1. Role of Accounting Records 1.Establishing accountability for the assets and or transactions under an individual’s control. 2.Keeping track of routine business activities such as the amounts of money in the company bank accounts, amounts due from credit customers, or amounts owed to supplies. 3.Obtaining detailed information about a particular transaction. 4.Evaluating the performance and efficiency of various departments within the organization.

2. 5.Maintaining documentary evidence of the company’s business activities. ( example for tax purposes) 6.Verifying authenticity, accuracy and validity of transactions in connection with the examination or review undertaken by external auditors.

3. Accounts/ledgers The record used to keep track of the increases and decreases in financial statement items. Chart of Accounts A list of accounts in the ledger, arranged in order in which they appear in the financial statements. Balance sheet accounts are listed first Income statement accounts are listed in order of revenues and expenses

4. Current Assets (account numbers 10000 - 16999) 10100 Cash - Regular Checking 10200 Cash - Payroll Checking 10600 Petty Cash Fund 12100 Accounts Receivable 12500 Allowance for Doubtful Accounts 13100 Inventory 14100 Supplies 15300 Prepaid Insurance Property, Plant, and Equipment (account numbers 17000 - 18999) 17000 Land 17100 Buildings 17300 Equipment 17800 Vehicles 18100 Accumulated Depreciation - Buildings 18300 Accumulated Depreciation - Equipment 18800 Accumulated Depreciation - Vehicles Current Liabilities (account numbers 20000 - 24999) 20100 Notes Payable - Credit Line #1 20200 Notes Payable - Credit Line #2 21000 Accounts Payable 22100 Wages Payable 23100 Interest Payable 24500 Unearned Revenues Long-term Liabilities (account numbers 25000 - 26999) 25100 Mortgage Loan Payable 25600 Bonds Payable 25650 Discount on Bonds Payable Stockholders' Equity (account numbers 27000 - 29999) 27100 Common Stock, No Par 27500 Retained Earnings 29500 Treasury Stock Operating Revenues (account numbers 30000 - 39999) 31010 Sales - Division #1, Product Line 010 31022 Sales - Division #1, Product Line 022 32015 Sales - Division #2, Product Line 015 33110 Sales - Division #3, Product Line 110 Cost of Goods Sold (account numbers 40000 - 49999) 41010 COGS - Division #1, Product Line 010 41022 COGS - Division #1, Product Line 022 42015 COGS - Division #2, Product Line 015 43110 COGS - Division #3, Product Line 110 Marketing Expenses (account numbers 50000 - 50999) 50100 Marketing Dept. Salaries 50150 Marketing Dept. Payroll Taxes 50200 Marketing Dept. Supplies 50600 Marketing Dept. Telephone Payroll Dept. Expenses (account numbers 59000 - 59999) 59100 Payroll Dept. Salaries 59150 Payroll Dept. Payroll Taxes 59200 Payroll Dept. Supplies 59600 Payroll Dept. Telephone Other (account numbers 90000 - 99999) 91800 Gain on Sale of Assets 96100 Loss on Sale of Assets

5. The account is a means of accumulating in one place all the information about changes in specific financial items. Determining the balances of a T-Account If the debit total exceeds the credit total, the account has a debit balance. If the credit exceeds the debit total, the account has a credit balance. Example: Jan 2 50,000 Jan 25 2,000 Jan 31 7,000 ----------------------------------------------- Balance 33,500 Jan 10 20,000 Jan 27 2,000 Jan 31 3,500 ----------------------------------------------- Cash

6. Flow of Data from Source Documents through Trial Balance Enter Business Transactions in the General Journal Analyze Transactions using source documents and chart of accounts Post the entries in the Journal to the General Ledger From the General Ledger prepare a Trial Balance

7. General Journal Page 1 Date Account Titles and ExplanationPost Ref DebitCredit 2007 Jan 2Cash10050,000 Ramos, Capital 300 50,000 Owner’s original investment in appliance repair business. Account Ramos, Capital Account No. 300 Date 2007 ITEM POST REF DEBITCREDIT BALANCES DEBITCREDIT JAN 2J150,000 Ledger

8. Ramos Appliance Repair Service Trial Balance January 31, 2007 Account Title Balance Debit Credit Cash P 33,500 Accounts Receivable - Shop Supplies 4,000 Tools and equipment 18,000 Accounts payable P 3,000 S.Ramos, capital 50,000 Service revenue 7,000 Utilities expense 1,000 Wage expense 2,500 Supplies expense 1,000 Total P 60,000 P 60,000 ======== ========