1. Chapter 4 Journal, Ledger, Trail Balance 1© Paradigm Publishing, Inc.

2. 1.Describe the standard form of a two- column journal. Describe the standard form of a two- column journal.Describe the standard form of a two- column journal. 2.Record business transactions in a two- column journal. Record business transactions in a two- column journal.Record business transactions in a two- column journal. 3.Prepare a chart of accounts. Prepare a chart of accounts.Prepare a chart of accounts. 4.Describe the balance form of account. Describe the balance form of account.Describe the balance form of account. © Paradigm Publishing, Inc.2 Learning Objectives

3. 5.Post from a two-column journal to ledger accounts. Post from a two-column journal to ledger accounts.Post from a two-column journal to ledger accounts. 6.Prepare a trial balance from a ledger after posting. Prepare a trial balance from a ledger after posting.Prepare a trial balance from a ledger after posting. © Paradigm Publishing, Inc.3 Learning Objectives

4. Sequence of steps and procedures Used to record and summarize accounting data during an accounting period © Paradigm Publishing, Inc.4

5. Step 1 Analyze transactions from source documents. Step 2 Record transactions in a journal. Step 3 Post from the journal to the ledger. Step 4 Prepare a trial balance of the ledger. © Paradigm Publishing, Inc.5

6. Business documents or papers that prove business transactions The basis for journal entries Provide objective evidence to support the journal entries © Paradigm Publishing, Inc.6

7. Describe the standard form of a two-column journal Learning Objective 1 © Paradigm Publishing, Inc.7

8. A record in which business transactions are recorded in the order that they occur AKA book of original entry © Paradigm Publishing, Inc.8

9. 1.Numbered pages, beginning with page 1 2.A Date column to record transaction date 3.An Account Title column  To record the accounts affected  To record a brief explanation 4.A posting reference (P.R.) column 5.Two money (or amount) columns  Labeled Debit and Credit, respectively  Used to record the dollar amount © Paradigm Publishing, Inc.9

10. 1.Page number 2.A Date column 3.An Account Title column 4.A Posting Reference (P.R.) column 5.Debit and Credit columns © Paradigm Publishing, Inc.10

11. © Paradigm Publishing, Inc.11 The sequence of steps and procedures used by a business to record and summarize accounting data is known as the a.accounting cycle. b.balance form of account. c.book of original entry. d.accounting period. e.principle of materiality. Quick Check

12. Record business transactions in a two-column journal Learning Objective 2 © Paradigm Publishing, Inc.12

13. Analyze into its debit and credit parts. For each transaction, you must decide:  Which accounts are affected by the transaction  Were the accounts increased or decreased  How to increase or decrease (debit or credit the accounts affected © Paradigm Publishing, Inc.13

14. Provide a brief explanation for each journal entry. Notes telling someone not trained in accounting what occurred in a transaction. Writing them will reinforce your understanding of transactions. © Paradigm Publishing, Inc.14

15. ??? When making journal entries, which is listed first? Account being debited is always listed first Credit follows, indented © Paradigm Publishing, Inc.15

16. No set format Should be brief and easy to understand Optional: may be omitted if purpose of entry is obvious © Paradigm Publishing, Inc.16

17. Example Alice Browning starts an accounting and tax business by investing $5,000 in the business on January 1, 20X1. Analyze the account to be debited and the account to be credited. © Paradigm Publishing, Inc.17 Cash, an asset account, is increasing. Assets are increased with debits. Alice Browning, Capital, an equity account, is increasing. Equity accounts are increased with credits.

18. Example Alice Browning starts an accounting and tax business by investing $5,000 in the business on January 1, 20X1. © Paradigm Publishing, Inc.18 General Journal DateAccount TitleP.R.DebitCredit 20X1 Jan. 1Cash5,000 Alice Browning, Capital5,000 Invested cash in the business.

19. Review Quiz 3-1 Record each transaction in a general journal. Omit the explanations. Record each transaction in a general journal. Omit the explanations. Mar. 1, Becky invested $7,000 cash in her business. © Paradigm Publishing, Inc.19 General Journal DateAccount TitleP.R.DebitCredit 20XX Mar. 1Cash7,000 Becky McAfee, Capital7,000

20. Record each transaction in a general journal. Omit the explanations. Record each transaction in a general journal. Omit the explanations. Mar. 4, purchased supplies on credit, $750. © Paradigm Publishing, Inc.20 Review Quiz 3-1 General Journal DateAccount TitleP.R.DebitCredit 20XX Mar. 4Supplies750 Accounts Payable750

21. Record each transaction in a general journal. Omit the explanations. Record each transaction in a general journal. Omit the explanations. Mar. 6, purchased equipment for cash, $475. © Paradigm Publishing, Inc.21 Review Quiz 3-1 General Journal DateAccount TitleP.R.DebitCredit 20XX Mar. 6Equipment475 Cash475

22. Review Quiz 3-1 Record each transaction in a general journal. Omit the explanations. Record each transaction in a general journal. Omit the explanations. Mar. 9, paid half of the amount owed for supplies, $375. © Paradigm Publishing, Inc.22 General Journal DateAccount TitleP.R.DebitCredit 20XX Mar. 9Accounts Payable375 Cash375

23. Entry requiring three or more accounts Total debits will equal the total credits regardless of the number of accounts involved in the journal entry © Paradigm Publishing, Inc.23

24. Example On July 25, 20X1, Susan King purchases equipment for $10,000 by making a down payment of $3,500 with the balance on account. Analyze the account(s) to be debited and the account(s) to be credited. © Paradigm Publishing, Inc.24 Equipment, an asset account, is increasing. Assets are increased with debits. Cash, an asset account, is decreasing. Assets are decreased with credits. Accounts Payable, a liability account, is increasing. Liabilities are increased with credits.

25. Example © Paradigm Publishing, Inc.25 On July 25, 20X1, Susan King purchases equipment for $10,000 by making a down payment of $3,500 with the balance on account. Analyze the account(s) to be debited and the account(s) to be credited. General Journal DateAccount TitleP.R.DebitCredit 20X1 Jul. 25Equipment10,000 Cash 3,500 Accounts Payable Purchased equipment with a down payment and the balance on account. 6,500

26. Provides a chronological (by order of date) record of transactions Provides a place to make an explanation of an entry, if needed Use lessens the possibility of recording an error, because both the debit and credit parts are recorded together Easier to locate recording errors © Paradigm Publishing, Inc.26

27. © Paradigm Publishing, Inc.27 The process of recording transactions in a journal is called a.dailying. b.transitioning. c.journalizing. d.footing. e.ledgering. Quick Check

28. Review Quiz 3-2 Record each transaction in a general journal. Omit Explanations. Record each transaction in a general journal. Omit Explanations. Jun. 12, paid utilities expense, $145. © Paradigm Publishing, Inc.28 DateAccount TitleP.R.DebitCredit Utilities Expense145 Cash 145 20X1 Jun. 12 General Journal

29. Review Quiz 3-2 John Dark’s business had the following transactions in June 20X1. Record each transaction in a general journal. Omit Explanations. John Dark’s business had the following transactions in June 20X1. Record each transaction in a general journal. Omit Explanations. Jun. 17, John withdrew cash for personal use, $175. © Paradigm Publishing, Inc.29 DateAccount TitleP.R.DebitCredit John Dark, Drawing175 Cash 175 20X1 Jun. 17 General Journal

30. Review Quiz 3-2 John Dark’s business had the following transactions in June 20X1. Record each transaction in a general journal. Omit Explanations. John Dark’s business had the following transactions in June 20X1. Record each transaction in a general journal. Omit Explanations. Jun. 22, received cash for services performed, $950. © Paradigm Publishing, Inc.30 DateAccount TitleP.R.DebitCredit Cash950 Service Revenue 950 20X1 Jun. 22 General Journal

31. Review Quiz 3-2 John Dark’s business had the following transactions in June 20X1. Record each transaction in a general journal. Omit Explanations. John Dark’s business had the following transactions in June 20X1. Record each transaction in a general journal. Omit Explanations. Jun. 25, John made the following additional investments in his business: office supplies, $75; and a truck, $4,000. © Paradigm Publishing, Inc.31 DateAccount TitleP.R.DebitCredit Office Supplies75 John Dark, Capital4,075 20X1 Jun. 25 General Journal Truck 4,000

32. Learning Objective 3 © Paradigm Publishing, Inc.32 Prepare a Chart of Accounts

33. A listing of all accounts and their account numbers A listing of all accounts and their account numbers A directory of accounts available for making journal entries Includes only account titles that may be used when recording transactions in the journal © Paradigm Publishing, Inc.33

34. © Paradigm Publishing, Inc.34 A directory or listing of accounts available in the ledger is referred to as the a.book of final entry. b.book of original entry. c.source document. d.chart of accounts. e.balance form of account. Quick Check

35. Learning Objective 4 © Paradigm Publishing, Inc.35 Describe the balance form of account

36. A record for each item in a business The balance form of an account includes a  Debit column  Credit column  Debit Balance column  Credit Balance column The four-column ledger account form shows a running balance of each account Ledger accounts not footed and balanced Balance form of account widely used © Paradigm Publishing, Inc.36

37. © Paradigm Publishing, Inc.37

38. © Paradigm Publishing, Inc.38 The ledger is often referred to as the book of a.final entry. b.numbers. c.balances. d.original entry. e.materiality. Quick Check

39. Learning Objective 5 © Paradigm Publishing, Inc.39 Post from a two-column journal to ledger accounts

40. 40 1.The date of the journal entry is recorded in the Cash account. 2.The Cash account is debited for 10,000. 3.The page number of the journal entry is recorded in the P.R. column of the Cash account. 4.The account number is recorded in the journal. 5.Since this is the first number posted to the Cash account, the balance is 10,000 and is recorded in the balance debit column. 1.The date of the journal entry is recorded in the Cash account. © Paradigm Publishing, Inc. 1

41. 41 1.The date of the journal entry is recorded in the Cash account. 2.The Cash account is debited for 10,000. 3.The page number of the journal entry is recorded in the P.R. column of the Cash account. 4.The account number is recorded in the journal. 5.Since this is the first number posted to the Cash account, the balance is 10,000 and is recorded in the balance debit column. 2.The Cash account is debited for 10,000. © Paradigm Publishing, Inc. 2

42. 42 1.The date of the journal entry is recorded in the Cash account. 2.The Cash account is debited for 10,000. 3.The page number of the journal entry is recorded in the P.R. column of the Cash account. 4.The account number is recorded in the journal. 5.Since this is the first number posted to the Cash account, the balance is 10,000 and is recorded in the balance debit column. 3 3.The page number of the journal entry is recorded in the P.R. column of the Cash account. © Paradigm Publishing, Inc.

43. 1.The date of the journal entry is recorded in the Cash account. 2.The Cash account is debited for 10,000. 3.The page number of the journal entry is recorded in the P.R. column of the Cash account. 4.The account number is recorded in the journal. 5.Since this is the first number posted to the Cash account, the balance is 10,000 and is recorded in the balance debit column. 43 4 4.The account number is recorded in the journal. © Paradigm Publishing, Inc.

44. 44 1.The date of the journal entry is recorded in the Cash account. 2.The Cash account is debited for 10,000. 3.The page number of the journal entry is recorded in the P.R. column of the Cash account. 4.The account number is recorded in the journal. 5.Since this is the first number posted to the Cash account, the balance is 10,000 and is recorded in the balance debit column. 5 © Paradigm Publishing, Inc.

45. 1.The date of the journal entry is recorded in the Owner’s Capital account. © Paradigm Publishing, Inc.45 1

46. 1.The date of the journal entry is recorded in the owner’s capital account. 2.Stanley Walker, Capital is credited for 10,000. 3.The page number of the journal entry is recorded in the P.R. column of the Stanley Walker, Capital account. 4.The account number is recorded in the journal. 5.Since this is the first number posted to the Stanley Walkr, Capital account, the balance is 10,000 and is recorded in the balance credit column. 2.Stanley Walker, Capital is credited for 10,000. 2 © Paradigm Publishing, Inc.46

47. 1.The date of the journal entry is recorded in the owner’s capital account. 2.Stanley Walker, Capital is credited for 10,000. 3.The page number of the journal entry is recorded in the P.R. column of the Stanley Walker, Capital account. 4.The account number is recorded in the journal. 5.Since this is the first number posted to the Stanley Walker, Capital account, the balance is 10,000 and is recorded in the balance credit column. 3 3.The page number of the journal entry is recorded in the P.R. column of the Stanley Walker, Capital account. © Paradigm Publishing, Inc.47

48. 1.The date of the journal entry is recorded in the owner’s capital account. 2.Stanley Walker, Capital is credited for 10,000. 3.The page number of the journal entry is recorded in the P.R. column of the Stanley Walker, Capital account. 4.The account number is recorded in the journal. 5.Since this is the first number posted to the Stanley Walker, Capital account, the balance is 10,000 and is recorded in the balance credit column. 4.The account number is recorded in the journal. © Paradigm Publishing, Inc.48 4

49. 1.The date of the journal entry is recorded in the owner’s capital account. 2.Stanley Walker, Capital is credited for 10,000. 3.The page number of the journal entry is recorded in the P.R. column of the Stanley Walker, Capital account. 4.The account number is recorded in the journal. 5.Since this is the first number posted to the Stanley Walker, Capital account, the balance is 10,000 and is recorded in the balance credit column. 5 5.Since this is the first number posted to the Stanley Walker, Capital account, the balance is 10,000 and is recorded in the Balance Credit column. © Paradigm Publishing, Inc.49

50. © Paradigm Publishing, Inc.50 Which of the following represents the correct order of the first four steps of the account cycle? a.Analyze transactions, journalize, post to ledger, prepare trial balance b.Journalize, analyze transactions, post to ledger, prepare trial balance c.Analyze transactions, post to ledger, journalize, prepare trial balance d.Journalize, post to ledger, analyze transactions, prepare trial balance e.Journalize, post to ledger, prepare trial balance, analyze transactions Quick Check

51. Learning Objective 6 © Paradigm Publishing, Inc.51 Prepare a Trial Balance from a Ledger after Posting

52. Not a formal financial statement A test of the equality of debits and credits in the ledger The order of accounts is consistent with the order on the financial statements and the chart of accounts © Paradigm Publishing, Inc.52

53. The purpose of the trial balance is to prove the equality of the debits and credits. © Paradigm Publishing, Inc.53 Walker and Associates Trial Balance November 30, 20X1 Account TitleDebitCredit Cash9,525 Accounts Receivable300 Office Supplies125 Office Equipment3,000 Office Furniture2,000 Accounts Payable4,000 Stanley Walker, Capital10,000

54. The purpose of the trial balance is to prove the equality of the debits and credits. © Paradigm Publishing, Inc.54 Walker and Associates Trial Balance November 30, 20X1 Account TitleDebitCredit Stanley Walker, Drawing Service Revenue Rent Expense Repairs Expense Totals 16,200 8,000 2,200 400 50

55. © Paradigm Publishing, Inc.55 The four-column account form contains each of the following columns except the a.Debit Balance column b.Credit Balance column c.Credit column d.Debit column e.Difference column Quick Check

56. Prepare a trial balance for the following accounts. © Paradigm Publishing, Inc.56 Account Balance Accounts Payable $ 7,210 Cash 1,400 Equipment 16,400 LeAnn Lovering, Capital 14,600 LeAnn Lovering, Drawing 700 Rent Expense 3,000 Repairs Expense 450 Revenue from Services 16,380 Salaries Expense 2,510 Supplies 3,860 Truck 9,400 Utilities Expense 470 Review Quiz 3-3

57. Answer: © Paradigm Publishing, Inc.57 LeAnn’s TV Repair Shop Trial Balance December 31, 20XX Account TitleDebitCredit Cash1,400 Supplies3,860 Equipment16,400 Truck9,400 Accounts Payable7,210 LeAnn Lovering, Capital14,600 LeAnn Lovering, Drawing700 Revenue from Services16,380 Rent Expense3,000 Salaries Expense2,510 Utilities Expense470 Repairs Expense450 Totals16,200 Review Quiz 3-3

58. Why do you believe the plastic surgeon kept his job at the clinic even though he admitted that he had stolen several hundred thousands of dollars? Focus on Ethics © Paradigm Publishing, Inc.58 Refer to the Focus on Ethics box on page 109 in your text.

59. The First Four Steps in the Accounting Cycle Joining the Pieces © Paradigm Publishing, Inc.59