIES EQUITIES

Debit Credit Debit Credit Debit Credit

+ - - + - +

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 Exh.
3.8

Double-Entry Accounting

Equity

Capital Withdrawals Revenues Expenses

Debit Credit Debit Credit Debit Credit Debit Credit

- + + - - + + -
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 Double-Entry Accounting
An account balance is the difference between
the increases and decreases in an account.

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 Balance Column Account
T-accounts are useful illustrations, but balance
column ledger accounts are used in practice.

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 Posting Journal Entries

1 Identify the account.

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 Posting Journal Entries

2 Enter the date.

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 Posting Journal Entries

Enter the amount and description. 3

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 Posting Journal Entries

Enter the journal reference. 4

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 Posting Journal Entries

Compute the balance.

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 Posting Journal Entries

Enter the ledger reference. 6

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 Analyzing Transactions – An Illustration

Analysis:

Double entry: Dr Cr
(1) Cash 30,000
C. Taylor, Capital 30,000
Posting:
Cash C. Taylor, Capital
(1) 30,000 (1) 30,000

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 Analyzing Transactions – An Illustration

Analysis:

Double entry: Dr Cr
(2) Supplies 2,500
Cash 2,500

Posting:
Supplies Cash
(2) 2,500 (1) 30,000 (2) 2,500

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 Analyzing Transactions – An Illustration

Analysis:

Double entry: Dr Cr
(3) Equipment 26,000
Cash 26,000

Posting:
Equipment Cash
(3) 26,000 (1) 30,000 (2) 2,500
(3) 26,000

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 Analyzing Transactions – An Illustration

Analysis:

Double entry: Dr Cr
(4) Supplies 7,100
Accounts payable 7,100

Posting:
Supplies Accounts Payable
(2) 2,500 (4) 7,100
(4) 7,100

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 Analyzing Transactions – An Illustration

Analysis:

Double entry: Dr Cr
(5) Cash 4,200
Consulting Revenue 4,200

Posting:
Consulting Revenue Cash
(5) 4,200 (1) 30,000 (2) 2,500
(5) 4,200 (3) 26,000

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 Trial Balance

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 Practise Question
Zain Ltd started its operations on Jan 01, 2013.
It’s business transactions are as follows;
(1) Share Capital introduced £500,000
(2) Plant & Machinery acquired £200,000
(3) Supplies Purchased £50,000
(4) Rent for the office paid £24,000
(5) Salaries to the staff paid £15,000
(6) Sales for the year £100,000
Prepare Journal Entries, Ledger Accounts and
the Trial Balance.
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 Searching for and Correcting Errors
If the trial balance does not balance, the error(s) must
be found and corrected.
Make sure the trial balance Recompute each account
columns are correctly added. balance in the ledger.

Make sure account

balances are correctly Verify that each journal
entered into the ledger. entry is posted correctly.

See if debit or credit Verify that each original

accounts are mistakenly journal entry has equal
placed on the trial balance. debits and credits.
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 End of Chapter 2

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