Ch 02 : The Recording Process FA 111-KU

Accounting:
Providing Information To
Is an information System Business Organization Users
about

Accounting Process
Internal External
Identification Recording Communicating Managers Investors
Selecting Analyzing Preparing Financial Statements: Creditors
economic Journal 1- Income statement
Ledger 2- Retained Earnings Statement
events 3- Statement of Financial Position
Trial Balance 4- Statement of Cash Flow

Proprietorship Partnership Corporation

Accounting Process:
1- Identification
Selecting events that affecting on ASSETS or LIABILITIES or EQUITY
Example:
Discuss product design with customer.
Purchase Equipment For $20,000 on Account
2- Recording
There are three steps in recording
a. Analyzing
b. Record in Journal ‫التسجيل في دفتر اليومية‬
c. Posting To Ledger ( T Account) ‫الترحيل الي دفتر االستاذ‬

d. Summarize in Trial Balance ‫التلخيص في ميزان المراجعة‬

Determining the debit side and credit side of an entry:

Normal + Dr.
Assets Expenses Dividends Debit
Balance - Cr.

Normal + Cr.
Liabilities Revenues Equity Credit
Balance - Dr.
Journal: Purchased equipment for $20,000 on account
Date Accounts Dr. Cr.
Jan 01 Equipment 20,000
Accounts Payable 20,000

Page 1 of 5 By : Ehab Abdou [97672930]

Ch 02 : The Recording Process FA 111-KU

Ledger:
There are two forms of Ledger
a- T – Account form (Used in Text Books)
Dr. Equipment Cr.
Jan-01 20,000 Jan-02 3,000
Jan-03 2,000
15,000

Dr. Accounts Payable Cr.

Jan-01 20,000

20,000
b- Ledger form (Used in Practice)

Chart of Accounts

Page 2 of 5 By : Ehab Abdou [97672930]

Ch 02 : The Recording Process FA 111-KU

Trial Balance:
Accounts Dr. Cr.
Equipment 15,000
Accounts Payable 20,000
Cash 25,000
Share Capital 20,000
40,000 40,000
Limitations of a Trial Balance

The trial balance may balance even when

1. a transaction is not journalized,

2. a correct journal entry is not posted,
3. a journal entry is posted twice,
4. incorrect accounts are used in journalizing or posting, or
5. offsetting errors are made in recording the amount of a transaction.

3- Communicating.
 Preparing Financial Statements
 Analyze and interprets the financial statements for the use of external users.

Helpful Hints:
1. Paid $500 cash for Current Month rent.
2. Paid $500 cash for Next Month Rent.
3. Received $600 cash for services performed.
4. Received $600 cash for services will performed.
5. Purchased equipment for $10,000 paying $3,000 cash and the balance on Note Payable.

Date Accounts Dr. Cr.

01 Rent Expenses 500
Cash 500
02 Prepaid rent 500
Cash 500
03 Cash 600
Services revenue 600
04 Cash 600
Unearned Services 600
05 Equipment 10,000
Cash 3,000
Note Payable 7,000

Page 3 of 5 By : Ehab Abdou [97672930]

Ch 02 : The Recording Process FA 111-KU

Ex. 196
Journalize the following business transactions in general journal form. Identify each transaction by
number. You may omit explanations of the transactions.
1. The company issues ordinary shares in exchange for ₤25,000 cash.
2. Purchased ₤400 of supplies on credit.
3. Purchased equipment for ₤10,000, paying ₤3,000 in cash and signed a 30-day, ₤7,000, note
payable.
4. Real estate commissions billed to clients amount to ₤4,000.
5. Paid ₤700 in cash for the current month's rent.
6. Paid ₤200 cash on account for supplies purchased in transaction 2.
7. Received a bill for ₤600 for advertising for the current month.
8. Paid ₤2,200 cash for salaries.
9. The company paid dividends of ₤1,200.
10. Received a check for ₤3,000 from a client in payment on account for commissions billed in
transaction 4.

Solution 196
1. Cash......................................................................................... 25,000
Share Capital-Ordinary .................................................... 25,000

2. Supplies ................................................................................... 400

Accounts Payable ............................................................ 400

3. Equipment ................................................................................ 10,000

Cash ................................................................................ 3,000
Notes Payable ................................................................. 7,000

4. Accounts Receivable ................................................................ 4,000

Service Revenue ............................................................. 4,000

5. Rent Expense ........................................................................... 700

Cash ................................................................................ 700

6. Accounts Payable..................................................................... 200

Cash ................................................................................ 200

7. Advertising Expense ................................................................. 600

Accounts Payable ............................................................ 600

8. Salaries and Wages Expense................................................... 2,200

Cash ................................................................................ 2,200

9. Dividends ................................................................................. 1,200

Cash ................................................................................ 1,200

10. Cash......................................................................................... 3,000

Accounts Receivable ....................................................... 3,000

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Ch 02 : The Recording Process FA 111-KU

Ex. 198
Transactions for Tom Petty Company for the month of October are presented below. Journalize
each transaction and identify each transaction by number. You may omit journal explanations.
1. Issued ordinary shares in exchange for $50,000 cash.
2. Purchased land costing $28,000 for cash.
3. Purchased equipment costing $20,000 for $3,000 cash and the remainder on credit.
4. Purchased supplies on account for $800.
5. Paid $1,000 for a one-year insurance policy.
6. Received $3,000 cash for services performed.
7. Received $4,000 for services previously performed on account.
8. Paid salaries to employees for $2,500.
9. Paid dividends of $1,000.

Ex. 207
M. Caria and Associates is a financial planning service. The account balances at December 31,
2014 are shown by the following alphabetical list:
Accounts Payable $ 13,000
Accounts Receivable 19,000
Buildings 120,000
Cash 26,500
Equipment 71,000
Land 42,000
Notes Payable 95,000
Notes Receivable 8,100
Share Capital-Ordinary 179,700
Supplies 1,100

Instructions
Prepare a trial balance with the accounts arranged in proper order.

Page 5 of 5 By : Ehab Abdou [97672930]