Heintz & Parry
Chapter
20th Edition
College
Accounting
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4
Journalizing
and Posting
Transactions
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Flow of Data
1
STEP #1
Describe the flow of
data from source
documents through
the trial balance.
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Flow of Data
INPUT
Analyze transactions
using
SOURCE DOCUMENTS and
CHART OF ACCOUNTS
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2
PROCESSING
GENERAL
JOURNAL
GENERAL
LEDGER
“Journalizing”
“Posting”
EP
ST
#2
E
ST
P
#3
From the
general ledger,
prepare a
TRIAL
BALANCE
Describe the chart of
accounts as a means
of classifying
financial information.
#
4
Post the entries
in the journal to
the
ST
EP
Enter business
transactions in
the
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Jessie Jane’s Campus Delivery
Chart of Accounts
The Chart of Accounts
Assets
101
122
141
145
185
•
A list of ALL accounts used by a business
•
In numeric order
•
Used to determine which accounts are affected
by a given transaction
(100–199)
Cash
Accts. Rec.
Supplies
Prepaid Ins.
Delivery Eq.
Assets begin with 1
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Jessie Jane’s Campus Delivery
Chart of Accounts
Jessie Jane’s Campus Delivery
Chart of Accounts
Assets
101
122
141
145
185
(100–199)
Cash
Accts. Rec.
Supplies
Prepaid Ins.
Delivery Eq.
Liabilities (200–299)
202
Accts. Pay.
Assets
101
122
141
145
185
(100–199)
Cash
Accts. Rec.
Supplies
Prepaid Ins.
Delivery Eq.
Liabilities (200–299)
202
Accts Pay.
Liabilities begin with 2
uit
Eq
r’s
e
wn
y
sw
gin
be
3
ith
O
Owner’s Eq. (300–399)
311
Jessica Jane, Capital
312
Jessica Jane, Drawing
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Jessie Jane’s Campus Delivery
Chart of Accounts
Jessie Jane’s Campus Delivery
Chart of Accounts
Assets
101
122
141
145
185
(100–199)
Cash
Accts. Rec.
Supplies
Prepaid Ins.
Delivery Eq.
Revenues
401
Liabilities (200–299)
202
Accts Pay.
(400–499)
Delivery Fees
Re
ve
nu
e
sb
eg
in
wi
th
4
Owner’s Eq. (300–399)
311
Jessica Jane, Capital
312
Jessica Jane, Drawing
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Assets
101
122
141
145
185
(100–199)
Cash
Accts. Rec.
Supplies
Prepaid Ins.
Delivery Eq.
Revenues
401
(400–499)
Delivery Fees
Expenses
(500–599)
511
Wages Exp.
521
Rent Exp.
525
Tele. Exp.
Ex
Liabilities (200–299)
pe
ns
202
Accts Pay.
es
be
gin
Owner’s Eq. (300–399)
wi
th
311
Jessica Jane, Capital
5
312
Jessica Jane, Drawing
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Jessie Jane’s Campus Delivery
Chart of Accounts
Assets
101
122
141
145
185
(100–199)
Cash
Accts. Rec.
Supplies
Prepaid Ins.
Delivery Eq.
Revenues
401
(400–499)
Delivery Fees
Expenses
511
521
525
(500–599)
Wages Exp.
Rent Exp.
Tele. Exp.
3
Describe and
explain the
purpose of source
documents.
Liabilities (200–299)
202
Accts Pay.
Owner’s Eq. (300–399)
311
Jessica Jane, Capital
312
Jessica Jane, Drawing
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Source Documents
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Source Documents
EXAMPLE
•
Trigger the analysis of what happened
•
Begin the process of entering transactions in
the accounting system
•
Serve as objective evidence of business
transactions
•
Filed for possible future reference
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Source Documents
EXAMPLE
PROVIDES
1. Copies of
sales tickets or
sales invoices
issued to
customers or
clients
INFORMATION ABOUT
2. Purchases
invoices received
from suppliers
Sales of goods or services
1. Check stubs
or copies of
checks
PROVIDES
INFORMATION ABOUT
Cash payments
2. Receipt stubs,
copies of receipts,
cash register tapes,
or memos of cash
register totals
Cash receipts
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
4
Journalize
transactions.
Purchases of goods or
services
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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Journal
Example
•
A day-by-day listing of transactions
•
Purpose: To provide a record of all transactions
completed by the business
•
Commonly referred to as a book of original entry
•
The simplest journal form is a two-column general
journal
•
The act of entering transactions in a journal is called
journalizing
Jessie invested $2,000 in the
business on June 1, 20--.
NEW!
DATED
TRANSACTIONS
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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Debits = Credits
General Journal
DATE
1
CASH
DR.
+
J. JANE, CAPITAL
CR.
–
DR.
–
PR
DEBIT
CREDIT
2
CR.
+
2,000
DESCRIPTION
20-JUNE 1
Step #1
ENTER THE DATE
The year and month
are only written on the
first line of each page.
2,000
NOW WE WILL
“JOURNALIZE”
THIS TRANSACTION
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General Journal
DATE
1
DESCRIPTION
PR
General Journal
DEBIT
CREDIT
20-JUNE 1 CASH
2
DATE
1
DESCRIPTION
20-JUNE 1 CASH
PR
DEBIT
CREDIT
2000 00
2
Step #2a
ENTER THE NAME OF THE
ACCOUNT BEING DEBITED
Align with the left margin
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Step #2b
ENTER THE AMOUNT
OF THE DEBIT
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General Journal
DATE
DESCRIPTION
20-1 JUNE 1 CASH
2
J. JANE, CAPITAL
General Journal
PR DEBIT CREDIT
2000 00
2000 00
Step #3
ENTER THE ACCOUNT
NAME AND THE AMOUNT
OF THE CREDIT
DATE
DESCRIPTION
20-1 JUNE 1 CASH
J. JANE, CAPITAL
2
3
Owner’s original
4
investment in business
2000 00
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General Journal
3
4
5
2000 00
Step #4
ENTER THE EXPLANATION
Indent even further
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DATE
DESCRIPTION
20-1 JUNE 1 CASH
2
J. JANE, CAPITAL
PR DEBIT CREDIT
Compound Entry
PR DEBIT CREDIT
•
An entry requiring more than one debit
and/or more than one credit
•
All debits come before any credits
2000 00
2000 00
Owner’s original
investment in business
Step #5
SKIP A LINE
Leave a blank line between
transactions
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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Compound Entry Example
On June 10, 20--,
purchased a $1,500
scooter for $300 cash
and $1,200 on
account.
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T Account Analysis
CASH
DELIVERY EQUIP.
DR.
CR.
DR.
CR.
+
–
+
–
Both are asset
accounts
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T Account Analysis
ACCOUNTS PAYABLE
DR.
CR.
–
+
A
liability
account
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On June 10, 20--, purchased a $1,500
scooter for $300 cash and $1,200 on
account.
DELIVERY EQUIPMENT
DR.
CR.
+
–
On June 10,
20--,
purchased a
$1,500
scooter for
$300 cash
and $1,200
on account.
Each
account?
Increase or
Decrease?
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On June 10, 20--, purchased a $1,500
scooter for $300 cash and $1,200 on
account.
CASH
DR.
CR.
+
–
300
1,500
DECREASED
INCREASED
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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1 Debit And 2 Credits
But Debit $ = Credit $
On June 10, 20--, purchased a $1,500
scooter for $300 cash and $1,200 on
account.
ACCOUNTS PAYABLE
DR.
+
CR.
–
1,200
INCREASED
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DELIVERY EQUIP.
CASH
DR.
CR.
DR.
+
–
+
1,500
CR.
–
300
ACCOUNTS PAYABLE
DR.
–
CR.
+
1,200
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
General Journal
Now Let’s Journalize The Transaction
DATE
DESCRIPTION
PR DEBIT CREDIT
20-1 JUNE 10 DELIVERY EQUIPMENT
1500 00
ACCOUNTS PAYABLE
2
300 00
3
1200 00
CASH
4
Purchased scooter with
down payment; balance
on account
5
The order of the credits does
not matter, but ALL credits must
come after any debits
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The General Ledger
5
Post to the general
ledger and prepare
a trial balance.
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•
A complete set of all accounts used by a
business
•
Similar to T accounts
•
Used to keep a complete record of the
debits and credits made to each account as
a result of entries made in the journal
•
Numbered and arranged in the same order
as the chart of accounts
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Posting To The General Ledger
General Journal
The process of copying debits and credits
from the journal to the ledger accounts
DATE
DESCRIPTION
20-1 JUNE 1 CASH
2
J. JANE, CAPITAL
•
Done daily or at frequent intervals
3
4
5
•
Five-step process
•
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PR DEBIT CREDIT
2000 00
2000 00
Owner’s original
investment in business
LET’S POST THE DEBIT
PORTION OF THIS ENTRY
TO THE
GENERAL LEDGER
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General Ledger
Account:
Posting A Debit
Account No. 101
CASH
DATE
ITEM
PR
DR.
ACCOUNT
NAME
CR.
BALANCE
DR.
CR.
Account:
DATE
20-June 1
Account No. 101
CASH
ITEM
EACH ACCOUNT
IS NUMBERED
Account No. 101
PR
DR.
CR.
BALANCE
DR.
CR.
Account:
DATE
20-June 1
LEAVE “ITEM”
COLUMN BLANK
Used for special
transactions only
ITEM
Account No. 101
PR
DR.
2,000
DR.
CR.
BALANCE
DR.
CR.
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Posting A Debit
CASH
ITEM
PR
2,000
Posting A Debit
DATE
20-June 1
Account No. 101
CASH
STEP #2
ENTER THE
DEBIT AMOUNT
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Account:
BALANCE
DR.
CR.
Posting A Debit
CASH
ITEM
CR.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Posting A Debit
DATE
20-June 1
DR.
STEP #1
RECORD THE DATE
The year and month
are only written for
the first entry
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Account:
PR
CR.
BALANCE
DR.
CR.
2,000
STEP #3
ENTER THE NEW
BALANCE OF THE
ACCOUNT
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Account:
DATE
20-June 1
Account No. 101
CASH
ITEM
PR
DR.
J1 2,000
CR.
BALANCE
DR.
CR.
2,000
STEP #4
ENTER THE JOURNAL
PAGE NUMBER
“J” for journal and “1” for page 1
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Posting A Debit
DATE
DESCRIPTION
20-1 JUNE 1 CASH
2
J. JANE, CAPITAL
3
4
5
The Trial Balance
PR DEBIT CREDIT
•
Used to prove the equality of the debits and credits
in the ledger accounts
•
Can be prepared daily, weekly, monthly, or
whenever desired
•
Prepared after all transactions have been
journalized and posted
101 2000 00
2000 00
Owner’s original
investment in business
STEP #5
ENTER THE LEDGER
ACCOUNT NUMBER IN
THE GENERAL JOURNAL
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Jessie Jane’s Campus Delivery
Trial Balance
June 30, 20--
6
Account Title
Acct No. Debit Balance Credit Balance
Cash
370 00
101
Accounts Receivable
122
650 00
Supplies
80 00
141
Prepaid Insurance
145
200 00
rs
be
Delivery Equipment
185
3600 00
um
n
nt 1800 00
Accounts Payable
202
ou
ac c
Jessica Jane, Capital
311
2000 00
h
t
i
Jessica Jane, Drawing
w w150 00
312
No
Delivery Fees
401
2150 00
Wages Expense
511
650 00
Rent Expense
200 00
521
Telephone Expense
525
50 00
5950 00
5950 00
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Finding and Correcting Errors
in the Trial Balance
Explain how to find
and correct errors.
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Sloppy Steve’s Trial Balance
December 31, 20-Account Title
Cash
Accounts Receivable
Supplies
Prepaid Insurance
Office Equipment
Accounts Payable
Steve, Capital
Steve, Drawing
Delivery Fees
Wages Expense
Rent Expense
Telephone Expense
Acct No. Debit Balance
101
850 00
122
1650 00
141
230 00
145
600 00
185
6300 00
Help!! My Trial
202
Balance
Doesn’t
311
Balance 500 00
312
401
511
450 00
521
200 00
525
70 00
10580 00
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Credit Balance
1800 00
3500 00
5550 00
10700 00
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Step #1
•
Step #2
•
Double check your addition
Review balances:
o
Find the difference between the debits and
the credits
See if any are too large or small, relative to
other accounts, or entered in the wrong column
Is the difference the amount
of a specific transaction?
Perhaps I forgot to
post the debit or
credit part of that
transaction?
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Step #2 (continued)
•
Step #2 (continued)
Did I post the
debit or credit
twice, OR post
the debit as a
credit or vice
versa?
Divide the difference by 2
Is this number the amount of a specific
transaction?
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Step #2 (continued)
•
Slide Errors
•
Occur when the decimal point is “slid”
a digit or two to the right or left
•
For example:
Divide the difference by 9
If the difference is evenly divisible by 9,
you could have a slide error or a
transposition error
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The amount was $250, but recorded as $25
The difference is $225 ($250 ÷ $25)
The difference is evenly divisible by 9
($225 ÷ 9 = 25)
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Transposition Errors
Step #3
•
Occur when two digits are reversed
•
For example:
•
The amount was $520, but recorded as
$250
The difference is $270 ($520 – $250)
The difference is evenly divisible by 9
($270 ÷ 9 = 30)
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
If steps #1 and #2 don’t work:
Double check your addition for the
ledger accounts
Trace all postings
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Correcting Errors
•
•
Ruling Method
Two methods:
•
Ruling method
Correcting entry method
Erasing is NOT acceptable
When an incorrect journal entry has been
made, but not yet posted
When a proper entry has been made but
posted to the wrong account or for the
wrong amount
It may suggest that you are trying to
hide something
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Ruling Method Of Making A Correction
Paid employees
Sh
ou
ld
Correcting Entry Method
PR DEBIT CREDIT
DATE
DESCRIPTION
20-Wages Expense
1 SEPT 17 Entertainment Expense
2
Cash
3
4
5
6
7
8
9
Used for two types of errors:
•
650 00
650 00
be
18 Prepaid Insurance
Cash
Wa
ge
sE
xp
e
ns
e! !
!!
•
Used when an incorrect entry has been:
Journalized and
Posted to the wrong account
A whole new entry must be made to correct
the accounts
Paid premium for
eight-month insurance
policy
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Example
I need to get
$400 out of
Repair
Expense and
into Rent
Expense
Assume that a $400 payment
for rent was incorrectly debited
to Repair Expense but correctly
credited to Cash.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Correcting Entry Method
DATE
DESCRIPTION
20-1 Sept. 25 Rent Expense
2
3
4
5
6
7
8
Correcting Entry Method
PR DEBIT CREDIT
400 00
3
4
5
6
To put the $400 spent
on rent into the
proper
account
9
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
3
4
5
6
7
8
9
400 00
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Correcting Entry Method
DATE
DESCRIPTION
20-1 Sept. 25 Rent Expense
2
Repair Expense
400 00
To remove the $400
put in Repair Expense
by error
7
8
9
PR DEBIT CREDIT
DATE
DESCRIPTION
20-1 Sept. 25 Rent Expense
2
Repair Expense
Effects Of Correcting Entry On Ledger Accounts
PR DEBIT CREDIT
Account:
400 00
To correct error in which
payment for rent was
debited to Repair Expense
To explain that this entry was made to correct
an error in a prior transaction
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
400 00
DATE
20-Sept. 25
Rent Expense
ITEM
PR
Correcting
J6
DR.
Account No. 521
BALANCE
CR.
DR.
CR.
400
400
Indicates this came from
a correcting entry in the
general journal
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Effects Of Correcting Entry On Ledger Accounts
Account:
DATE
20-Sept. 10
Repair Expense
ITEM
15
25
Correcting
PR
DR.
Account No. 537
BALANCE
CR.
DR.
CR.
J5
50
50
J5
400
450
J6
400
50
The balance is now correct;
the $400 error has been
removed
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.