1. Acct 2210 Zeigler - Chp 3: Double Entry Accounting (13 slides)
There are no new transactions in Chapter 3.
Only a new way to organize the information using a “shorthand” tool.
Let’s take some notes & start with page 152/153 for an overview.

2. The Accounting Cycle...
Transactions (measurable financial events) occur in the normal course of business.
These transactions are recorded in the General Journal using Debits/Credits (pg 152 exhibit)
These journal entries are then “posted” to the General Ledger (Collection of all accounts – pg 153)
Adjusting Entries are made/posted (pg 152/153)
Financial Stmts are then prepared (pg 154).
The Closing Process then takes place (pg 155).

3. The “General Journal” (Ex 3-2, pg 152)

4. What is a “Chart of Accounts”?
Here is a summary of the ledger accounts after recording the transactions for Collins Brokerage Services.

5. The Accounting Process
Along the way…. (see pg 154)
We can prepare a “Trial Balance” at any time to “test the equality” of debits & credits. Note: This is not a financial stmt, but…….
Remember.., the accounting equation must always hold true and total debits must always equal total credits.
Optional section for those that want to discuss transaction analysis separate from Christy’s Lemonade (or at all).

6. To test whether debits equal credits in the general ledger, accountants regularly prepare an internal accounting schedule known as a trial balance. A trial balance lists every ledger account and its balance. Debit balances are listed in one column and credit balances are listed in an adjacent column. The columns are totaled and the totals are compared. Shown here is the trial balance of Collins Brokerage Services after all adjusting entries have been made.

7. Debits & Credits (pg 150)
Every recordable transaction (event) impacts at least two accounts.
Double-entry bookkeeping
ANY account can be increased or decreased.
Debit means “left side”
Credit means “right side”

8. Debits & Credits (pg 150) Assets: Liabilities and Equity:
Increased with debits, Decreased with credits
Liabilities and Equity:
Increased with credits, Decreased with debits
For each transaction:
DEBITS = CREDITS (No exceptions!)
We will use “T-Accounts” to analyze the effect of any transaction.

9. Let’s use E3-1A (pg 167) to practice debit (DR) & credit (CR) terminology.
The transactions presented in this chapter illustrate the relationships summarized in Panel A of this exhibit. Panel B illustrates these relationships in T-account form.
You may want to take a few minutes and review this fundamental information.

10. “AJE’s” (from Chapter 2)….
Accruals and Deferrals often necessitate the use of Adjusting Journal Entries (AJE).
Adjusting Journal Entry: an entry required at the end of the accounting period to properly update the income stmt and balance sheet.
i.e. adjusting entries update the account balances prior to the creation of financial statements.

11. The Closing Process
Transfers net income (or loss) and dividends to Retained Earnings. The result is an updated R/E balance.
Establishes zero balances in all revenue, expense, and dividend accounts.
At the end of the year, closing journal entries are prepared. Closing entries serve two purposes. First, they transfer net income (or loss) and dividends to Retained Earnings. This process gets the Retained Earnings account balance up to date. Second, they establish zero balances in all income statement and dividend accounts so they are ready to start collecting amounts for the next accounting period.

12. Closing Entries (pg 155) “Temporary” accounts”:
All income statement accounts, and
The Dividends account
These temporary accounts are closed at the end of the accounting period.
Brings their balances to ZERO.
Net Income and Dividends then flow into (update) Retained Earnings on the Balance Sheet.

13. Debits = Credits
And,.. to conclude our introduction to Chapter 3, a musical interlude to help us remember debits and credits….
Who says accounting can’t be fun?