1. Chapter 3
The Recording Process

2. 3-1 Three Parts of an Account
(1) ACCOUNT TITLE
(Left Side)
(2) DEBIT
(Right Side)
(3) CREDIT
Total Debits > Total Credits = Debit Balance
Total Credits > Total Debits = Credit Balance
Total Debits = Total Credits = Zero Balance

3. 3-1 Three Parts of an Account (continued)
Example:
CASH
9/1 Balance 12,000
9/ ,000
9/30 Balance 11,000
9/10 2,000
9/20 1,000
(Debit Balance)
ACCOUNTS PAYABLE
9/6 3,000
9/21 2,000
9/1 Balance 6,000
9/17 9,000
9/30 Balance ,000
(Credit Balance)

4. 3-2 Double Entry Recording Rules
ASSETS
LIABILITIES
Increase Account by DEBIT
Decrease Account by CREDIT
Decrease Account by DEBIT
Increase Account by CREDIT
Normal Balance
Normal Balance
DIVIDENDS
COMMON STOCK
Increase Account by DEBIT
Decrease Account by CREDIT
Decrease Account by DEBIT
Increase Account by CREDIT
Normal Balance
Normal Balance
RETAINED EARNINGS
EXPENSES
Decrease Account by DEBIT
Increase Account by CREDIT
Increase Account by DEBIT
Decrease Account by CREDIT
Normal Balance
Normal Balance
REVENUES
Decrease Account by DEBIT
Increase Account by CREDIT
Normal Balance

5. 3-2 Double Entry Recording Rules (continued)
SUMMARY
Debit
Credit
ASSETS
Increase (N)
Decrease
LIABILITIES
COMMON STOCK
RETAINED EARNININGS
DIVIDENDS
REVENUES
EXPENSES

6. 3-4 The Recording Process
ANALYZE
Business Transactions (for effects on specific accounts)
Business Documents
RECORD
Transactions entered in a Journal (book of original entry)
Journalizing
TRANSFER
Journal Information transferred to Ledger Accounts
Posting

7. Account Titles and Explanation
3-5 Journalizing
General Journal
Date
Account Titles and Explanation
Ref.
Debit
Credit
2008
Sept. 1
Cash
15,000
Common Stock
(To record sale of stock) 1. 2. 3. 4. 5.
Key: 1.
Enter date in Date Column. 2.
Enter debit account title(s) at left margin of Account Titles and Explanation Column and amounts in Debit Column. 3.
Enter credit account title(s) [INDENT CREDIT ACCOUNT TITLE(S)] and amounts in Credit Column. 4.
Enter explanation under account titles. 5.
Ref. Column is left blank until posting.

8. 3-6 Analyzing and Journalizing Transactions
Steps in the Recording Process
Instructions: Analyze and journalize the transactions provided.
Sept. 1
Stockholders Invested $5,000 in his video services corporation. 2
The corporation paid $500 cash for the store rent. 5
The corporation purchased video supplies of $1,000. 9
The corporation purchased video equipment for $12,000 paying $2,000 in cash and signed a $10,000 twenty-four month 9% note payable. 12
The corporation provided video services and collected cash of $3,000. 15
Declared and paid a $500 cash dived to stockholders.

9. 3-6 Analyzing and Journalizing Transactions (continued)
General Journal
Date
Account Titles and Explanation
Ref.
Debit
Credit
2008
Sept. 1
Cash
Common Stock
(Shares of stock issued for cash)
5,000 2
Rent Expense
(Paid rent)
500 5
Supplies
(Paid cash for supplies)
1,000 9
Equipment
Notes payable
(Purchased equipment, paying cash and issuing notes payable)
12,000
2,000
10,000 12
Service Revenue
(Collected cash for services provided)
3,000 15
Dividends
(Declared and paid a cash dividend)

10. 3-7 Forms of Accounts and Balances
Tabular
Account (or T-Account)
Three-Column
All forms must show increases and decreases to the account in order to determine the account balances (amounts are assumed).
Cash
101
Cash
9/1 Bal. + 12,000 9/
9/ ,000
9/ ,500
9/30 Bal. 9,000
9/1 Bal ,000 9/
9/10 2,000
9/20 1,500
9/30 Bal. 9,000
Three-Column Account Form
Cash
No. 101
Date
Explanation
Ref.
Debit
Credit
Balance
2008
Sept. 1
12,000 5 Jl
500
12,500 10
2,000
10,500 20
1,500
9,000 30
POSTING

11. Account Titles and Explanation
3-8 Steps in Posting
Instructions: Post the first two entries recorded in the General Journal.
General Journal Jl
Date
Account Titles and Explanation
Ref.
Debit
Credit
2009
Sept. 1
Cash
Common Stock
(Issued shares of stock for cash)
101
340
5,000 2
Rent Expense
(Paid rent)
560
500
Cash
No. 101
Date
Explanation
Ref.
Debit
Credit
Balance
2009, Sept. 1 Jl
5,000 2
500
4,500
Common Stock
No. 340
Date
Explanation
Ref.
Debit
Credit
Balance
2009, Sept. 1 Jl
5,000
Rent Expense
No. 560
Date
Explanation
Ref.
Debit
Credit
Balance
2009, Sept. 2 Jl
500

12. Double-Entry Accounting
“ Double-entry accounting is based on a simple concept: each party in a business transaction will receive something and give something in return. In bookkeeping terms, what is received is a debit and what is given is a credit. The T account is a representation of a scale or balance.”
Scale or Balance
T account
Left Side
Receive
DEBIT
Right Side
Give
CREDIT
Luca Pacioli
Developer of
Double-Entry
Accounting
Receive
DEBIT
Give
CREDIT

13. Illustrate Step 2- Journalizing
Accounting for the Hospitality Industry
Elisa S. Moncarz and Nestor de Portocarrero
©2004 Pearson Education, Inc.
Upper Saddle River, NJ 07458

14. Business Transactions Additional Example
Entry H.
Chris Clark (stockholder)
ABC Restaurant paid dividends of $2,000.
Reduction in obligation
Cash
receive
Debit
ABC
(payor)
give
Credit
give
Credit
General Journal
Date Description Debit Credit
11/30 Dividends 2,000
Cash 2,000

15. Expanded Accounting Equation
“ The basic accounting equation can be expanded to include all five financial categories indicating what has been received and given.”
DEBITS
received
CREDITS
given =

16. Business Transactions
Entry B.
Land Owner (seller)
ABC Restaurant buys land for $20,000.
Land
Cash
receive
Debit
ABC
(buyer)
give
Credit
give
Credit
General Journal
Date Description Debit Credit
11/5 Land 20,000
Cash 20,000

17. Business Transactions
Entry C.
Supplier (seller)
ABC Restaurant buys supplies for $1,350, agreeing to pay in the near future.
Supplies
A promise
to pay later
receive
Debit
ABC
(buyer)
give
Credit
give
Credit
General Journal
Date Description Debit Credit
11/10 Supplies 1,350
Accounts Payable 1,350

18. Business Transactions
Entry D.
Customer (buyer)
ABC Restaurant earns fees of $7,500, receiving cash.
Cash
Services
receive
Debit
ABC
(seller)
give
Credit
give
Credit
General Journal
Date Description Debit Credit
11/18 Cash 7,500
Fees Earned 7,500

19. Business Transactions
Entry E.
Various suppliers
ABC Restaurant paid: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275.
Services,
benefits
Cash
receive
Debit
ABC
(buyer)
give
Credit
give
Credit
General Journal
Date Description Debit Credit
11/18 Wages Expense 2,125
Rent Expense 800
Utilities Expense 450
Misc. Expense 275
Cash 3,650

20. Business Transactions
Entry G.
Internal Transaction
(no external entity)
At the end of the month, the cost of supplies on hand is $550.
Use of supplies
Supplies
receive
Debit
ABC
(user)
give
Credit
give
Credit
General Journal
Date Description Debit Credit
11/30 Supplies Expense 800
Supplies
Balance of Supplies account $1,350 less $550 on hand = $800 used

21. ABC Restaurant Trial Balance November 30, 2002
11 Cash 5,900
14 Supplies 550
17 Land 20,000
21 Accounts Payable 400
31 Capital Stock 25,000
33 Dividends 2,000
41 Fees Earned 7,500
51 Wages Expense 2,125
52 Rent Expense 800
54 Utilities Expense 450
55 Supplies Expense 800
59 Miscellaneous Expense 275
32,900 32,900
…and do not forget that all
debits should equal
all credits…!