RECORDING TRANSACTION TO GENERAL LEDGER

1. RECORDING TRANSACTION TO GENERAL LEDGER • To simplify of recording transaction in a company needs a basic procedure • To Process of recording transaction needs some accounts and general ledger

2. A. DEFINITION of ACCOUNTS, GENERAL LEDGER, and KINDS of ACCOUNTS • An account is simply a class of information in an accounting system. It involves accounts of assets, liabilities, equities, income, and expenses • Examples: Cash, Supplies, Accounts Payable, Capital, Services Revenue, Salaries Expense

3. General Ledger • General ledger is just a book containing all the company’s accounts • A manual (handwritten) bookkeeping system generally uses ledger to classify business transactions by account • Each page of the ledger usually represents one account

4. Usefulness of an Account • A group of accounts for a business entity is called a ledger • A list of the accounts in the ledger is called a chart of accounts • A chart of accounts is designed to meet the information needed for company’s managers and other users of their financial statements

5. Account Classification Assets Accounts Real Account Liabilities Accounts Equities Accounts Account in General Ledger Income Accounts Nominal Account Expenses Accounts

6. Characteristics of an Account • The simplest form of an account has three parts: • Each account has a title which is the name of the item recorded in the account • Each account has a space to record increases in the amount of the item • Each account has a space to record decreases in the amount of the item

7. Form of AccountsA simplest T – Form of Accounts Name of Account (Left side/ debit) (Right side/ Credit)

8. A completely T-form of account • Name of account is in list heading • The date column is used to record the transaction time occurred • The description column is used to record a description related to the transaction • F-column is filled journal page when posting to general ledger is done

9. A Completely T – Form of Accounts Name of Account Number:

10. Transaction Recording in Cash 550,000 67,600

11. The Rules of Recording in Account

12. The Rules of Debit and Credit on Assets • To INCREASE an ASSET – type account, enter the amount on the DEBIT side • To DECREASE an ASSET – type account, enter the amount on the CREDIT side • All assets accounts should have DEBIT BALANCE at the end of the period because increases can be expected to exceed decreases

13. The Rules of Debit and Credit on Liabilities and Equity To INCREASE a LIABILITY and an EQUITY – type account, enter the amount on the CREDIT side To DECREASE a LIABILITY and an EQUITY – type account, enter the amount on the DEBIT side All liabilities and equity accounts should have CREDIT BALANCES at the end of the period, because increases can be expected to exceed decreases

14. Types of an Equity Accounts • Owner’s Equity Account • Owner’s Withdrawal Account • Revenue Account • Expenses Account Revenue and Expenses Accounts are called Nominal Account/ Income Statement Accounts

15. The Rules of Debit and Credit in Income and Expenses Expenses Income Debit for Increasing (+) Credit for Decreasing (-) Debit for Decreasing (-) Credit for Increasing (+)

16. The Rules of Debit and Credit in Real Account on Balance Sheet Balance Sheet Liabilities Debit (-) Credit (+) Assets Debit (+) Credit (-) Normal Balance Owner’s Equity Normal Balance Debit (-) Credit (+) Normal Balance

17. The Rules of Debit and Credit to Real Account in Accounting Equation Assets Liabilities + Owner’s Equity = Debit (+) Credit (-) Debit (-) Credit (+) Debit (-) Credit (+)

18. The Rules of Debit and Credit to Real Account in Accounting Equation Increases are recorded on the left or debit size Decreases are recorded on the right or credit side Decreases are recorded on the left or debit side Increasesare recorded on the right side or credit side Decreases are recorded on the left or debit side Increasesare recorded on the right side or creditside DEBIT balances for ASSETS CREDIT balances for EQUITIES

19. The Rules of Debit and Credit to Nominal Account in Equities Account Equities Credit Debit Income Expenses Debit (+) Credit (-) Debit (-) Credit (+) Normal Balance Normal Balance

20. The Rules of Debit and Credit and Normal Balance in Each Accounts Group

21. Analyzing the Impact of Business Transaction to the Accounts • The Analysis of transaction is a critical step in accounting cycle • This step will have an impact to the following steps • It is used to understand the impact of transaction to the accounts in accounting equation

22. Each business transaction will cause at least two accounts and the sum of debit must be equal to the sum of credit • This equality of debit and credit for each transaction is built into the accounting equation: Assets = Liabilities + Owner’s Equity • It is also because of this double equality that the system is known as double-entry accounting

23. Recording transaction in Account Examples: Transaction 1: January, 02, 2008, Kartika established a Transportation and Travel Company named “Widya, Co”. She invested Cash Rp. 1,000,000,000 and Office Supplies Rp. 15,000,000. Those transactions will be recorded on the accounts as follows:

24. Transaction Analysis • Transaction 1 will cause: • Asset account (Cash and Office Supllies) and Equity (Kartika’s Capital) increase • Debited : Cash Rp. 1,000,000,000 • Debited : Office Supplies Rp. 15,000,000 • Credited: Kartika’s Capital Rp. 1,015,000,000

25. Recording Transaction on Accounts Cash Office Supplies 1. Rp. 1,000,000,000 1. Rp. 15,000,000 Kartika’s Capital 1. Rp. 1,015,000,000

26. Transaction 2: January, 22, 2008, “Widya, Co” purchased building at cost Rp. 700,000,000. This building is used to operational of office activities • Transaction Analysis • This transaction will change one asset to another asset (Cash Building) • Debited : Building Rp. 700,000,000 • Credited : Cash Rp. 700,000,000

27. Recording Transaction on Accounts Cash 2. Rp. 700,000,000 Building 2. Rp.700,000,000