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Unit # 3 – Recording Transactions in T-Accounts.  We will now learn that when dealing with balances in All Accounts, you will need to know:  Debit means.

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Presentation on theme: "Unit # 3 – Recording Transactions in T-Accounts.  We will now learn that when dealing with balances in All Accounts, you will need to know:  Debit means."— Presentation transcript:

1 Unit # 3 – Recording Transactions in T-Accounts

2  We will now learn that when dealing with balances in All Accounts, you will need to know:  Debit means Left Side of the account.  Credit means Right Side of the account.  Debit = Left, Credit = Right

3 Unit # 3 – Recording Transactions in T-Accounts  Recall our Balance Sheet Equation Assets = Liabilities + Owners Equity  Debit (Dr) Credit (Cr)

4 Unit # 3 – Recording Transactions in T-Accounts A = L + OE Normal Bal. Debit (Dr) Credit (Cr) To Increase Dr Cr To Decrease Cr Dr Notice a pattern?

5 Unit # 3 – Recording Transactions in T-Accounts  So how do we use Debit & Credits to record transactions? We need to use T-Account Ledgers Cash T Debit (LHS)Credit (RHS)

6 Unit # 3 – Recording Transactions in T-Accounts  What is a Ledger? A ledger is a group of accounts and it records the changes in each of these accounts as they occur from the business transaction.

7 Unit # 3 – Recording Transactions in T-Accounts  How do you open the Ledger Accounts? All you need to do is “copy” the account totals from your balance sheet  See an example on the next slide

8 Goldman's Gym Balance Sheet Sept. 30, 20XX Cash Accounts Payable Accounts Receivable Bank Loan Computers Mortgage Payable Land Total Liabilities Building Training Equipment Owner's Equity R. Millar, Capital Total Liabilities & Owner's Equity Total Assets $ $

9 Unit # 3 – Recording Transactions in T-Accounts  Step 1: First make the T-Accounts  Step 2: Enter the account balances into each ledger account  Step 3: Identify the which accounts are affected and the type of account (Asset, Liability, or Owner’s Equity)  Step 4: Enter the amount on either as either a debit (LHS) or credit (RHS)

10 Unit # 3 – Recording Transactions in T-Accounts  Example # 1: Aug. 2 – Received $500 cash as payments on membership dues owing.

11 Unit # 3 – Recording Transactions in T-Accounts  Example # 2: Aug. 5 – Purchased new computer worth $750 from Central Computer Co.

12 Unit # 3 – Recording Transactions in T-Accounts  Example # 3: Aug. 5 – Paid $705 now due to Equipment Unlimited for goods previously purchased, but not paid for.

13 Unit # 3 – Recording Transactions in T-Accounts  Example # 4: Aug. 7 – Purchased three new tennis racquets for $545 each (total $1635). A cash down payment of $535 was made. The remaining amount $1100 is to be paid at a later date.

14 Unit # 3 – Recording Transactions in T-Accounts  Example # 5: Aug. 7 – Owner invested an additional $5000 in the business.

15 Unit # 3 – Recording Transactions in T-Accounts  Practice makes Perfect! Complete exercises 1-3abc (not d) starting on Page 51.

16 Unit # 3 – Recording Transactions in T-Accounts Where we are: 1.Journalize (Using the General Journal) 2.Post (To Ledger Accounts – which are also known as T- Accounts) – Partially Done 3.Trial Balance (Can enter on the Worksheet) - Now 4.Adjustments (On the worksheet) 5.Complete the Worksheet 6.Financial Statements (Income Statement then the Balance Sheet - Done) 7.Closing Entries (Closing the Temporary Accounts – Drawings, Revenue, Expenses)

17 Unit # 3 – Recording Transactions in T-Accounts  The Trial Balance! Companies prepare a “Trial Balance” to verify that the total debits = the total credits. This is done after you are finished recording the business transactions into the T-Account Ledgers.

18 Unit # 3 – Recording Transactions in T-Accounts  Once completed entering all the business transactions companies will put the totals of the T-Account Ledgers in either a Debit column or a Credit Column.

19 Unit # 3 – Recording Transactions in T-Accounts Accounts Acc. No. Debits Credits

20 Unit # 3 – Recording Transactions in T-Accounts  Once the Trial Balance is completed (and the Debits = the Credits), you can now create a “New Balance Sheet” using the information from the Trial Balance.


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