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Recording process guide

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janelle.tamayo
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13 views3 pages

Recording process guide

Uploaded by

janelle.tamayo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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ABC Company has the following transactions for the month of October:

1. October 1: The company started with $10,000 cash and $5,000 in accounts receivable.

2. October 5: ABC Company sold goods for $8,000 cash.

3. October 10: The company purchased office supplies for $2,000 on credit.

4. October 15: ABC Company received $4,000 from customers for previous credit sales.

5. October 20: The company paid $1,000 towards the accounts payable.

6. October 25: ABC Company incurred $1,500 in utility expenses, paid in cash.

7. October 30: ABC Company sold additional goods for $5,000 on credit.

Step 1: Identify (1) Accounts involved, (2) Amount, and (3) whether to Debit (Assets / Costs and
expenses) or Credit (Liabilities and equity / revenue)

Sample: “October 1: The company started with $10,000 cash and $5,000 in accounts receivable.”

Identify:

(1) Accounts involved :


a. Cash,
b. accounts receivable, and
c. owner’s capital
(2) Amounts:
a. Cash - $10,000;
b. Accounts receivable - $5,000;
c. Owner’s capital - $15,000.
(3) Debit / Credit:
a. Cash and Account receivable are Asset accounts, so, Debit;
b. Owner’s capital is an Equity account, so, Credit.

Step 2: Journalize the identified transaction

Date Accounts and descriptions Debit (Dr) Credit (Cr)


October 1 Cash $10,000
Account receivable 5,000
Owner’s capital $15,000

**Make sure your debit and credit sides are always equal.
Step 3: Post the accounts (T- accounts) – we do this by account

Cash 101
Date Reference Debit (Dr) Credit (Cr)
October 1 J1 $10,000

Account receivable 102


Date Reference Debit (Dr) Credit (Cr)
October 1 J1 $5,000

Owner’s capital 301


Date Reference Debit (Dr) Credit (Cr)
October 1 J1 $10,000

Step 4: Get the balance of each account – we do this at the end of the period (in this case, when all
October items are journalized and posted)

Cash 101
Date Reference Debit (Dr) Credit (Cr)
October 1 J1 $10,000

$10,000

Account receivable 102


Date Reference Debit (Dr) Credit (Cr)
October 1 J1 $5,000

$5,000

Owner’s capital 301


Date Reference Debit (Dr) Credit (Cr)
October 1 J1 $15,000

$15,000
Step 5: Make the trial balance

ABC Company

Trial balance

October [xxx]

Account Debit (Dr) Credit (Cr)


Cash $10,000
Accounts payable 5,000
Owner’s capital $15,000

$15,000 $15,000
**Make sure that your debits equal your credits

Repeat the process for all periods to fill in the missing transactions for October

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