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Notes Topic 3

The document defines key accounting terms like journal, ledger, accounts, and chart of accounts. It describes the characteristics of accounts which are individual records showing increases and decreases of financial statement elements. Accounts are separated using T-accounts with debit and credit columns. The document provides examples of different types of accounts for assets, liabilities, equity, revenues, and expenses. It outlines the steps for recording transactions from determining affected accounts to journalizing and posting entries.

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68 views4 pages

Notes Topic 3

The document defines key accounting terms like journal, ledger, accounts, and chart of accounts. It describes the characteristics of accounts which are individual records showing increases and decreases of financial statement elements. Accounts are separated using T-accounts with debit and credit columns. The document provides examples of different types of accounts for assets, liabilities, equity, revenues, and expenses. It outlines the steps for recording transactions from determining affected accounts to journalizing and posting entries.

Uploaded by

Fatin Nur Dini
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Definition.

Journal = book of first entry


Account = separate record showing increases and decreases for each Financial Statement item
Chart of account = a list of the accounts in a ledger
Ledger = a group of accounts for a business entity

Characteristic of an Account & Chart of account


Characteristic of an Account
1. individual accounting record
2. increases and decreases in a specific asset, liability, or owner’s equity item.
3. Company will have separate account for cash, salaries expense, account payable and etc

How to separate account?


-use T Account
Title = name of accounting equation element (assets, liabilities, owner equity)

Debit Credit

Example of Assets, Liabilities, Owner’s Equity, Revenues, Expenses


Assets
-Cash
-Supplies
-Accounts receivable
-Buildings

Liabilities
-Accounts payable
-Notes payable
-Wages payable
-Interest payable
-Unearned rent
Owner’s Equity = owner’s right to the assets after all liabilities have been paid

-capital account
-drawing

Revenues = increases in assets and owner’s equity

-Fees earned
-Commissions revenue
-Rent revenue

Expenses = using up of assets or consuming services in the process of generating revenues

-Wages expense
-Rent expense
-Miscellaneous expense

Account receivable (assets)


= customer may pay for services provided at a later date
= revenue is earned even though no cash has been received

Normal Balance of an Account


- either a debit or a credit increase /either a debit or credit decrease

Rules of Debit and Credit


Double-Entry Accounting System
- Every business must record transactions in at least 2 accounts
- Total debit = Total credit

Rules

A D E L O R
Steps in Recording Process

Determine which accounts is affected by the transaction.

Determine whether the account increases or decreases.

Determine whether the account should be debited or credited.

Record the transaction using journal entry.

Post the journal entries to the accounts in the ledger .


Prepare an unadjusted trial balance at the end of the period .
Journalizing Process
1. Date of transaction
2. Title of account to be debited, amount in debit column
3. Title of account to be credited, amount in credit column
4. Brief description below credited title
5. Posting reference column left blank when the journal entry initially recorded. This
column is used later when the journal entry amounts are transferred to the accounts in
the ledger
Journalizing = process of recording a transaction in the journal
Journal Entry = entry in the journal

Transaction Terminology

Posting Journal Entries to Accounts


Posting = process of transferring the debits and credits from the journal entries to the
accounts
-The debits and credits for each journal entry are posted to the accounts in the order in which
they occur in the journal

Trial Balance
Why using trial balance?
-To prove the equality (kesamaan) in debit and credit in ledger at the end of accounting
period

Errors affecting the trial balance


-transposition occurs when the order of the digits is copied incorrectly

Errors not affecting the trial balance


-errors that not affecting the equality
Contoh: supplies tak boleh negative, tapi terbuat negative

-correcting journal entry - If an error has already been journalized and posted to the ledger

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