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    Chapter 2 Notes: Created Tags Updated

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    Tristan Ramos
    The document summarizes key concepts from Chapter 2 including: - Accounts consist of a title and debit/credit sides for recording increases and decreases of assets, liabilities, and equity. Debits and credits do not mean increase or decrease but rather refer to the side of the account being recorded to. - Transactions are analyzed and recorded in a journal before being posted to the appropriate accounts in the ledger. A trial balance is prepared to prove the equality of total debits and credits. - Key accounting records include journals for recording transactions, a ledger for maintaining accounts, a chart of accounts listing account numbers, and a trial balance for verifying debits and credits.

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    Chapter 2 Notes: Created Tags Updated

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    Tristan Ramos
    13 views4 pages
    The document summarizes key concepts from Chapter 2 including: - Accounts consist of a title and debit/credit sides for recording increases and decreases of assets, liabilities, and equity. Debits and credits do not mean increase or decrease but rather refer to the side of the account being recorded to. - Transactions are analyzed and recorded in a journal before being posted to the appropriate accounts in the ledger. A trial balance is prepared to prove the equality of total debits and credits. - Key accounting records include journals for recording transactions, a ledger for maintaining accounts, a chart of accounts listing account numbers, and a trial balance for verifying debits and credits.

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    ACCT 115

    Original Title

    Chapter 2 Notes

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    The document summarizes key concepts from Chapter 2 including: - Accounts consist of a title and debit/credit sides for recording increases and decreases of assets, liabilities, and equity. Debits and credits do not mean increase or decrease but rather refer to the side of the account being recorded to. - Transactions are analyzed and recorded in a journal before being posted to the appropriate accounts in the ledger. A trial balance is prepared to prove the equality of total debits and credits. - Key accounting records include journals for recording transactions, a ledger for maintaining accounts, a chart of accounts listing account numbers, and a trial balance for verifying debits and credits.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    13 views4 pages

    Chapter 2 Notes: Created Tags Updated

    Uploaded by

    Tristan Ramos
    The document summarizes key concepts from Chapter 2 including: - Accounts consist of a title and debit/credit sides for recording increases and decreases of assets, liabilities, and equity. Debits and credits do not mean increase or decrease but rather refer to the side of the account being recorded to. - Transactions are analyzed and recorded in a journal before being posted to the appropriate accounts in the ledger. A trial balance is prepared to prove the equality of total debits and credits. - Key accounting records include journals for recording transactions, a ledger for maintaining accounts, a chart of accounts listing account numbers, and a trial balance for verifying debits and credits.

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    Chapter 2 Notes

    Created Sep 7, 2019 433 PM

    Tags

    Updated Sep 7, 2019 510 PM

    The Recording Process

    Accounts, Debits and Credits


    The Account

    Account- individual accounting record of increases and decreases in a


    specific asset, liability, or equity item

    Consists of title, left or debit side, and right or credit side

    T-account- format resembles of T-account

    Debits and Credits

    Debit- left side of an account

    Credit- right side of the account

    DO NOT MEAN INCREASE OR DECREASE!! Repeatedly in the recording


    process to describe where entries are made in accounts

    Debiting and crediting are the acts of making entries/ entering accounts in
    the respective side of the account

    Debit balance and credit balance is shown when debit exceeds credit or
    credit exceeds debit

    Debit and Credit Procedure

    Debits must equal credits

    Equality of debits and credits provides basis for double-entry system


    of recording transactions (aka the dual effect of each transaction is
    recorded in appropriate accounts)

    Debit and Credit Procedure for Assets and Liabilities

    Increases and decreases in liabilities are entered on the opposite side


    of the increases and decreases in assets

    Chapter 2 Notes 1
    Assets usually show debit balances, while liability accounts show credit
    balances

    Debit and Credit Procedure for Equity

    Share-Capital, Retained Earnings and Revenue increase in the Credit


    side, while Dividends and Expenses increase on the Debit side

    The Journal
    The Recording Process

    Analyze each transaction in terms of its effect on the accounts

    Enter the transaction information in a journal

    Transfer the journal information to the appropriate accounts in the ledger

    The Journal

    Journal- book of original entry

    Shows the debit and credit effects on specific accounts

    Discloses in one place the complete effects of a transaction

    Provides a chronological record of transactions

    Helps to prevent or locate errors because the debit and credit amounts
    for each entry can be easily compared

    Journalizing- entering transaction data in the journal

    Complete entries consist of the date of the transaction, accounts and


    amounts to be debited and credited, and a brief explanation of the
    transaction

    Important to use correct and specific account titles in journalizing

    Simple and Compound Entries

    Simple Entry- entries that only involve a debit and a credit

    Compound Entry- transactions that require more than two accounts in


    journalizing

    Ledger and Posting

    The Ledger

    Ledger- Entire group of accounts maintained by a company

    Chapter 2 Notes 2
    General Ledger- contains all asset, liability, and equity accounts

    Provides the balance in each of the accounts

    Standard Form of Account

    Three-column form of account- contains 3 money columns (debit,


    credit, balance)

    Balance in the account is determined after each transaction

    Posting

    Procedure of transferring journal entries to the ledger accounts

    Steps:

    In the ledger, date, journal page, and debit amount is entered in the
    appropriate columns of the account debited

    Write account number to which the debit amount is posted in the


    reference column of the journal

    Repeat for credit amounts

    Posting should be in chronological order

    Company should post all the debits and credits of one journal entry
    before proceeding to the next journal entry

    Reference column of a ledger account indicates the journal page from


    which the transaction was posted

    Chart of Accounts

    Lists the accounts and the account numbers that identify their location in
    the ledger

    Numbering system usually starts with the statement of financial position


    accounts and follows with income statement accounts

    The purpose of transaction analysis is first to identify the type of account


    involved, and then to determine whether to make a debit or a credit to the
    account

    Trial Balance

    Trial Balance- list of accounts and their balances at a given time

    Proves the mathematical equality of debits and credits after posting

    Chapter 2 Notes 3
    May also uncover errors in journalizing and posting

    Useful in preparation of financial statements

    Steps:

    List the account titles and their balances in the appropriate debit or
    credit column

    Total the debit and credit columns

    Verify the equality of the two columns

    Limitations of a Trial Balance

    Does not guarantee freedom from recording errors

    Does not prove that the company has recorded all transactions or that the
    ledger is correct

    Chapter 2 Notes 4

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