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Bookkeeping

Bookkeeping. 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. Three Parts of an Account (continued).

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Bookkeeping

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  1. Bookkeeping

  2. 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. Three Parts of an Account(continued) Example: CASH 9/1 Balance 12,000 9/5 2,000 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 10,000 (Credit Balance)

  4. 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. Double Entry Recording Rules(continued) SUMMARY

  6. 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). Instructions: (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)

  7. Normal Account Balances(continued) Answer: Note: The normal balance is same as increase to the account.

  8. 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

  9. Journalizing General Journal

  10. Analyzing and JournalizingTransactions Steps in the Recording Process Instructions: Analyze and journalize the transactions provided.

  11. Analyzing and Journalizing Transactions (continued) General Journal

  12. 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). 101 Cash Cash 9/1 Bal. + 12,000 9/5 + 500 9/10 - 2,000 9/20 - 1,500 9/30 Bal. 9,000 9/1 Bal. 12,000 9/5 500 9/10 2,000 9/20 1,500 9/30 Bal. 9,000 Three-Column Account Form Cash No. 101 POSTING

  13. Determining Account Balances Instructions: Set up T-accounts for each of the account listed in General Journal and record balance in T-account, be sure to record the amounts on the proper side of the account

  14. Steps in Posting Instructions: Post the first two entries recorded in the General Journal. General Journal Jl Cash No. 101 Common Stock No. 340 Rent Expense No. 560

  15. Trial Balance All balances are taken from the ledger accounts after considering all transactions for the month. Proves equality of debits and credits.

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