Acct 2210 Zeigler - Chp 3: Double Entry Accounting (13 slides)

There are no new transactions in Chapter 3.

Only a new way to organize the information using a “shorthand” tool.

Let’s take some notes & start with page 152/153 for an overview.

The Accounting Cycle... Transactions (measurable financial events)

occur in the normal course of business. These transactions are recorded in the

General Journal using Debits/Credits (pg 152 exhibit)

These journal entries are then “posted” to the General Ledger (Collection of all accounts – pg 153)

Adjusting Entries are made/posted (pg 152/153)

Financial Stmts are then prepared (pg 154). The Closing Process then takes place (pg

155).

3-3

The “General Journal” (Ex 3-2, pg 152)

3-4

What is a “Chart of Accounts”?

The Accounting Process

Along the way…. (see pg 154) We can prepare a “Trial Balance” at

any time to “test the equality” of debits & credits. Note: This is not a financial stmt, but…….

Remember.., the accounting equation must always hold true and total debits must always equal total credits.

Debits & Credits (pg 150)

Every recordable transaction (event) impacts at least two accounts. Double-entry bookkeeping

ANY account can be increased or decreased.

Debit means “left side” Credit means “right side”

Debits & Credits (pg 150)

Assets: Increased with debits, Decreased with

credits Liabilities and Equity:

Increased with credits, Decreased with debits

For each transaction: DEBITS = CREDITS (No

exceptions!) We will use “T-Accounts” to

analyze the effect of any transaction.

Let’s use E3-1A (pg 167) to practice debit (DR) & credit (CR) terminology.

“AJE’s” (from Chapter 2)…. Accruals and Deferrals often

necessitate the use of Adjusting Journal Entries (AJE).

Adjusting Journal Entry: an entry required at the end of the accounting period to properly update the income stmt and balance sheet.

i.e. adjusting entries update the account balances prior to the creation of financial statements.

The Closing ProcessTransfers net income

(or loss) and dividends to

Retained Earnings. The result is an

updated R/E balance.Establishes zero

balances in all revenue, expense,

and dividend accounts.

Closing Entries (pg 155) “Temporary” accounts”:

All income statement accounts, and The Dividends account

These temporary accounts are closed at the end of the accounting period. Brings their balances to ZERO. Net Income and Dividends then flow into

(update) Retained Earnings on the Balance Sheet.

Debits = Credits

http://www.youtube.com/watch?v=j71Kmxv7smk

And,.. to conclude our introduction to Chapter 3, a musical interlude to help us remember debits and credits…. Who says accounting can’t be fun?