Chapter 3:
Analyzing and
Recording Transactions
Professor Jen Menjivar
Accounting Period
• Calendar Year
An accounting time period
that starts on January 1 and
ends on December 31
• Fiscal Year
An accounting time period
that is one year in length
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Accounting Principles
• Revenue Recognition Principle
Recognize revenue in the accounting
period in which it is earned.
• Expense Recognition Principle
(Also known as Matching Principle)
 Expenses matched with revenues in
the period when expenses were
incurred to generate revenues
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T-Account
• Account – An individual
record of the increases
and decreases in a
specific asset, liability, or
stockholders’ equity
item
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Expanded Accounting Equation
ASSETS
Debit +
=
Credit -
LIABILITIES
Debit -
+
STOCKHOLDERS’ EQUITY
Credit +
Normal
Balance
Debit -
Normal
Balance
COMMON STOCK
Debit -
Normal Balance
+
Credit +
RETAINED EARNINGS
Debit -
Normal
Balance
REVENUES
Debit
-
-
Debit +
Normal
Balance
Normal
Balance
Credit +
Normal Balance
EXPENSES
Credit +
Credit +
Credit -
-
DIVIDENDS
Debit +
Credit -
Normal
Balance
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Accounting Cycle
Analyze
Closing
Entries
Journalize
Transactions
Financial
Statements
Post
Adjusted
Trial Balance
Trial Balance
Adjusting
Entries
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Accounting Cycle - Analyzing
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Accounting Cycle - Journalizing
Date
Account Titles and Explanation
Debit
Credit
8
Accounting Cycle - Posting
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Journal Entries Example 1
• Issued $50,000 common stock in exchange for cash. Journalize.
ASSETS
Debit +
Date
Credit -
=
LIABILITIES
Debit -
Credit +
Account Titles and Explanation
+
STOCKHOLDERS’ EQUITY
Debit -
Credit +
Debit
Credit
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Journal Entries Example 2
• Paid June rent in the amount of $5,500 cash for factory building. Journalize.
ASSETS
Debit +
Date
Credit -
=
LIABILITIES
Debit -
Credit +
Account Titles and Explanation
+
STOCKHOLDERS’ EQUITY
Debit -
Credit +
Debit
Credit
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Journal Entries Example 3
• Purchased equipment for $3,000 cash. Journalize.
ASSETS
Debit +
Date
Credit -
=
LIABILITIES
Debit -
Credit +
Account Titles and Explanation
+
STOCKHOLDERS’ EQUITY
Debit -
Credit +
Debit
Credit
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Journal Entries Example 4
• Purchased equipment for $3,000 on account. Journalize.
ASSETS
Debit +
Date
Credit -
=
LIABILITIES
Debit -
Credit +
Account Titles and Explanation
+
STOCKHOLDERS’ EQUITY
Debit -
Credit +
Debit
Credit
13
Journal Entries Example 5
• Paid $3,000 on account for equipment purchased previously. Journalize.
ASSETS
Debit +
Date
Credit -
=
LIABILITIES
Debit -
Credit +
Account Titles and Explanation
+
STOCKHOLDERS’ EQUITY
Debit -
Credit +
Debit
Credit
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Journal Entries Example 6
• Purchased office supplies for cash, $4,200. Journalize.
ASSETS
Debit +
Date
Credit -
=
LIABILITIES
Debit -
Credit +
Account Titles and Explanation
+
STOCKHOLDERS’ EQUITY
Debit -
Credit +
Debit
Credit
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Journal Entries Example 7
• Received a bill for utilities, $500. Journalize.
ASSETS
Debit +
Date
Credit -
=
LIABILITIES
Debit -
Credit +
Account Titles and Explanation
+
STOCKHOLDERS’ EQUITY
Debit -
Credit +
Debit
Credit
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Journal Entries Example 8
• Incurred delivery expense on account, $250. Journalize.
ASSETS
Debit +
Date
Credit -
=
LIABILITIES
Debit -
Credit +
Account Titles and Explanation
+
STOCKHOLDERS’ EQUITY
Debit -
Credit +
Debit
Credit
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Journal Entries Example 9
• Received $3,250 cash for accounting services provided. Journalize.
ASSETS
Debit +
Date
Credit -
=
LIABILITIES
Debit -
Credit +
Account Titles and Explanation
+
STOCKHOLDERS’ EQUITY
Debit -
Credit +
Debit
Credit
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Journal Entries Example 10
• Billed a client for accounting services provided, $3,250. Journalize.
ASSETS
Debit +
Date
Credit -
=
LIABILITIES
Debit -
Credit +
Account Titles and Explanation
+
STOCKHOLDERS’ EQUITY
Debit -
Credit +
Debit
Credit
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Journal Entries Example 11
• Received $3,250 on account (previously billed) from a client. Journalize.
ASSETS
Debit +
Date
Credit -
=
LIABILITIES
Debit -
Credit +
Account Titles and Explanation
+
STOCKHOLDERS’ EQUITY
Debit -
Credit +
Debit
Credit
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Journal Entries Example 12
• Borrowed $20,000 from Wells Fargo by signing a 5-year note. Journalize.
ASSETS
Debit +
Date
Credit -
=
LIABILITIES
Debit -
Credit +
Account Titles and Explanation
+
STOCKHOLDERS’ EQUITY
Debit -
Credit +
Debit
Credit
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Journal Entries Example 13
• Paid a cash dividend, $7,000. Journalize.
ASSETS
Debit +
Date
Credit -
=
LIABILITIES
Debit -
Credit +
Account Titles and Explanation
+
STOCKHOLDERS’ EQUITY
Debit -
Credit +
Debit
Credit
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Journal Entries Example 14
• Hired two new cashiers. Journalize.
ASSETS
Debit +
Date
Credit -
=
LIABILITIES
Debit -
Credit +
Account Titles and Explanation
+
STOCKHOLDERS’ EQUITY
Debit -
Credit +
Debit
Credit
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Journal Entries Example 15
• Purchased cleaning supplies for $150 cash to use at home. Journalize.
ASSETS
Debit +
Date
Credit -
=
LIABILITIES
Debit -
Credit +
Account Titles and Explanation
+
STOCKHOLDERS’ EQUITY
Debit -
Credit +
Debit
Credit
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Journal Entries Example 16
• Paid employees their weekly salaries, $5,200. Journalize.
ASSETS
Debit +
Date
Credit -
=
LIABILITIES
Debit -
Credit +
Account Titles and Explanation
+
STOCKHOLDERS’ EQUITY
Debit -
Credit +
Debit
Credit
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Journal Entries Example 17
• On September 1, Greystone Corporation purchased $3,000 worth of inventory
from Stine Supplier; Half was paid with cash and the rest on account.
Journalize.
ASSETS
Debit +
Date
Credit -
=
LIABILITIES
Debit -
Credit +
Account Titles and Explanation
+
STOCKHOLDERS’ EQUITY
Debit -
Credit +
Debit
Credit
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Journal Entries Example 18
• On September 1, Greystone Corporation purchased $3,000 inventory and
$2,000 supplies from Stine Supplier on account. Journalize.
ASSETS
Debit +
Date
Credit -
=
LIABILITIES
Debit -
Credit +
Account Titles and Explanation
+
STOCKHOLDERS’ EQUITY
Debit -
Credit +
Debit
Credit
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Journal Entries Example 19
• On September 2, Greystone Corporation paid $24,000 for 6 months’ rent in
advance. Journalize.
ASSETS
Debit +
Date
Credit -
=
LIABILITIES
Debit -
Credit +
Account Titles and Explanation
+
STOCKHOLDERS’ EQUITY
Debit -
Credit +
Debit
Credit
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Journal Entries Example 20
• On September 15, Greystone Corporation received $3,300 from Customer X
for 11 hours of services in advance. Journalize.
ASSETS
Debit +
Date
Credit -
=
LIABILITIES
Debit -
Credit +
Account Titles and Explanation
+
STOCKHOLDERS’ EQUITY
Debit -
Credit +
Debit
Credit
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Posting Example
• Assume you own a business and have beginning balances in the following accounts:
Cash $20,000; Equipment $0; Accounts Payable $1,000. Post the following transaction
in T-accounts and calculate each account’s ending balances.
Date
12/5
12/20
Account Titles and Explanation
Equipment
Accounts Payable
Purchased office furniture on account
Accounts Payable
Cash
Paid $7,000 to supplier on account
Cash
Equipment
Debit
Credit
$12,500
$12,500
$7,000
$7,000
Accounts Payable
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