Accounting Cycle: Analysis and Recording of Transactions

1. Module 3 Analysis and Recording of Transactions

2. Learning Objectives

3. The Accounting Cycle Analyze transactions Prepare post-closing trial balance 9 1 Journalize 2 2 Close 8 Post 3 Prepare statements 7 Prepare unadjusted trial balance 4 Adjust Prepare adjusted trial balance 6 5

4. = + Assets Liabilities Equity The Accounting Equation • A detailed record of increases and decreases in a specific asset, liability, or equity item. Introductory Accounting SAP 2007 / SAP University Alliances

5. The General Ledger

6. The T-Account Introductory Accounting SAP 2007 / SAP University Alliances

7. Calculating the Account Balance Example: 1 2 3 • Steps: • Add the amounts on the debit side. • Add the amounts on the credit side. • Calculate the difference between the debits and credits. Introductory Accounting SAP 2007 / SAP University Alliances

8. Double-Entry Accounting Debits = Credits Always!

9. Debit Credit Debit Credit Debit Credit +- - + - + Double-Entry Accounting = + Assets Liabilities Equity Assets Liabilities Owner’s Equity Introductory Accounting SAP 2007 / SAP University Alliances

10. Capital Withdrawals Revenues Expenses Debit Credit Debit Credit Debit Credit Debit Credit - + +- - + +- Double-Entry Accounting Equity Accounts Introductory Accounting SAP 2007 / SAP University Alliances

11. Assets Liabilities Equity Normal Balances • An account’s normal balance is the debit or credit side where increases are recorded. = + Introductory Accounting SAP 2007 / SAP University Alliances

12. Chart of Accounts

13. Analyzing Transactions

14. Analyzing Transactions • Example 1: • The owner invests $10,000 in the business. 1 2 3

15. Analyzing Transactions • Example 1: • The owner invests $10,000 in the business. 1 2 3

16. Analyzing Transactions • Example #1: • The owner invests $10,000 in the business. 1 2 3

17. Analyzing Transactions • Example #1: • The owner invests $10,000 in the business. 1 2 3

18. Analyzing Transactions • Example 1: • The owner invests $10,000 in the business. Debit cash for $10,000 Credit owner, capital for $10,000 Introductory Accounting SAP 2007 / SAP University Alliances

19. Analyzing Transactions • Example 2: • The company purchases supplies by paying $2,500 cash. 1 2 3

20. Analyzing Transactions • Example 2: • The company purchases supplies by paying $2,500 cash. 1 2 3

21. Analyzing Transactions • Example 2: • The company purchases supplies by paying $2,500 cash. 1 2 3

22. Analyzing Transactions • Example 2: • The company purchases supplies by paying $2,500 cash. 1 2 3

23. Analyzing Transactions • Example 2: • The company purchases supplies by paying $2,500 cash. Debit supplies for $2,500 Credit cash for $2,500 Introductory Accounting SAP 2007 / SAP University Alliances

24. Analyzing Transactions • Example 3: • The company purchases supplies for $1,100 on credit. 1 2 3

25. Analyzing Transactions • Example 3: • The company purchases supplies for $1,100 on credit. 1 2 3

26. Analyzing Transactions • Example 3: • The company purchases supplies for $1,100 on credit. 1 2 3

27. Analyzing Transactions • Example 3: • The company purchases supplies for $1,100 on credit. 1 2 3

28. Analyzing Transactions • Example 3: • The company purchases supplies for $1,100 on credit. Debit supplies for $1,100 Credit accounts payable for $1,100 Introductory Accounting SAP 2007 / SAP University Alliances

29. The General Journal

30. Posting Journal Entries

31. The Posting Process General journal information is transferred to the general ledger 3 1 2 5 5 4 • Steps: • Identify the account. • Enter date • Enter amount • Calculate new account balance • Enter posting references

32. Trial Balance

33. Trial Balance