Business Accounting Topic 3 - The Recording Process

THE
CHAPTER 3
RECORDING
PROCESS
THE RECORDING
PROCESS
Characteristic of an account
The rules of debit and credit
The steps in recording process
Preparing of trial balance
DEFINITIONS
Book of first entry
Account
Separate record showing

increases and decreases for
each Fin Stmnt item
Chart of
accounts
A list of the accounts in a

ledger
Ledger
A group of accounts for a

business entity
3
Journal
DOUBLE ENTRY CONCEPT OF

ACCOUNTING
Based
on a simple concept: each party in

a business transaction will receive
something and give something in return.
* The two sides of a coin
*
Receive & Give
* Left versus Right
DEBITS AND CREDITS

A T-account represents a ledger account and is a tool used
to understand the effects of one or more transactions.
TRANSACTION ANALYSIS
Determine which account 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.
JOURNAL ENTRIES
Every transaction would first be recorded in a journal
The process of recording a transaction in the journal is called
journalizing
Journal
Date
Description
Pg
PR
Debit
Credit
JOURNALIZING
STEPS
1. Record the date.
2. Record the title of the account debited in
the Description column.
3. Enter the amount in the Debit column.
4. Record the title of the account credited in
the Description column.
5. Enter the amount in the Credit column.
ASSETS = LIABILITIES + OWNERS EQUITY
Assets
Debit
INCRE
ASE
Credit
DECRE
ASE
Debit
LIABILITY
DECRE
ASE
Credit
INCRE
ASE
Debit
Sales
Credit
Owners Capital
INCREASE
Additional
Capital
Revenues/Sales
DE
C
RE
AS
E
IN
C
RE
AS
E
Equity
Wage Exp
Debit
Withdrawal
DECREASE
Expenses
IN
C
RE
AS
E
Credit
DE
C
RE
AS
E
OE {Cap, Add, Rev}

Debit
Credit
DECRE
ASE
INCRE
ASE
OE {Expenses & Withdrawal}
Debit
INCRE
ASE
Credit
DECRE
ASE
Journal, Ledger, Trial Balance
1. Transactions are analyzed

and recorded in journal.
Documents
Journal
2. Transactions are posted

from journal to ledger.
Journal
3. Trial balance is prepared.

Trial Balance
Ledger
JOURNAL ENTRIES
(a) On July 1, Luna Mayor opens a new
business and deposits RM500,000 in a bank
account in the name of Sea-Link.
Journal
Pg
Date
Description
Jul 1 Cash
Luna Mayor, Capital
Invested cash in Sea-Link.
PR
Debit
Credit
500,000
500,000
On July 5, Sea-Link bought a piece of land

for RM200,000 by paying cash.
Date
Description
PR
Nov 5 Land
Debit
Credit
200,000
Cash
200,000
Purchased land for cash.

Dt
Jul 5 Land
Land
200,000
Ct
Dt
Cash
Ct
Jul 5 Cash 200,000
July10, Sea-Link purchased supplies on

account for RM13,500.
Date
Description
PR
Jul10 Supplies
Debit
Credit
13,500
Accounts Payable
13,500
Purchased supplies on
account.
Dt
Jul 10 A/C Pay
Supplies
13,500
Ct
Dt
A/C Payable
Ct
Jul 10 Supplies 13,500
July 30, Sea-Link paid creditors RM9,500.
Date
PR
Description
Jul 30 Accounts Payable
Debit
Credit
9,500
9,500
Cash
Paid creditors.
Dt
Jul 30
Cash
A/C Payable
9,500
Ct
Dt
Cash
Ct
Jul 30 A/C Pay
9,500
July 30 Sea-Link purchased a truck for

RM64,500 paying RM18,000 cash and the
remainder on account.
Date
Description
Jul
30
Truck
Cash
A/C Pay
Credit
64,500
Cash
18,000
Accounts Payable
46,500
Dt
Jul 30
Debit
Truck
Ct
Dt
18,000
46,500
Cash
Ct
Jul 30 Truck
18,000
Dt
A/C Payable
Ct
Jul 30 Truck
46,500
Aug 18, Sea-Link received fees of RM27,500

from customers for services provided for the
month of July 2011
Date
Description
PR
Aug 18 Cash
Debit
Credit
27,500
Fees Earned
27,500
Received fees from

customers.
Dt
Aug 18 Fees Earned
Cash
27,500
Ct
Dt
Fees Earned
Aug 18
Ct
Cash
27,500
Aug 30 incurred the following expenses:

wages RM20,500 to be paid on Sept 5; and
rent RM3,000 paid by cash.
Date
Description
PR
Aug 30 Wages expense
Debit
Credit
20,500
Wages Payable
20,500
Aug 30 Rent expense

Dt
Aug 30 Wages Pay
Dt
Aug 30
Cash
Cash
Wages Exp
3,000
Ct
Dt
20,500
Rent Exp
3,000
Wages Payable
3,000
Ct
Aug 30 Wages Exp

20,500
Ct
Dt
Cash
Ct
Aug 30 Rent Exp
3,000
A count revealed that RM8,000 of the

supplies inventory had been used during
August.
Date
Description
PR Debit
Aug Supplies expense

30
Credit
8,000
Supplies
8,000
Supplies used during

the month of August.
Dt
Aug 30 Supplies
Supp. Exp
8,000
Ct Dt
Supplies
Ct
Aug 30 Supp. Exp
8,000
August 27 issued an invoice for the sum of

RM45,000 to Abd Halim for a completed
consultation work. He has promised to settle the
amount before the year ends.
Aug Accounts Receivable
27
45,000
Fees earned
Dt
Aug 27 Fees Earned
45,000
A/C Rec
45,000
Ct Dt
Fees Earned
Ct
Aug 27 A/C Rec
45,000
Aug 30, Luna Mayor withdrew RM2,000 in

cash from Sea-Link for personal use.
Aug 30 Luna Mayor, Withdrawal
2,000
Cash
2,000
Owner withdrew cash for

personal use.
Dt
Aug 30 Cash
Wthdrwl
2,000
Ct Dt
Cash
Ct
Aug 30 Wthdrwl
2,000
DEBIT & CREDIT RULE AND

ACCOUNTS NORMAL BALANCES
Increase
Decrease
Normal
balance
FP accounts:
Asset
Debit
Credit
Debit
Liability
Credit
Debit
Credit
Capital
Credit
Debit
Credit
Drawing
Debit
Credit
Debit
Revenue
Credit
Debit
Credit
Expense
Debit
Credit
Debit
Owners equity
25
CI accounts:
TRIAL BALANCE
A list of all the accounts maintained

A
list
of
all
the
accounts
maintained
by the business entity, along with
by
therespective
business balances
entity, along with
their
their respective balances
TYPES OF ERRORS
Transposition - occurs when the order of the digits is
changed mistakenly, such as writing RM542 as RM452 or
RM524.
Slide - the entire number is mistakenly moved one or more
spaces to the right or the left, such as writing RM542.00 as
RM54.20.

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THE

Separate record showing

A list of the accounts in a

A group of accounts for a

DOUBLE ENTRY CONCEPT OF

on a simple concept: each party in

Receive & Give

* Left versus Right

DEBITS AND CREDITS

Determine whether the account should be debited or credited.

Prepare an unadjusted trial balance at the end of the period.

5. Enter the amount in the Credit column.

ASSETS = LIABILITIES + OWNERS EQUITY

OE {Cap, Add, Rev}

OE {Expenses & Withdrawal}

Journal, Ledger, Trial Balance

1. Transactions are analyzed

2. Transactions are posted

3. Trial balance is prepared.

On July 5, Sea-Link bought a piece of land

Purchased land for cash.

Jul 5 Cash 200,000

July10, Sea-Link purchased supplies on

Jul 10 Supplies 13,500

July 30, Sea-Link paid creditors RM9,500.

Jul 30 Accounts Payable

Jul 30 A/C Pay

July 30 Sea-Link purchased a truck for

Aug 18, Sea-Link received fees of RM27,500

Received fees from

Aug 30 incurred the following expenses:

Aug 30 Wages expense

Aug 30 Rent expense

Aug 30 Wages Exp

Aug 30 Rent Exp

A count revealed that RM8,000 of the

Aug Supplies expense

Supplies used during

Aug 30 Supp. Exp

August 27 issued an invoice for the sum of

Aug 27 A/C Rec

Aug 30, Luna Mayor withdrew RM2,000 in

Aug 30 Luna Mayor, Withdrawal

Owner withdrew cash for

DEBIT & CREDIT RULE AND

A list of all the accounts maintained

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