1. Unit # 3 – Recording Transactions in T-Accounts

2. 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 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
$ 5000
6000
500
25000
110000
94500
241000
$ 4000
65000
80000
149000
92000
241000

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:
Journalize (Using the General Journal)
Post (To Ledger Accounts – which are also known as T- Accounts) – Partially Done
Trial Balance (Can enter on the Worksheet) - Now
Adjustments (On the worksheet)
Complete the Worksheet
Financial Statements (Income Statement then the Balance Sheet - Done)
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 1 2 3 4 5 6 7 8 9 10 11

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.