2.2 - The Recording Process
2.2 - The Recording Process
2.2 - The Recording Process
Title of Account
Dr. Cr.
18,300 18,300
Balance 8050
Credit :
Accounts Payable
Dr. Cr.
7,000 15,000
1,700 1,200
250 1,500
1,300 600
18,300 18,300
Credit balance 8050
Debit and Credit Procedure
Fundamentals of Double Entry systems
For each transaction debits must equal credits in
the accounts. The equality of debits and credits
provides the basis for the double entry systems
of recording transactions.
Normal Balance
Liability
Debits for decreases Credits for increases
Normal Balance
Debit and Credit Effect
Owners Capital
Owners Drawing
Debit for increase Credit for decrease
Normal balance
Debit and Credit Effect
Revenues
Debit for decrease Credit for increase
Normal Balance
Expenses
Debit for increase Credit for decrease
Normal Balance
Steps in Recording Process
The basic steps in recording process are:
1.Analyze each transaction for its effects.
Posting:
The procedure of transferring journal entries
Ledger is called posting.
Trial Balance
A trial balance is a list of accounts and their
balances at a given time. A trial balance is
prepared at the end of an accounting period.
The primary purpose of a trial balance is to
prove that the debits equal credits after posting.
Practice Problem
Problem 1
On October 1, 2010 C.R Byrd invests $10,000
cash in an advertising agency called Pioneer
advertising agency.
On October1, 2010 Pioneer purchases office
equipment costing $5000 by signing a 3
months, 12% note payable.
On October 2, Pioneer receives a $1200 cash
advance from R. Knox, a client, for advertising
services that are expected to be completed by
December 31.
On October 3, Pioneer pays office rent for
October in Cash $900.
On October 4, Pioneer pays $600 for a one year
insurance policy that will expire next year on
September 30.
On October 5, Pioneer purchases an estimated 3
months supply of advertising materials on
account from Aero Supply for $2500.
On October 9, Pioneer hires four employees to
begin work on October 15. Each employee is to
receive a weekly salary of $500 for a five day
work week, payable every 2 weeks- First
payment made on October 26.
On October 20, C.R Byrd withdraws $500 cash
for personal use.
On October 26, Pioneer paid employee salaries
of $4000 in cash.
On October 31, Pioneer receives $10,000 in
cash from a company for advertising services
provided in October.
Instruction:
a. Give journal entry from the above
transaction.
b. Prepare necessary ledger accounts.
c. Prepare a trial balance at October 31,
2010.