1. PROCESSING BUSINESS TRANSACTIONS
CHAPTER 3
PROCESSING BUSINESS TRANSACTIONS
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2. Outline Accounting as an Information System Business Transactions
The Accounting Cycle
Rules of Debit and Credit
The Journal
Transactional Analysis
The General Journal: Illustration
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3. Accounting as an Information System
INPUT PROCESS OUTPUT
SOURCE ACCOUNTING INFORMATION
DOCUMENTS CYCLE TO MANAGEMENT
Business Transactions Financial Statements
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4. Business Transactions
Raw Material of the accounting process
Like crude oil or food supplies, transactions must be processed in order to get the end product
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5. The Accounting Cycle The accounting cycle: first 3 steps
Identification of Business Transactions
Journalizing-recording the business transactions in chronological order in a General Journal
Posting to the General Ledger
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6. Identifying Business Transactions: Step 1
Identification of Business Transactions
Values Received=Values Given
Debits = Credits (Dr = Cr)
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7. Rules of Debits and Credits
ASSETS
INCREASE
DECREASE
LIABILITIES
OWNERS’ EQUITY
REVENUE
EXPENSE
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8. Journalizing: Step 2 Once we recognize
that a transaction has occurred,
We record it in the “book of original entry”,
usually known as
THE GENERAL JOURNAL
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9. The Journal A book of original entry
Transactions are recorded in chronological order
Used to complete Step 2 of the Accounting Cycle
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10. The General Journal
Date Account Names Ref Dr Cr
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11. Recording Transactions in the General Journal – Step 2 of the Accounting Cycle
Mr. Carlton invests $30,000 in a new travel agency
The business borrows $50,000 at 8% per annum.
First month rent is paid, $1,000.
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12. Transactional Analysis
1. Value Received by the Travel Agency is $30,000 in Cash- Debit Cash; Value Given by the Travel Agency is ownership interest in the amount of $30,000- Credit M. Carlton, Capital
2. Value Received is $50,000 in Cash- Debit Cash; Value given is the promise to pay $50,000 in the future- Credit notes payable
3. Value Received is the use of the premises rented worth $1,000- Debit Rent Expense; Value Given is a payment of $1,000 in Cash- Credit Cash
See journal entries in the next slide
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13. The General Journal: Illustration
Date Account Names Ref Dr Cr.
Sep. 1 Cash ,000-
M.Carlton, Capital ,000-
Owner’s investment
Sep. 2 Cash ,000-
Notes Payable ,000-
Company borrows money at 12% per annum
Sep. 3 Rent Expense ,000-
Cash ,000-
Rent is paid
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