Copyright  2006 Pearson Education Canada Inc. 4-1

Copyright  2006 Pearson Education Canada Inc. 4-2 Outline  The Accounting Cycle  Transactional Analysis: Step 1  Journalizing: Step 2  The General Journal  Steps 3 and 4 of the Accounting Cycle  Posting to the General Journal: Step 3  The General Ledger and “T” Accounts  Posting Procedures: An Illustration  The Chart of Accounts  Taking the Trial Balance: Step 4  Discovering Sources of Error  Computers in Accounting

Copyright  2006 Pearson Education Canada Inc. 4-3 The Accounting Cycle STEP ONE ANALYZING TRANSACTIONS STEP TWO JOURNALIZING STEP THREE POSTING STEP FOUR TAKING THE TRIAL BALANCE

Copyright  2006 Pearson Education Canada Inc. 4-4 Transactional Analysis: Step 1  Transactional analysis – Identification of business transaction  Determine values received – Debits  Determine values given – Credits  DEBITS = CREDITS

Copyright  2006 Pearson Education Canada Inc. 4-5 Journalizing: Step 2  Recording values received (debits) and values given (credits) in a journal  Chronological recording of the transaction - like keeping a business diary  Debits = Credits

Copyright  2006 Pearson Education Canada Inc. 4-6 The General Journal  Used to record hospitality entity transactions in chronological order 1. Date Column 2. Account Names and Description column 3. Reference column – REF 4. Debit (dr) and Credit (cr) columns

Copyright  2006 Pearson Education Canada Inc. 4-7 ILLUSTRATION Chapter 4 Exercise 2 (b) General Journal

Copyright  2006 Pearson Education Canada Inc. 4-8 Steps 3 and 4 of the Accounting Cycle STEP 3 Posting Transferring information From the journal to the ledger Dr=Cr STEP 4 Taking a trial balance of The General Ledger

Copyright  2006 Pearson Education Canada Inc. 4-9 Posting to The General Ledger: Step 3 The book of final entry Used to complete Step 3 of the Accounting Cycle- Posting to the General Ledger Group of Accounts that constitute a hospitality organization’s accounting system It may be a book, a tray of cards, a CD-ROM, or “T” accounts

Copyright  2006 Pearson Education Canada Inc General Ledger ”T” Accounts

Copyright  2006 Pearson Education Canada Inc General Ledger “T” Accounts

Copyright  2006 Pearson Education Canada Inc Posting Procedures: An Illustration

Copyright  2006 Pearson Education Canada Inc The Chart of Accounts  Sequential listing of the firm’s accounts found in the General Ledger  Facilitates finding ledger accounts during journalizing, posting and preparing financial statements

Copyright  2006 Pearson Education Canada Inc Chart of Accounts - Chapter 4 – Problem 2 (b)

Copyright  2006 Pearson Education Canada Inc Calculation of General Account Balance for the Cash Account-Refer to Problem 2 Chapter 4  Debit postings are added  Total 355,000  Credit postings are added  Total 185,526  Since debit postings are Higher than credit postings The ending balance of cash is 169,474 (355, ,526)

Copyright  2006 Pearson Education Canada Inc Taking the Trial Balance: Step 4  Used to check the accuracy of the debit and credit balances in the General Ledger at the end of the accounting period  List of General Ledger accounts with their current balances as of the last day of the accounting period

Copyright  2006 Pearson Education Canada Inc Trial Balance for Lockwood Hotel Corporation - Refer to Problem 2 Chapter 4  Note that the order of accounts in the Trial Balance is the same as in the General Ledger (Assets, Liabilities,  Owners’ Equity, Revenues, and Expenses)  Balances of accounts with Debit balances are added in a left-hand money column while the balances of the accounts with credit balances are added in the right-hand columns  The equality of value exchanges must be maintained DEBIT BALANCES MUST BE EQUAL TO CREDIT BALANCES

Copyright  2006 Pearson Education Canada Inc Discovering Sources of Error  If a trial balance balances, the existence of errors and or omissions is not precluded  Different types of errors or omissions

Copyright  2006 Pearson Education Canada Inc Computers in Accounting  Facilitate data entry  Might eliminate posting errors  Eliminate errors in the calculation of account balances

Copyright  2006 Pearson Education Canada Inc Computers in Accounting Expedite the accounting process Errors can be corrected more easily