24314920 Financial Managerialaccounting 15e Williams Haka Bettner Chap3
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Transcript of 24314920 Financial Managerialaccounting 15e Williams Haka Bettner Chap3
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5/28/2018 24314920 Financial Managerialaccounting 15e Williams Haka Bettner Chap3
1/15McGraw-Hill/Irwin Copyright 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
The Accounting Cycle:
Capturing Economic Events
Chapter 3
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3-2
The Ledger
The entire group of
accounts is kepttogether in an
accounting record
called a ledger.
Cash
Accounts
Payable
Capital
Stock
Accountsare
individual records
showing increases
and decreases.
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3-3
The Use of Accounts
Increases are
recorded on oneside of the T
account, and
decreasesare
recorded on theother side.
Left
or
Debit
Side
Right
or
Credit
Side
Title of Account
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3-4
Cash
5/1 8,000 5/2 2,500
5/25 75 5/8 2,0005/29 750 5/28 150
5/31 50
5/31 4,125
Bal.
Receipts are
on the debit
side.
Payments are
on the credit
side.
The balance is the
difference between the
debit and credit entries
in the account.
Debit and Credit Entries
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A = L + OEASSETSDebit
for
Increase
Credit
for
Decrease
EQUITIES
Debit
for
Decrease
Credit
for
Increase
LIABILITIES
Debit
for
Decrease
Credit
for
Increase
Debits and credits affect accounts as follows:
Debit and Credit Entries
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In an actual accounting system,transactions are initially recorded in the
journal.
GENERAL JOURNAL
Date Account Titles and Explanation Debit Credit
2009
May 1 Cash 8,000
Capital Stock 8,000
Owners invest cash in the business.
The Journal
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Posting Journal Entries to the
Ledger Accounts
Postingsimply
means updating theledger accounts forthe effects of the
transactionsrecorded in thejournal.
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GENERAL JOURNAL
Date Account Titles and Explanation Debit Credit
2009
May 1 Cash 8,000
Capital Stock 8,000
Owners invest cash in the business.General Ledger
Cash
Date Debit Credit Balance
2009
May 1 8,000 8,000
Posting Journal Entries to the
Ledger Accounts
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GENERAL JOURNAL
Date Account Titles and Explanation Debit Credit
2009
May 1 Cash 8,000
Capital Stock 8,000
Owners invest cash in the business.General Ledger
Capital Stock
Date Debit Credit Balance
2009
May 1 8,000 8,000
Posting Journal Entries to the
Ledger Accounts
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General Ledger
Cash
Date Debit Credit Balance
2009May 1 8,000 8,000
2 2,500 5,500
T accountsare simplified versions ofthe ledger account that only show the
debit and credit columns.
Ledger Accounts After Posting
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Net income is not an asset its an increase
in owners equity from profits of the
business.
A = L + OEIncrease Decrease
As income is earned,
either an asset is
increased or a liability is
decreased.
Increase
Net income
always results in
the increase of
Owners Equity
What is Net Income?
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Revenue and Expenses
The price for
goods sold
and services
rendered during a
given accountingperiod.
Increases
owners equity.
The costs ofgoods and
services used up
in the process of
earning revenue.
Decreases
owners equity.
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Debit and Credit Rules for
Revenue and Expenses
EQUITIES
Debit
for
Decrease
Credit
for
Increase
Expenses
decrease
owners
equity.
Revenues
increase
owners
equity.
EXPENSESCredit
for
Decrease
Debit
for
Increase
REVENUESDebit
for
Decrease
Credit
for
Increase
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EQUITIES
Debit
for
Decrease
Credit
for
Increase
Payments toowners
decrease
owners
equity.
Ownersinvestments
increase
owners
equity.
DIVIDENDS
Credit
for
Decrease
Debit
for
Increase
Dividends
CAPITAL STOCK
Debit
for
Decrease
Credit
for
Increase
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End of Chapter 3