1. www.lrjj.cn Bookkeeping

2. www.lrjj.cn 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. www.lrjj.cn Three Parts of an Account (continued) CASH ACCOUNTS PAYABLE 9/1 Balance12,000 9/52,000 9/30Balance11,000 9/102,000 9/201,000 9/63,000 9/212,000 9/1Balance6,000 9/179,000 9/30Balance10,000 Example: (Debit Balance) (Credit Balance)

4. www.lrjj.cn Double Entry Recording Rules ASSETS DIVIDENDS EXPENSES REVENUES RETAINED EARNINGS COMMON STOCK LIABILITIES Increase Account by DEBIT Decrease Account by DEBIT Increase Account by CREDIT Decrease Account by CREDIT Normal Balance

5. www.lrjj.cn Double Entry Recording Rules (continued) DebitCredit ASSETSIncrease (N)Decrease LIABILITIESDecreaseIncrease (N) COMMON STOCKDecreaseIncrease (N) RETAINED EARNININGSDecreaseIncrease (N) DIVIDENDSIncrease (N)Decrease REVENUESDecreaseIncrease (N) EXPENSESIncrease (N)Decrease SUMMARY

6. www.lrjj.cn Normal Account Balances Review the normal balances of accounts introduced in Chapters One and Two. Review how an increase in the account would be recorded (DR/CR). (a) For each account, indicate the normal balance (Debit/Credit). (b) For each account, indicate how an increase in the account is recorded (DR/CR) Instructions: AccountNormal BalanceIncrease in Account 1. Cash (EXAMPLE)DR 2. Accounts Receivable 3. Rent Expense 4. Service Revenue 5. Accounts Payable 6. Common Stock 7. Dividends 8. Unearned Revenue 9. Insurance Expense 10. Notes Payable 11. Retained Earnings

7. www.lrjj.cn Normal Account Balances (continued) AccountNormal BalanceIncrease in Account 1. Cash (EXAMPLE)DR 2. Accounts ReceivableDR 3. Rent ExpenseDR 4. Service RevenueCR 5. Accounts PayableCR 6. Common StockCR 7. DividendsDR 8. Unearned RevenueCR 9. Insurance ExpenseDR 10. Notes PayableCR 11. Retained EarningsCR Answer: Note: The normal balance is same as increase to the account.

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

9. www.lrjj.cn Journalizing DateAccount Titles and ExplanationRef.DebitCredit 2008 Sept. 1 Cash10115,000 Common Stock31115,000 (To record sale of stock) 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 – account number 1. 2. 3. 4. 5. General Journal

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

11. www.lrjj.cn Analyzing and Journalizing Transactions (continued) DateAccount Titles and ExplanationRef.DebitCredit 2014 Sept. 1 Cash Common Stock (Shares of stock issued for cash) 101 340 5,000 2 Rent Expense Cash (Paid rent) 560 101 500 5 Supplies Cash (Paid cash for supplies) 129 101 1,000 9 Equipment Cash Notes payable (Purchased equipment, paying cash and issuing notes payable) 157 101 200 12,000 2,000 10,000 12 Cash Service Revenue (Collected cash for services provided) 101 400 3,000 15 Dividends Cash (Declared and paid a cash dividend) 332 101 500 General Journal J1

12. www.lrjj.cn Forms of Accounts and Balances 1.Tabular 2.Account (or T-Account) 3.Three-Column All forms must show increases and decreases to the account in order to determine the account balances (amounts are assumed). Cash 9/1 Bal. 12,000 9/5 500 9/102,000 9/201,500 9/30 Bal. 9,000 101 Cash 9/1Bal.+ 12,000 9/5+ 500 9/10- 2,000 9/20- 1,500 9/30Bal. 9,000 Three-Column Account Form Cash No. 101 DateExplanationRef.DebitCreditBalance 2008 Sept. 1 Balance12,000 5Jl50012,500 10Jl2,00010,500 20Jl1,5009,000 30Balance9,000 POSTING

13. www.lrjj.cn Steps in Posting Instructions: Post the first two entries recorded in the General Journal. DateAccount Titles and ExplanationRef.DebitCredit 2014 Sept. 1 Cash Common Stock (Issued shares of stock for cash) 101 340 5,000 2Rent Expense Cash (Paid rent) 560 101 500 Cash DateExplanationRef.DebitCreditBalance 2014, Sept. 1Jl5,000 2Jl5004,500 DateExplanationRef.DebitCreditBalance 2014, Sept. 1Jl5,000 General Journal Common Stock Rent Expense DateExplanationRef.DebitCreditBalance 2014, Sept. 2Jl500 Jl No. 101 No. 340 No. 560

14. www.lrjj.cn Name of the Company Trial Balance September 31, 2014 DebitCredit Cash$ 4,000 Supplies 1,000 Equipment 12,000 Notes Payable$ 10,000 Common Stock 5,000 Dividends 500 Service Revenue 3,000 Rent Expense 500______ $18,000 All balances are taken from the ledger accounts on Sept 31 after considering all transactions for the month. Proves equality of debits and credits. Trial Balance

15. www.lrjj.cn The Recording Process (recap) Double entry bookkeeping –The transactions involve at least two accounts –The journal entry must show at least one debit and one credit entry –The sum of debit and credits must be equal General Journal –An accounting record in which transactions are initially recorded in chronological order General Ledger –Shows all the bookkeeping accounts individually including their current balance Posting –The procedure of transferring journal entries to the ledger accounts. Trial Balance –A list of accounts an their balances at a given time –To prove equality of debit and credit