Topic 3 - The Recording Process (Student)

THE CHAPTER 3
RECORDING
PROCESS
THE RECORDING
PROCESS
Characteristic of an account
The rules of debit and credit
The steps in recording process
Preparing of trial balance
DEFINITIONS
Journal • Book of first entry
• Separate record showing

Account increases and decreases for
each Fin Stmnt item
Chart of • A list of the accounts in a

accounts ledger
• A group of accounts for a

Ledger business entity
3
DOUBLE ENTRY CONCEPT OF
ACCOUNTING
Based on a simple concept: each party in a
business transaction will receive something
and give something in return.
* The two sides of a coin

* Receive & Give
* Left versus Right
DEBITS AND CREDITS
A ‘T’-account represents a ledger account and is a tool used
to understand the effects of one or more transactions.
T- Account
TRANSACTION ANALYSIS
Determine which account is affected by the transaction.
Determine whether the account increases or decreases.
Determine whether the account should be debited or credited.
Record the transaction using journal entry.
Post the journal entries to the accounts in the ledger.
Prepare an unadjusted trial balance at the end of the period.
6
JOURNAL ENTRIES
Every transaction would first be recorded in a journal
The process of recording a transaction in the journal is called
journalizing
Journal Pg
Date Description PR Debit Credit

1
2
3
7
JOURNALIZING STEPS
1. Record the date.
2. Record the title of the account debited in
the Description column.
3. Enter the amount in the Debit column.
4. Record the title of the account credited in
the Description column.
5. Enter the amount in the Credit column.
8
ASSETS = LIABILITIES + OWNER’S EQUITY
Debit Assets Credit
DECRE
ASE
INCRE
+ ASE -
Debit
LIABILITY Credit
DECRE
ASE INCRE
- ASE
+
Debit Sales Credit
Owner’s Capital
INCREASE
Additional
DE
Capital
-
C IN
Revenues/Sales
RE
AS
E
C
RE
AS
+
E
Equity
Debit Wage Exp Credit
Withdrawal DE
-
IN C
DECREASE Expenses + C
RE
RE
AS
AS E
E
OE {Cap, Add, Rev}
Debit Credit
DECRE
ASE
INCRE
ASE
- +
OE {Expenses & Withdrawal}
Debit Credit
DECRE
ASE
INCRE
ASE
+ -
Journal, Ledger, Trial Balance
1. Transactions are analyzed

and recorded in journal.
Documents
Journal
2. Transactions are posted

from journal to ledger.
Journal Ledger
3. Trial balance is prepared.

Trial Balance
JOURNAL ENTRIES
(a) On July 1, Luna Mayor opens a new

business and deposits RM500,000 in a bank
account in the name of Sea-Link.
Journal
Pg
Jul 1 Cash 500,000
Luna Mayor, Capital 500,000
Invested cash in Sea-Link.
On July 5, Sea-Link bought a piece of land
for RM200,000 by paying cash.

Nov 5 Land 200,000
Cash 200,000
Purchased land for cash.
Dt Land Ct Dt Cash Ct
Jul 5 Land 200,000 Jul 5 Cash 200,000

July10, Sea-Link purchased supplies on
account for RM13,500.

Jul10 Supplies 13,500
Accounts Payable 13,500
Purchased supplies on
account.
Dt Supplies Ct Dt A/C Payable Ct
Jul 10 A/C Pay 13,500 Jul 10 Supplies 13,500

July 30, Sea-Link paid creditors RM9,500.

Jul 30 Accounts Payable 9,500
Cash 9,500
Paid creditors.
Dt A/C Payable Ct Dt Cash Ct
Jul 30 Cash 9,500 Jul 30 A/C Pay 9,500

July 30 Sea-Link purchased a truck for
RM64,500 paying RM18,000 cash and the
remainder on account.
Date Description Debit Credit

Jul Truck 64,500
30
Cash 18,000
Accounts Payable 46,500
Dt Truck Ct Dt Cash Ct
Jul 30 Cash 18,000 Jul 30 Truck

A/C Pay 46,500 18,000
Dt A/C Payable Ct
Jul 30 Truck
46,500
Aug 18, Sea-Link received fees of RM27,500
from customers for services provided for the
month of July 2011

Aug 18 Cash 27,500
Fees Earned 27,500
Received fees from
customers.
Dt Cash Ct Dt Fees Earned Ct
Aug 18 Fees Earned 27,500 Aug 18 Cash 27,500

Aug 30 incurred the following expenses:
wages RM20,500 to be paid on Sept 5; and
rent RM3,000 paid by cash.
Aug 30 Wages expense 20,500
Wages Payable 20,500
Aug 30 Rent expense 3,000

Cash 3,000
Dt Wages Exp Ct Dt Wages Payable Ct
Aug 30 Wages Pay 20,500 Aug 30 Wages Exp

20,500
Dt Rent Exp Ct Dt Cash Ct
Aug 30 Cash 3,000 Aug 30 Rent Exp 3,000

A count revealed that RM8,000 of the
supplies inventory had been used during
August.
Aug Supplies expense 8,000
30
Supplies 8,000
Supplies used during
the month of August.
Dt Supp. Exp Ct Dt Supplies Ct
Aug 30 Supplies 8,000 Aug 30 Supp. Exp 8,000

August 27 issued an invoice for the sum of
RM45,000 to Abd Halim for a completed
consultation work. He has promised to settle the
amount before the year ends.
Aug Accounts Receivable 45,000

27
Fees earned 45,000
Dt A/C Rec Ct Dt Fees Earned Ct
Aug 27 Fees Earned Aug 27 A/C Rec 45,000

45,000
Aug 30, Luna Mayor withdrew RM2,000 in
cash from Sea-Link for personal use.
Aug 30 Luna Mayor, Withdrawal 2,000

Cash 2,000
Owner withdrew cash for
personal use.
Dt Wthdrwl Ct Dt Cash Ct
Aug 30 Cash 2,000 Aug 30 Wthdrwl 2,000

DEBIT & CREDIT RULE AND
ACCOUNTS NORMAL BALANCES
Normal
Increase Decrease balance
FP accounts:
Asset Debit Credit Debit
Liability Credit Debit Credit
Owner’s equity
Capital Credit Debit Credit
Drawing Debit Credit Debit
CI accounts:
Revenue Credit Debit Credit
Expense Debit Credit Debit
25
TRIAL BALANCE
A list of all the accounts maintained

A list of all the accounts maintained
by the business entity, along with
by therespective
their business balances
entity, along with
their respective balances
TYPES OF ERRORS
Transposition - occurs when the order of the digits is

changed mistakenly, such as writing RM542 as RM452 or
RM524.
Slide - the entire number is mistakenly moved one or more

spaces to the right or the left, such as writing RM542.00 as
RM54.20.

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THE CHAPTER 3

Journal • Book of first entry

• Separate record showing

Chart of • A list of the accounts in a

• A group of accounts for a

* The two sides of a coin

Determine whether the account increases or decreases.

Determine whether the account should be debited or credited.

Record the transaction using journal entry.

Post the journal entries to the accounts in the ledger.

Prepare an unadjusted trial balance at the end of the period.

Date Description PR Debit Credit

Debit Assets Credit

1. Transactions are analyzed

2. Transactions are posted

3. Trial balance is prepared.

(a) On July 1, Luna Mayor opens a new

Date Description PR Debit Credit

Jul 5 Land 200,000 Jul 5 Cash 200,000

Date Description PR Debit Credit

Dt Supplies Ct Dt A/C Payable Ct

Jul 10 A/C Pay 13,500 Jul 10 Supplies 13,500

Date Description PR Debit Credit

Dt A/C Payable Ct Dt Cash Ct

Jul 30 Cash 9,500 Jul 30 A/C Pay 9,500

Date Description Debit Credit

Jul 30 Cash 18,000 Jul 30 Truck

Date Description PR Debit Credit

Dt Cash Ct Dt Fees Earned Ct

Aug 18 Fees Earned 27,500 Aug 18 Cash 27,500

Aug 30 Rent expense 3,000

Dt Wages Exp Ct Dt Wages Payable Ct

Aug 30 Wages Pay 20,500 Aug 30 Wages Exp

Dt Rent Exp Ct Dt Cash Ct

Aug 30 Cash 3,000 Aug 30 Rent Exp 3,000

Dt Supp. Exp Ct Dt Supplies Ct

Aug 30 Supplies 8,000 Aug 30 Supp. Exp 8,000

Aug Accounts Receivable 45,000

Dt A/C Rec Ct Dt Fees Earned Ct

Aug 27 Fees Earned Aug 27 A/C Rec 45,000

Aug 30 Luna Mayor, Withdrawal 2,000

Aug 30 Cash 2,000 Aug 30 Wthdrwl 2,000

A list of all the accounts maintained

Transposition - occurs when the order of the digits is

Slide - the entire number is mistakenly moved one or more

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