Role of Accounting Records 1.Establishing accountability for the assets and or transactions under an individual’s control. 2.Keeping track of routine business activities such as the amounts of money in the company bank accounts, amounts due from credit customers, or amounts owed to supplies. 3.Obtaining detailed information about a particular transaction. 4.Evaluating the performance and efficiency of various departments within the organization.

5.Maintaining documentary evidence of the company’s business activities. ( example for tax purposes) 6.Verifying authenticity, accuracy and validity of transactions in connection with the examination or review undertaken by external auditors.

Accounts/ledgers The record used to keep track of the increases and decreases in financial statement items. Chart of Accounts A list of accounts in the ledger, arranged in order in which they appear in the financial statements. Balance sheet accounts are listed first Income statement accounts are listed in order of revenues and expenses

Current Assets (account numbers ) Cash - Regular Checking Cash - Payroll Checking Petty Cash Fund Accounts Receivable Allowance for Doubtful Accounts Inventory Supplies Prepaid Insurance Property, Plant, and Equipment (account numbers ) Land Buildings Equipment Vehicles Accumulated Depreciation - Buildings Accumulated Depreciation - Equipment Accumulated Depreciation - Vehicles Current Liabilities (account numbers ) Notes Payable - Credit Line # Notes Payable - Credit Line # Accounts Payable Wages Payable Interest Payable Unearned Revenues Long-term Liabilities (account numbers ) Mortgage Loan Payable Bonds Payable Discount on Bonds Payable Stockholders' Equity (account numbers ) Common Stock, No Par Retained Earnings Treasury Stock Operating Revenues (account numbers ) Sales - Division #1, Product Line Sales - Division #1, Product Line Sales - Division #2, Product Line Sales - Division #3, Product Line 110 Cost of Goods Sold (account numbers ) COGS - Division #1, Product Line COGS - Division #1, Product Line COGS - Division #2, Product Line COGS - Division #3, Product Line 110 Marketing Expenses (account numbers ) Marketing Dept. Salaries Marketing Dept. Payroll Taxes Marketing Dept. Supplies Marketing Dept. Telephone Payroll Dept. Expenses (account numbers ) Payroll Dept. Salaries Payroll Dept. Payroll Taxes Payroll Dept. Supplies Payroll Dept. Telephone Other (account numbers ) Gain on Sale of Assets Loss on Sale of Assets

The account is a means of accumulating in one place all the information about changes in specific financial items. Determining the balances of a T-Account If the debit total exceeds the credit total, the account has a debit balance. If the credit exceeds the debit total, the account has a credit balance. Example: Jan 2 50,000 Jan 25 2,000 Jan 31 7, Balance 33,500 Jan 10 20,000 Jan 27 2,000 Jan 31 3, Cash

Flow of Data from Source Documents through Trial Balance Enter Business Transactions in the General Journal Analyze Transactions using source documents and chart of accounts Post the entries in the Journal to the General Ledger From the General Ledger prepare a Trial Balance

General Journal Page 1 Date Account Titles and ExplanationPost Ref DebitCredit 2007 Jan 2Cash10050,000 Ramos, Capital ,000 Owner’s original investment in appliance repair business. Account Ramos, Capital Account No. 300 Date 2007 ITEM POST REF DEBITCREDIT BALANCES DEBITCREDIT JAN 2J150,000 Ledger

Ramos Appliance Repair Service Trial Balance January 31, 2007 Account Title Balance Debit Credit Cash P 33,500 Accounts Receivable - Shop Supplies 4,000 Tools and equipment 18,000 Accounts payable P 3,000 S.Ramos, capital 50,000 Service revenue 7,000 Utilities expense 1,000 Wage expense 2,500 Supplies expense 1,000 Total P 60,000 P 60,000 ======== ========