copyright 2006 pearson education canada inc. 4-1
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Copyright 2006 Pearson Education Canada Inc. 4-1
Copyright 2006 Pearson Education Canada Inc. 4-2
Outline The Accounting Cycle Transactional Analysis: Step 1 Journalizing: Step 2 The General Journal Steps 3 and 4 of the Accounting Cycle Posting to the General Journal: Step 3 The General Ledger and “T” Accounts Posting Procedures: An Illustration The Chart of Accounts Taking the Trial Balance: Step 4 Discovering Sources of Error Computers in Accounting
Copyright 2006 Pearson Education Canada Inc. 4-3
The Accounting Cycle
STEP ONEANALYZING TRANSACTIONS
STEP TWOJOURNALIZING
STEP THREEPOSTING
STEP FOURTAKING THE TRIAL BALANCE
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Transactional Analysis: Step 1
Transactional analysis – Identification of business transaction
Determine values received – Debits Determine values given – Credits DEBITS = CREDITS
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Journalizing: Step 2 Recording values received
(debits) and values given (credits) in a journal
Chronological recording of the transaction - like keeping a business diary
Debits = Credits
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The General Journal
Used to record hospitality entity transactions in chronological order
1. Date Column
2. Account Names and Description column
3. Reference column – REF
4. Debit (dr) and Credit (cr) columns
General Journal
Date Account Names Ref. Dr. Cr.
Copyright 2006 Pearson Education Canada Inc. 4-7
ILLUSTRATIONChapter 4 Exercise 2 (b) General Journal
b) Rustic Hotel General Journal
200X ReferenceFeb. Description Debit Credit15 Food & beverage inventory 4,561
Accounts payable 4,561Record purchase of inventory on account
18 Cash 4,113Accounts receivable 2,344
Sales 6,457Sales made for cash and on account
20 Cash 3,789Accounts receivable 3,789
Received cash on account21 Accounts payable 3,672
Cash 3,672Paid accounts payable
25 Equipment 5,600Cash 1,600Notes payable 4,000
Purchase of equipment for cash and Notes Payable
Copyright 2006 Pearson Education Canada Inc. 4-8
Steps 3 and 4 of the Accounting Cycle
STEP 3Posting
Transferring informationFrom the journal to the
ledger
Dr=Cr
STEP 4Taking a trial
balance ofThe General Ledger
Copyright 2006 Pearson Education Canada Inc. 4-9
Posting to The General Ledger: Step 3
The book of final entry
Used to complete Step 3 of the Accounting Cycle-Posting to the General Ledger
Group of Accounts that constitute a hospitality organization’s accounting system
It may be a book, a tray of cards, a CD-ROM, or “T” accounts
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General Ledger ”T” Accounts
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General Ledger “T” Accounts
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Posting Procedures: An Illustration
Credit Notes payable
Rustic Hotel General Journal
200X ReferenceFeb. Description Debit Credit15 Food & beverage inventory 4,561
Accounts payable 4,561Record purchase of inventory on account
18 Cash 4,113Accounts receivable 2,344
Sales 6,457Sales made for cash and on account
Copyright 2006 Pearson Education Canada Inc. 4-13
The Chart of Accounts
Sequential listing of the firm’s accounts found in the General Ledger
Facilitates finding ledger accounts during journalizing, posting and preparing financial statements
Copyright 2006 Pearson Education Canada Inc. 4-14
Chart of Accounts - Chapter 4 – Problem 2 (b)
Assets Shareholders' EquityCash 101 Common stock 350Accounts receivable 104Prepaid expenses 125
Land 150 Revenue and ExpensesBuildings 155 Sales 401
Payroll expense 601
Liabilities Utilities expense 611Accounts payable 201 Advertising expense 621Notes payable 205 Interest expense 684Mortgages payable 209
Copyright 2006 Pearson Education Canada Inc. 4-15
Calculation of General Account Balance for the Cash Account-Refer to Problem 2 Chapter 4
Cash 101GJ 10/1 250,000 100,000 GJ 10/3GJ 10/2 50,000 65,000 GJ 10/6GJ 10/15 25,000 1,000 GJ 10/8GJ 10/31 30,000 4,800 GJ 10/10
2,000 GJ 10/16300 GJ 10/18
8,826 GJ 10/203,600 GJ 10/27
Totals 355,000 185,526Bal. 10/31 169,474
Debit postings are addedTotal 355,000
Credit postings are addedTotal 185,526
Since debit postings are Higher than credit postings
The ending balance of cash is169,474 (355,000-185,526)
Copyright 2006 Pearson Education Canada Inc. 4-16
Taking the Trial Balance: Step 4
Used to check the accuracy of the debit and credit balances in the General Ledger at the end of the accounting period
List of General Ledger accounts with their current balances as of the last day of the accounting period
Copyright 2006 Pearson Education Canada Inc. 4-17
Trial Balance for Lockwood Hotel Corporation - Refer to Problem 2 Chapter 4
Debit CreditCash 169,474Accounts receivable 6,000Prepaid expenses 8,400Land 455,000Buildings 150,000Accounts payable 41,300Notes payable 45,000Mortgages payable 399,000Common stock 250,000Sales 61,000Payroll expense 1,000Utilities expense 2,000Advertising expense 1,600Interest expense 2,826
796,300 796,300
Trial Balance
Lockwood Motel Corporation
at October 31, 2008 Note that the order of accounts in the Trial Balance is
the same as in the General Ledger (Assets, Liabilities,
Owners’ Equity, Revenues,and Expenses)
Balances of accounts with Debit balances are added in a
left-hand money column while the balances of the accounts
with credit balances are addedin the right-hand columns
The equality of value exchanges mustbe maintainedDEBIT BALANCES MUST
BE EQUAL TO CREDIT BALANCES
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Discovering Sources of Error
If a trial balance balances, the existence of errors and or omissions is not precluded
Different types of errors or omissions
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Computers in Accounting
Facilitate data entry
Might eliminate posting errors
Eliminate errors in the calculation of account balances
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Computers in Accounting
Expedite the accounting process
Errors can be corrected more easily
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