Analyzing & Recording Business Transactions

Chapter 2

Source documents Identify and describe transactions

and events entering the accounting process.

Account Is a record of increases and

decreases in a specific asset, liability, equity, revenue or expense

Ledger Is a record containing all accounts used

by a company

Assets Cash Accounts

receivable What customers

owe us Note receivable Prepaid Accounts Supplies Equipment

Liabilities Accounts payable

Money owed to suppliers

Notes payable Unearned revenue

Deposits from customers

Equity Common Stock

Shareholders investment in the business

Dividends Distributions of

income to shareholders

Retained Earnings

Chart of Accounts List of an accounts a company uses

and includes an idea. 101-199 Assets 201-299 Liabilities 301-399 Equity 401-499 Revenues 501-599 Expenses

T- Accounts

Debit Credit

Left side Right side

Accounting Equation

Assets =

DR CR

Liabilities

DR CR

+ Equity

DR CR

Double entry accounting: each transactions affect, And recorded in, at least two accounts

Debits = Credits

Journal Journal

Gives a complete record of each transaction in one place

Journalizing Process of

recording transactions

Posting Process of

transferring journal entry info to the ledger

Journal

Date Account PR Debit Credit

Journal Entries Go to excel worksheet

Transactions Shareholder invests in the business

$30,000 in cash Co pays $2,500 cash for supplies Co pays $26,000 cash for equipment Co purchases $7,100 of supplies on

account ( on credit) Co provides consulting services and

collects $4,200 cash

Transactions Co pays for $1,000 cash for rent Co pays $700 cash for salaries Co provides consulting services of

$1,600 and bills the customer Co receives $1,600 cash from the

client billed Co pays $900 on account Co pays dividends $1,000

Transactions Co receives $3,000 cash in advance Co pays $2,400 cash for insurance

for one year

Posting to the ledger Record the transactions into ledger

by account name Prepare a TRIAL BALANCE

List of accounts and balances