3 - 1 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Beginning the Accounting Cycle: Journalizing, Posting, and the Trial Balance Chapter 3

3 - 2 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Objective 1 Journalizing: analyzing and recording business transactions into a journal.

3 - 3 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Introduction Accounting cycle The accounting period One year: Calendar year Fiscal year Less than one year: QuarterlyMonthly

3 - 4 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 3-1 (Analyzing and Recording Business Transactions) Business transactions occurred. Analyzing transactions and recording. Posting to the general ledger. Preparing the trial balance.

3 - 5 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 3-1 (Analyzing and Recording Business Transactions) What is the general journal? It is the book of original entry. Transactions are written in a journal in chronological order. Journalizing is the process of entering information as debits and credits to the correct accounts.

3 - 6 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 3-1 (Analyzing and Recording Business Transactions) The accountant must refer to the chart of accounts for the account name to be used in the journal.

3 - 7 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 3-1 (Analyzing and Recording Business Transactions) What is the general ledger? It is the book of final entry. The information from the journal is transferred to the ledger in the posting process. Debits and credits in the journal remain exactly the same when posted to the accounts in the ledger.

3 - 8 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 3-1 (Analyzing and Recording Business Transactions) Clark’s Word Processing Services General Journal Page 1 Date Account Titles and Description PRDr.Cr. 200x May 1 Cash Brenda Clark, Capital Initial investment of cash by owner 10,00010,000

3 - 9 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 3-1 (Analyzing and Recording Business Transactions) Clark’s Word Processing Services General Journal Page 1 Date Account Titles and Description PRDr.Cr. 200x May 1 EquipmentCash Accounts Payable Purchase of equipment 6,0001,0005,000

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 3-1 (Analyzing and Recording Business Transactions) Clark’s Word Processing Services General Journal Page 1 Date Account Titles and Description PRDr.Cr. 200x May 1 Prepaid Rent Cash Rent paid in advance – 3 months 1,2001,200

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 3-1 (Analyzing and Recording Business Transactions) Clark’s Word Processing Services General Journal Page 1 Date Account Titles and Description PRDr.Cr. 200x May 3 Office Supplies Accounts Payable Purchase of supplies on account from Norris

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Objective 2 Posting: transferring information from a journal to a ledger.

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 3-2 (Posting to the Ledger) DatePost.Ref.DebitCredit DebitCredit Balance May 1 GJ110,00010,000 Clark’s Word Processing Services General Ledger CashAccount No. 111 Insert the number of the journal page.

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 3-2 (Posting to the Ledger) Account Name: CashAccount Number: 111 DatePost.Balance 200xDescriptionRef. DebitCredit Debit Credit May 1GJ 1 10,000 10,000 General Journal Page 1 DatePost. 200xDescriptionRef. DebitCredit May 1Cash ,000 Brenda Clark, Capital 31110,000 To record initial investment

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Objective 3 Preparing a trial balance.

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 3-3 (Preparing the Trial Balance) The trial balance lists the accounts which have balances in the same order as they appear in the chart of accounts. The trial balance will show if debits/credits have been interchanged. It will show if amounts have been transposed, or if a debit/credit was omitted or recorded twice.

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 3-3 (Preparing the Trial Balance) Clark’s Word Processing Services Trial Balance, May 31, 200x Cash Accounts Receivable Office Supplies Prepaid Rent Word Processing Equipment Accounts Payable Brenda Clark, Capital Brenda Clark, Withdrawals Word Processing Fees Expenses Totals Totals DebitCredit DebitCredit 6,155 6,155 5,000 5, ,200 1,200 6,000 6,000 3,350 3,35010, ,000 8,000 1,770 1,770 21,35021,350

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 3-3 (Preparing the Trial Balance) Mathematical error in addition Omission Slide or transposition

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 3-3 (Preparing the Trial Balance) Some errors do not show, such as omissions or recording to the wrong account. Corrections before posting are made in the journal. An audit trail must be left. Do not erase – cross out errors and enter corrections.

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 3-3 (Preparing the Trial Balance) What about corrections after posting? This means that errors are also in the ledger accounts. Cross out incorrect amounts, change to corrected amounts, and record balance changes.

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater End of Chapter 3