Copyright 2006 Pearson Education Canada Inc. 4-1.


Outline The Accounting Cycle Transactional Analysis: Step 1 Journalizing: Step 2 The General Journal Steps 3 and 4 of the Accounting Cycle Posting to the General Journal: Step 3 The General Ledger and “T” Accounts Posting Procedures: An Illustration The Chart of Accounts Taking the Trial Balance: Step 4 Discovering Sources of Error Computers in Accounting


The Accounting Cycle

STEP ONEANALYZING TRANSACTIONS

STEP TWOJOURNALIZING

STEP THREEPOSTING

STEP FOURTAKING THE TRIAL BALANCE


Transactional Analysis: Step 1

Transactional analysis – Identification of business transaction

Determine values received – Debits Determine values given – Credits DEBITS = CREDITS


Journalizing: Step 2 Recording values received

(debits) and values given (credits) in a journal

Chronological recording of the transaction - like keeping a business diary

Debits = Credits


The General Journal

Used to record hospitality entity transactions in chronological order

1. Date Column

2. Account Names and Description column

3. Reference column – REF

4. Debit (dr) and Credit (cr) columns

General Journal

Date Account Names Ref. Dr. Cr.


ILLUSTRATIONChapter 4 Exercise 2 (b) General Journal

b) Rustic Hotel General Journal

200X ReferenceFeb. Description Debit Credit15 Food & beverage inventory 4,561

Accounts payable 4,561Record purchase of inventory on account

18 Cash 4,113Accounts receivable 2,344

Sales 6,457Sales made for cash and on account


Received cash on account21 Accounts payable 3,672

Cash 3,672Paid accounts payable

25 Equipment 5,600Cash 1,600Notes payable 4,000

Purchase of equipment for cash and Notes Payable


Steps 3 and 4 of the Accounting Cycle

STEP 3Posting

Transferring informationFrom the journal to the

ledger

Dr=Cr

STEP 4Taking a trial

balance ofThe General Ledger


Posting to The General Ledger: Step 3

The book of final entry

Used to complete Step 3 of the Accounting Cycle-Posting to the General Ledger

Group of Accounts that constitute a hospitality organization’s accounting system

It may be a book, a tray of cards, a CD-ROM, or “T” accounts


General Ledger ”T” Accounts


General Ledger “T” Accounts


Posting Procedures: An Illustration

Credit Notes payable

Rustic Hotel General Journal

200X ReferenceFeb. Description Debit Credit15 Food & beverage inventory 4,561

Accounts payable 4,561Record purchase of inventory on account


Sales 6,457Sales made for cash and on account


The Chart of Accounts

Sequential listing of the firm’s accounts found in the General Ledger

Facilitates finding ledger accounts during journalizing, posting and preparing financial statements


Chart of Accounts - Chapter 4 – Problem 2 (b)

Assets Shareholders' EquityCash 101 Common stock 350Accounts receivable 104Prepaid expenses 125

Land 150 Revenue and ExpensesBuildings 155 Sales 401

Payroll expense 601

Liabilities Utilities expense 611Accounts payable 201 Advertising expense 621Notes payable 205 Interest expense 684Mortgages payable 209


Calculation of General Account Balance for the Cash Account-Refer to Problem 2 Chapter 4

Cash 101GJ 10/1 250,000 100,000 GJ 10/3GJ 10/2 50,000 65,000 GJ 10/6GJ 10/15 25,000 1,000 GJ 10/8GJ 10/31 30,000 4,800 GJ 10/10

2,000 GJ 10/16300 GJ 10/18

8,826 GJ 10/203,600 GJ 10/27

Totals 355,000 185,526Bal. 10/31 169,474

Debit postings are addedTotal 355,000

Credit postings are addedTotal 185,526

Since debit postings are Higher than credit postings

The ending balance of cash is169,474 (355,000-185,526)


Taking the Trial Balance: Step 4

Used to check the accuracy of the debit and credit balances in the General Ledger at the end of the accounting period

List of General Ledger accounts with their current balances as of the last day of the accounting period


Trial Balance for Lockwood Hotel Corporation - Refer to Problem 2 Chapter 4

Debit CreditCash 169,474Accounts receivable 6,000Prepaid expenses 8,400Land 455,000Buildings 150,000Accounts payable 41,300Notes payable 45,000Mortgages payable 399,000Common stock 250,000Sales 61,000Payroll expense 1,000Utilities expense 2,000Advertising expense 1,600Interest expense 2,826

796,300 796,300

Trial Balance

Lockwood Motel Corporation

at October 31, 2008 Note that the order of accounts in the Trial Balance is

the same as in the General Ledger (Assets, Liabilities,

Owners’ Equity, Revenues,and Expenses)

Balances of accounts with Debit balances are added in a

left-hand money column while the balances of the accounts

with credit balances are addedin the right-hand columns

The equality of value exchanges mustbe maintainedDEBIT BALANCES MUST

BE EQUAL TO CREDIT BALANCES


Discovering Sources of Error

If a trial balance balances, the existence of errors and or omissions is not precluded

Different types of errors or omissions


Computers in Accounting

Facilitate data entry

Might eliminate posting errors

Eliminate errors in the calculation of account balances


Computers in Accounting

Expedite the accounting process

Errors can be corrected more easily

Copyright 2006 Pearson Education Canada Inc. 4-1.

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