Why Record Transactions?

1. Why Record Transactions? • To have a systematic recording of transaction  analyze  report to users • Items that goes to Balance Sheet (Asset, Liability & Equity) • To know to financial position how much your assets, the amount owe to others and the money that business owns (equity) • Items that goes to Profit and Loss Statement (Sales, Sales return/return inward, Sales discount, Purchase, Purchase return/return outward, Expense) • Know the performance (profit and loss) for particular accounting period

2. How to record transaction? • Identify the TWO (2) Items • Give a appropriate name • Identify the types of account • Balance sheet items • Profit and loss items • Know the increase and the decrease • Determine the debit and credit • Balance sheet items (always involve two side) • Profit and loss items (normally take one side) • Post to appropriate Journal or Ledger  Trial Balance  Profit & Loss/ Balance Sheet

3. Examples: Balance Sheet Items (Asset) Buy an equipment by cash RM100 1) Identify the TWO Items Equipment Cash

4. Examples: Balance Sheet Items (Asset) Buy an equipment by cash RM100 2) Give a appropriate name Equipment  Office Equipment Cash  Cash in Hand

5. Examples: Balance Sheet Items (Asset) Buy an equipment by cash RM100 3) Identify the types of account Office Equipment = Asset Cash in Hand = Asset

6. Identify the type of these account Cash in Bank = Asset Bank Loan = Liability Capital = Equity Sale of Goods = Sales = Expense Salary/ Pay bill

7. Identify the type of these account = Purchase Purchase goods = Contra-sales Return Inward/ Sale Return Return Outward/ Purchase Return = Contra-purchase Sales Discount = Contra-sales Drawing = Contra-capital

8. Examples: Balance Sheet Items (Asset) Buy an equipment by cash RM100 4) Know the increase and the decrease Office Equipment = Asset Cash in Hand = Asset

9. Examples: Balance Sheet Items (Asset) Buy an equipment by cash RM100 5) Determine the debit and credit Office Equipment = Asset Debit Cash in Hand = Asset Credit

10. Determine debit and credit for the following: Asset Debit Credit Liability Credit Debit Capital Credit Debit

11. Determine debit and credit for the following: Sales Credit Return Inward/Sales Return Debit Sales Discount Debit Purchase Debit Credit Return Outward/Purchase Return Expense Debit

12. Examples: Balance Sheet Items (Asset) Buy an equipment by cash RM100 6) Post to appropriate Journal or Ledger Journal Entries 2 Jan 2012 Dr Office Equipment RM100 Cr Cash in Hand RM100 (Buy an office equipment)

13. Examples: Balance Sheet Items (Asset) Buy an equipment by cash RM100 6) Post to appropriate Journal or Ledger Account Ledger Office Equipment 1 Jan 2012 Balance b/dRMxx 2 Jan 2012 Cash in Hand RM100

14. Only Balance Sheet Items has balance b/d or beginning balance Maybe why it is called BALANCE Sheet

15. Examples: Balance Sheet Items (Asset) Buy an equipment by cash RM100 6) Post to appropriate Journal or Ledger Account Ledger Cash in Hand 1 Jan 2012 Balance b/dRMxx 2 Jan 2012 Office Equipment RM100

16. Trial Balance Cash Bank Loan Bank Creditors Car Capital Equipment Inventory Purchase Sales Return Inward Return Outward Sales Discount Expenses Drawing

17. Trial Balance Cash Bank Loan Bank Creditors Car Capital Equipment (Drawing) Inventory Sales (Return Inward) (Sales Discount) (Purchase) Return Outward (Expenses)

18. Trial Balance Cash Bank Loan Bank Creditors Car Capital Equipment (Drawing) Inventory Sales (Return Inward) (Sales Discount) (Purchase) Return Outward (Expenses) Profit

19. Trial Balance Cash Bank Loan Bank Creditors Car Capital Equipment (Drawing) Inventory Profit

20. BALANCE SHEET LIABILITIES ASSETS Cash Bank Loan Bank Creditors Car EQUITIES Equipment Capital Inventory (Drawing) Profit

21. PROFIT AND LOSS STATEMENT Sales (Sales Discount) (Return Inward) (Purchase) Return Outward (Expenses) Profit

22. PROFIT AND LOSS STATEMENT Sales (Sales Discount) (Return Inward) (Purchase) Return Outward Cost of goods sold (Expenses) Profit

23. WAIT ! WHAT ABOUT INVENTORY???

24. BALANCE SHEET LIABILITIES ASSETS Cash Bank Loan Bank Creditors Car EQUITIES Equipment Capital Inventory (Drawing) Profit

25. BALANCE SHEET LIABILITIES ASSETS Cash Bank Loan Bank Creditors Car EQUITIES Equipment Capital Inventory (Drawing) Profit Change in Inventory

26. BALANCE SHEET LIABILITIES ASSETS Cash Bank Loan Bank Creditors Car EQUITIES Equipment Capital Inventory (Drawing) Profit Change in Inventory

27. Trial Balance Cash Bank Loan Bank Creditors Car Capital Equipment (Drawing) Inventory Sales (Return Inward) (Sales Discount) (Purchase) Return Outward (change in inventory) (Expenses) Profit

28. PROFIT AND LOSS STATEMENT Sales (Sales Discount) (Return Inward) (Purchase) Cost of goods sold Return Outward (Change in inventory) (Expenses) Profit

29. We calculate Beginning Inventory – Ending Inventory to calculate Change in Inventory

30. Cost of goods sold Beginning Inventory plus: Purchase Less: Purchase return Less: Ending Inventory Cost of Goods Sold

31. PROFIT AND LOSS STATEMENT Sales (Sales Discount) (Return Inward) Total Sales Less: Cost of goods sold Beginning Inventory + Purchase - Purchase Return - Ending Inventory (Cost of goods sold) Gross Profit Less: Expenses) Net Profit