recording of business transactions. financial statement : income statement balance sheet ...

RECORDING OF RECORDING OF BUSINESS TRANSACTIONSBUSINESS TRANSACTIONS

Financial Statement :

Income Statement

Balance SheetStatement of

Owner’s EquityCash Flow

StatementNotes of

Financial Statement

Trial Balance

UNDERSTANDING THE STEPS OF RECORDING PROCESS

Transaction occurs and the information

is recorded on a source document

Transaction occurs and the information

is recorded on a source document Source document

information is recorded in a journal

Source document information is

recorded in a journal

Transaction information is posted from the journal to

the ledger

Transaction information is posted from the journal to

the ledgerA Trial Balance is prepared at the end of the period

A Trial Balance is prepared at the end of the period

Financial Statement are prepared (Income Statement, Statement of Owner’s Capital, Balance Sheet, Cash Flows Statement, Notes of Financial Statement)

Financial Statement are prepared (Income Statement, Statement of Owner’s Capital, Balance Sheet, Cash Flows Statement, Notes of Financial Statement) To the Decision

Makers

The General Journal and Its The General Journal and Its FunctionFunction

• A Journal is the first recording of the business transaction

• The function of a journal is to provide a permanent and complete record, arranged in chronological order for future reference, of all the business transactions of a firm

• The manner of entering transaction in the journal displays their effects on the accounts of the firm

• The process of recording a transaction in the journal is called journalizing

• This form of recording a transaction is called a journal entry

The Procedures of Journalizing a transaction

1. Every page of the journal is numbered for future reference

2. The year is entered at the head of the date column

3. The date of the business transaction is entered in the date column. The name of the month need not be repeated for successive transactions during that month

4. The name of the account to be debited is entered against the left margin of the description column

5. The amount to be debited is entered in the debit amount column

6. The name of the account to be credited is entered on the line following the debit account entry. An indentation is made to indicate that the account is credited

Continuing……….

7.The amount to be credited is entered in the credit amount column

8. A detailed description is entered immediately below the journal entry. This valuable information becomes a permanent record for the company

9. A line is usually skipped between journal entries

10. The reference column is provided for entering cross references to the accounts in the ledger

The Types of Journal

There are two types of journal:

• General Journal

• Special JournalSpecial Journal consists of:• Cash Receipts Journal• Cash Disbursement Journal• Sales Journal• Purchased Journal • General Journal

Special Journal consists of:• Cash Receipts Journal• Cash Disbursement Journal• Sales Journal• Purchased Journal • General Journal

Illustration of the Two Column Journal

Date Date DescriptionDescription ReReff

DebitDebit CreditCredit

20082008

JuneJune

(3)(3)

11 Cash Cash 1,0001,000

Angga’s Angga’s CapitalCapital

1,0001,000

Angga invested Angga invested cash in cash in

the companythe company

General Journal

Page 6

(1)(in Rp.000)

(2)(4) (5)

(7)

(6)

(8)

(9)

(10)

Illustration of Cash Disbursement Journal

Cash Disbursement Journal Page:

Credit

Account Amount Cash

DebitDate Description Ref

Examples of Special Journal

Illustration of Cash Receipt Journal

Cash Receipt Journal Page:

Debit Credit

Cash Account AmountDate Description Ref

Examples of Special Journal

Preparing Journal Entries Preparing Journal Entries in in

General JournalGeneral Journal• The “Kartika”, Co is a service firm. Some of the following transactions took place during the month of May, 2008.

• How to record are those transactions into general journal?DateDate TransactionsTransactions

20082008

MayMay11 The owner invests in the firm. He contributes three assets: The owner invests in the firm. He contributes three assets:

cash, supplies and office equipment. Cash is recorded the Rp. cash, supplies and office equipment. Cash is recorded the Rp. 100,000,000 amount and office equipment is recorded the 100,000,000 amount and office equipment is recorded the Rp. 80,000,000 amount. The two asset accounts are debited Rp. 80,000,000 amount. The two asset accounts are debited and the capital account is credited to record the owner’s and the capital account is credited to record the owner’s equity in the firmequity in the firm

33 The firm buys equipment to operate the car-wash service on The firm buys equipment to operate the car-wash service on credit. Car-wash equipment is recorded the Rp. 136,000,000 credit. Car-wash equipment is recorded the Rp. 136,000,000 amount on debit side and Notes Payable is recorded the Rp. amount on debit side and Notes Payable is recorded the Rp. 136,000,000 amount on credit side.136,000,000 amount on credit side.

DateDate TransactionsTransactions

20082008

MayMay88 Supplies to be used in washing cars are purchased on Supplies to be used in washing cars are purchased on

credit. Supplies will be recorded the Rp. 8,000,000 amount credit. Supplies will be recorded the Rp. 8,000,000 amount on debit side. Account Payable is credited the Rp. on debit side. Account Payable is credited the Rp. 8,000,000 amount8,000,000 amount

1111 The rent for the month is paid. Rent Expense will be The rent for the month is paid. Rent Expense will be recorded the Rp. 3,000,000 on debit, and Cash will be recorded the Rp. 3,000,000 on debit, and Cash will be credited the Rp. 3,000,000 amountcredited the Rp. 3,000,000 amount

1717 The revenues earned are recorded the Rp. 80,000,000. This The revenues earned are recorded the Rp. 80,000,000. This revenue comes from sales on credit and cash. The Revenue revenue comes from sales on credit and cash. The Revenue will be credited the Rp. 80,000,000, Accounts Reveivable is will be credited the Rp. 80,000,000, Accounts Reveivable is debited the amount of Rp. 10,000,000, and Cash is debited debited the amount of Rp. 10,000,000, and Cash is debited the Rp. 70,000,000 amount the Rp. 70,000,000 amount

1818 The amount due Airlangga, Co on the May, 8 purchased of The amount due Airlangga, Co on the May, 8 purchased of supplies is paid. Account Payable will be debited the Rp. supplies is paid. Account Payable will be debited the Rp. 1,000,000 amount and Cash is credited the Rp. 1,000,000 1,000,000 amount and Cash is credited the Rp. 1,000,000 amountamount

Continuing …………

DateDate TransactionsTransactions

20020088

MayMay

2727 Collected cash form customer. This the amount owed from Collected cash form customer. This the amount owed from the May, 17 transaction. Cash will be debited the Rp. the May, 17 transaction. Cash will be debited the Rp. 1,000,000 amount, and Accounts Receivable is credited 1,000,000 amount, and Accounts Receivable is credited the Rp. 1,000,000 amountthe Rp. 1,000,000 amount

3131 Salaries are paid. Salaries expense will be debited the Rp. Salaries are paid. Salaries expense will be debited the Rp. 6,000,000 amount, and Cash is credited the Rp. 6,000,000 6,000,000 amount, and Cash is credited the Rp. 6,000,000 amountamount

3131 Utilities are paid. As in the case of other expenses, the Utilities are paid. As in the case of other expenses, the debit represents a decrease in capital. Utilities expenses debit represents a decrease in capital. Utilities expenses are debited the Rp. 1,000,000 amount and Cash is are debited the Rp. 1,000,000 amount and Cash is credited Rp. 1,000,000credited Rp. 1,000,000

3131 The revenues earned are recorded the Rp. 15,000,000. The revenues earned are recorded the Rp. 15,000,000. This revenue comes from sales on credit and cash. The This revenue comes from sales on credit and cash. The Revenue will be credited the Rp. 4,000,000, Accounts Revenue will be credited the Rp. 4,000,000, Accounts Reveivable is debited the amount of Rp. 11,000,000, and Reveivable is debited the amount of Rp. 11,000,000, and Cash is debited the Rp. 15,000,000 amount Cash is debited the Rp. 15,000,000 amount

3131 The owner withdraws cash for personal use. Angga’s The owner withdraws cash for personal use. Angga’s withdrawals will be debited Rp. 5,000,000 amount, and withdrawals will be debited Rp. 5,000,000 amount, and Cash is credited Rp. 5,000,000 amountCash is credited Rp. 5,000,000 amount

Continuing……….

Recording to transaction May, 1, 2008

(in Rp) General Journal Page: 2Description Ref Debit Credit

2008 1 Cash 100,000,000May Office equipment 80,000,000

Angga's Capital 180,000,000 Owner's invested in

the business

Date



2008 3 Car-wash equipment 136,000,000May Cash 136,000,000

Purchased car-wash equipment on credit

Date


2008 8 Supplies 8,000,000May Accounts Payable 8,000,000

Purchased car-wash supplies on credit

Date




2008 11Rent Expenses 3,000,000May Cash

Paid the May rent on 3,000,000 the building

Date



2008 17 Accounts Receivable 10,000,000May Cash 70,000,000

Car-Wash Revenue 80,000,000 Revenue earned for services

rendered first half of month

including cars washed on

credit

Date



2008 18 Accounts Payable 10,000,000May Cash 10,000,000

Paid the the amount

due the May,8 purchased

Date



2008 27 Cash 10,000,000May Accounts Receivable 10,000,000

Collected the amout due

from selling services

May, 17

Date



2008 31 Salaries expenses 6,000,000May Cash 6,000,000

Paid employers' salaries

for May

31 Utilities Expenses 1,000,000 Cash 1,000,000 Paid utilities for May

Date



2008 31 Accounts Receivable 4,000,000May Cash 11,000,000

Car-Wash Revenue 15,000,000 Revenue earned for services

rendered first half of month

including cars washed on

credit

Date



2008 31 Angga's Withdrawals 5,000,000May Cash 5,000,000

Angga withdrew cash for

personal use

Date

recording of business transactions. financial statement : income statement balance sheet ...

Documents

journal entrythe procedures

cash flows statement

date columnthe date

capital account

reference column

permanent record

following transactions

debit account entry