CH (2)

Record of increases and decreases in a specific asset, liability, equity, revenue, or expense item. Debit = “Left” Credit = “Right” Account An Account can be illustrated in a T-Account form. LO 1 Explain what an account is and how it helps in the recording process. The Account

Double-entry Double-entry accounting system Each transaction must affect two or more accounts to keep the basic accounting equation in balance. Recording done by debiting at least one account and crediting another. must equal DEBITS must equal CREDITS. LO 2 Define debits and credits and explain their use in recording business transactions. Debits and Credits

greater than If Debits are greater than Credits, the account will have a debit balance. $10,000Transaction #2$3,000 $15,000 8,000Transaction #3 Balance Transaction #1 Debits and Credits LO 2 Define debits and credits and explain their use in recording business transactions.

greater than If Credits are greater than Debits, the account will have a credit balance. $10,000Transaction #2$3,000 Balance Transaction #1 Debits and Credits LO 2 Define debits and credits and explain their use in recording business transactions. $1,000 8,000Transaction #3

Rules of Debit & Credit Normal BalanceDecreaseIncreaseNature of Account DrCrDrAssets / Expenses DrCrDrContra: Liabilities/OE/Revenues CrDrCrLiabilities/OE/Revenues CrDrCrContra: Assets/Expenses

Balance Sheet Income Statement Balance Sheet Income Statement = + - AssetLiabilityEquityRevenueExpense Debit Credit Debits and Credits Summary LO 2 Define debits and credits and explain their use in recording business transactions.

Debits: a. increase both assets and liabilities. b. decrease both assets and liability. c. increase assets and decrease liabilities. d. decrease assets and increase liabilities. Review Question Debits and Credits Summary LO 2 Define debits and credits and explain their use in recording business transactions.

Accounts that normally have debit balances are: a. assets, expenses, and revenues. b. assets, expenses, and owner’s capital. c. assets, liabilities, and owner’s drawings. d. assets, owner’s drawings, and expenses. Review Question Debits and Credits Summary LO 2 Define debits and credits and explain their use in recording business transactions.

Expansion of the Basic Equation Relationship among the assets, liabilities and owner’s equity of a business: The equation must be in balance after every transaction. For every Debit there must be a Credit. Illustration 2-11 AssetsLiabilities = Owner’s Equity Basic Equation Expanded Basic Equation LO 2 Define debits and credits and explain their use in recording business transactions. +

ALSARHANI YAHYA11 Example In blew the operation had happened in (NO WAY ) company 1/1 the company invest 10,000 R.O deposit in the cash in the company. 2/1 the company opened account in the bank. 5/1 the rent for the building 2,000 R.O paid by cash. 12/1 the company purchased supply office by 5,000 R.O paid 2,000 and the other on the account. 15/1 the company did service to other company by 50 R.O cash 17/1 the company did service by 300 R.O not receive.

ALSARHANI YAHYA12 20/1 the company paid 1,000 to the creditor (according to transaction on 12/1 by cash) 25/1 receive the all amount from the debtors (according to transaction on 17/1) 30/1 the company paid these expenses by cash : 15 water, 20 electric and 30 salary. Explain which it increase and what is decrease.

Business documents, such as a sales slip, a check, a bill, or a cash register tape, provide evidence of the transaction. Steps in the Recording Process LO 3 Identify the basic steps in the recording process. Illustration 2-12 Analyze each transactionEnter transaction in a journal Transfer journal information to ledger accounts

JOURNAL ENTERES What is the Journal? The company record all the transactions day by day in the book this book called Journal. The journal should be like this form: ALSARHANI YAHYA14 DATEDescriptionsNo. ledger DebitCredit

Journalizing - Entering transaction data in the journal. JournalizingJournalizing E2-4 (Facts) Presented below is information related to Hanshew Real Estate Agency. LO 4 Explain what a journal is and how it helps in the recording process. Pete Hanshew begins business as a real estate agent with a cash investment of $15,000. Oct. 1 Purchases office furniture for $1,900, on account.3 Sells a house and lot for B. Kidman; bills B. Kidman $3,200 for realty services provided. 6 Pays $700 on balance related to transaction of Oct Pays the administrative assistant $2,500 salary for Oct.30 E2-5 Instructions - Journalize the transactions for E2-4.

JournalizingJournalizing General Journal LO 4 Explain what a journal is and how it helps in the recording process. E2-4 (Facts) Presented below is information related to Hanshew Real Estate Agency. Pete Hanshew begins business as a real estate agent with a cash investment of $15,000. Oct. 1

JournalizingJournalizing General Journal LO 4 Explain what a journal is and how it helps in the recording process. E2-4 (Facts) Presented below is information related to Hanshew Real Estate Agency. Purchases office furniture for $1,900, on account. Oct. 3

JournalizingJournalizing General Journal LO 4 Explain what a journal is and how it helps in the recording process. E2-4 (Facts) Presented below is information related to Hanshew Real Estate Agency. Sells a house and lot for B. Kidman; bills B. Kidman $3,200 for realty services provided. Oct. 6

JournalizingJournalizing General Journal LO 4 Explain what a journal is and how it helps in the recording process. E2-4 (Facts) Presented below is information related to Hanshew Real Estate Agency. Pays $700 on balance related to transaction of Oct. 3. Oct. 27

JournalizingJournalizing General Journal LO 4 Explain what a journal is and how it helps in the recording process. E2-4 (Facts) Presented below is information related to Hanshew Real Estate Agency. Pays the administrative assistant $2,500 salary for Oct. Oct. 30

Simple Entry – Two accounts, one debit and one credit. Compound Entry – Three or more accounts. JournalizingJournalizing Example – On June 15, H. Burns, purchased equipment for $15,000 by paying cash of $10,000 and the balance on account (to be paid within 30 days). LO 4 Explain what a journal is and how it helps in the recording process. General Journal

ALSARHANI YAHYA22 The types of journal entry: 1.Simple journal: when the journal have just one account for both debit and credit. For example if Nasser bought car for 3,000 R.O in 5/1/2007 what is the journal? 2.Compound journal: when the journal have more then account. For example if Nasser paid expenses for electric & water 200 R.O and 800 salary what is the journal entry? Prepare the Journal entry for the question according to the last chapter?

ALSARHANI YAHYA23 Chart of Accounts To make it easy for the ledger book, that will give the number for each account. For example let start for asset: Cash 101 Account receivable 111 Note receivable 121 Office supply 131 Land 141

ALSARHANI YAHYA24 In the liability: Account payable 201 Note Payable 211 Owner equity: Capital 301 Withdrew 311 Revenue receive 401 Rent expenses 501 Salary expenses 502 Electric & water expenses 503

ALSARHANI YAHYA25 In blew the operation had happened in (NO WAY ) company 1/1 the company invest 10,000 R.O deposit in the cash in the company. 2/1 the company opened account in the bank. 5/1 the rent for the building 2,000 R.O paid by cash. 12/1 the company purchased supply office by 5,000 R.O paid 2,000 and the other on the account. 15/1 the company did service to other company by 50 R.O cash 17/1 the company did service by 300 R.O not receive.

ALSARHANI YAHYA26 20/1 the company paid 1,000 to the creditor (according to transaction on 12/1 by cash) 25/1 receive the all amount from the debtors (according to transaction on 17/1) 30/1 the company paid these expenses by cash : 15 water, 20 electric and 30 salary. Prepare the journal entry for all operation.