3.06 Journalizing and Posting Review

Accounting Cycle

We will begin this review with a sample chart of accountsa listing of accounts used in a business and then go through the first three steps 1. Analyze
2. Journalize
3. Post of the accounting circle.

Chart of Accounts

A simple chart of accounts has five divisions. Each one represents an account category:

1. Assets
2. Liabilities
3. Owner's Equity
4. Revenue
5. Expenses

Assets, begins with a Number 1.

Asset Accounts

Account Numbers	Account Title
101	Cash
120	Accounts Receivables
130	Merchandise Inventory
170	Equipment
171	Accumulated Depreciation

Liabilities, begins with a Number 2.

Liabilities Accounts

Account Numbers	Account Title
201	Accounts Payable
202	Mortgage Loan Payable

Owner's Equity, begins with a Number 3.

Owner's Equity Accounts

Account Numbers	Account Title
300	Mary Smith, Capital
301	Mary Smith, Drawing

Revenue Accounts, begins with a Number 4.

Revenue Accounts

Account Numbers	Account Title
401	Services Revenue

Expense Accounts, begins with a Number 5.

Expense Accounts

Account Numbers	Account Title
501	Salaries Expense
504	Rent Expense
505	Utilities Expense
507	Advertising Expense
508	Depreciation Expense

The last two remaining categories, Revenue and Expenses, are actually subcategories under Owner's Equity.

Rules for Business Transactions

Below are the rules for analyzing business transactions:

1. Identify the accounts affected
2. Classify each account- Is it an Asset, Liability, Capital, Revenue, Expense, or Drawing account?
3. Determine the amount of increase or decrease for each account affected.
4. Determine which account is debited and which account is credited.
5. Make the accounting entry into a journal

T- account chart

ADE = CLR
Debits Increase Credits Decrease	Credit Increase Debits Decrease

 

Step 2 Journalizing Transactions

Below are the steps for journalizing transactions:

1. Date Put the date in the "Date" column. Please note that in this class instead of the date, use the transaction number
2. Debit Put the debit amount in the "Debit" column.
3. CreditPut the credit amount in the "Credit" column.
4. Source Documents Type the number in the Documents No." column.

Before a transaction is recorded in a journal, however, the transaction is analyzed into its debit and credit parts.

Step 3 Post to Ledger

A ledger is a book of accounts in which transaction data from journals have been posted. These transactions' data are classified and summarized in a ledger.

The process of transferring informatin from a journal to ledger accounts is known as posting.

To post from the journal to the ledger:

1. Post the debit total to the debit column of the corresponding ledger account
2. Post the credit total to the credit column of the corresponding ledger account
3. Calculate the account balance

When you have things that are alike (Debit and Debit) or (Credit and Credit) you add the numbers.

When they are different (Debit and Credit) you subtract.