introduction · 2018-10-10 · lo1 lesson 4-1 a group of accounts is called a ledger. a ledger that...

© 2014 Cengage Learning. All Rights Reserved.

Introduction

● How would you obtain a balance for any account recorded in the journal?

● How do you keep track of cash received and spent?

● Name different ways you can pay with cash.

● What types of accounts would you need to run an event planning business?

● How would a company categorize its accounts into similar groups?

● How would you make corrections to errors discovered weeks later?

1


Accounts

● Business owners need to know a balance for each account

● Account numbers are assigned to account titles for easy grouping and reference

● There is a standard way of organizing a group of accounts

SLIDE 2

Lear

nin

g O

bje

ctiv

es


LO1 Construct a chart of accounts for a service business organized as a proprietorship.

LO2 Demonstrate correct principles for numbering accounts.

LO3 Apply file maintenance principles to update a chart of accounts.

LO4 Complete the steps necessary to open general ledger accounts.


Account Form

● Used to summarize in one place all the changes to a single account

● A separate form for each account

SLIDE 4

Sample of a blank account form

Lesson 4-1


Relationship of a T Account to an Account Form

SLIDE 5

Lesson 4-1

Information needed to trace entry back to journal page.

T Account

Debit side Credit side

Balance columns


● A journal page number is entered into the Post Ref. column so an entry can be traced back to where the transaction was originally recorded in a journal

● A balance-ruled account form provides an always available up-to-date balance for each account.

SLIDE 6


Chart of Accounts

SLIDE 7

LO1

Lesson 4-1


Chart of Accounts

SLIDE 8

LO1

Lesson 4-1

● A group of accounts is called a ledger.

● A ledger that contains all accounts needed to prepare financial statements is called a general ledger.

● The name given to an account is known as an account title.

● The number assigned to an account is called an account number.


Account Numbers

SLIDE 9

LO2

Lesson 4-1


Assigning Account Numbers

● The procedure for arranging accounts in a general ledger, assigning account numbers, and keeping records current is called file maintenance.

SLIDE 10

LO3

Lesson 4-1


Assigning Account Numbers

SLIDE 11

LO3

Lesson 4-1

560 Miscellaneous Expense (Existing account)

580 Water Expense (New Account)

570 Supplies Expense (Existing account)

570 Supplies Expense (Existing account)

565 Postage Expense (New Account)


Order of Accounts

● Expenses are listed alphabetically

● Assets are listed in order of liquidity

SLIDE 12


Opening an Account in a General Ledger

● Writing an account title and number on the heading of an account is called opening an account.

● Ledger records are kept in chart of accounts number order.

SLIDE 13

LO4

Lesson 4-1


Opening an Account in a General Ledger

SLIDE 14

1. Write the account title, Cash, after the word Account in the heading.

LO4

Lesson 4-1

1 2

2. Write the account number, 110, after the words Account No. in the heading.


Lesson 4-1 Audit Your Understanding

1. Describe the two parts of an account number.

SLIDE 15

ANSWER

• The first digit indicates in which general ledger division the account is located.

• The second and third digits indicate the location of the account within that division.

Lesson 4-1



2. List the two steps for opening an account.

SLIDE 16

ANSWER

1. Write the account title after the word Account in the heading.

2. Write the account number after the words Account No. in the heading.

Lesson 4-1


Lear

nin

g O

bje

ctiv

es


LO5 Post amounts from the General Debit and General Credit columns of a journal.

17


Posting an Amount from a General Debit Column

● Transferring information from a journal entry to a ledger account is called posting.

● Amounts in general amount columns are posted individually

● Amounts in special amount columns are posted as a total of the column

SLIDE 18

LO5

Lesson 4-2


Five Step Process

● Step 1: Write the date

● Step 2: Write the journal page number

● Step 3: Write the debit or credit amount in the matching column

● Step 4: Write the account balance in the appropriate balance column

● Step 5: Return to the journal and write the account number

SLIDE 19


Importance of the order for posting

● General debits and credits posted in chronological order

● Special column totals posted left to right

● Complete posting steps in order to assure that all items have been posted properly and to mark your place if interrupted.

SLIDE 20


Calculating the balance in an account

● Debit entry with a current debit balance?

● Add to get new debit balance

● Credit entry with a current credit balance?

● Add to get new credit balance

● Debit entry with a current credit balance?

● Subtract to get new balance

● Credit entry with a current debit balance?

● Subtract to get new balance

SLIDE 21


When subtracting to get a new balance

● Balance is determined by which entry is larger.

Examples:

1,500 debit balance 450 debit balance

-700 credit entry -1,000 credit entry

= 800 debit balance = 550 credit balance

SLIDE 22


Posting an Amount from a General Debit Column

SLIDE 23

LO5

Lesson 4-2

1. Write the date. 4. Write the new account balance.

2. Write the journal page number.

3. Write the debit amount.

5. Return to the journal and write the account number.

5

4

2

1

3


Posting a Second Amount to an Account

SLIDE 24

Lesson 4-2



3. Write the debit amount.


5

4

2

13

LO5


Posting an Amount from a General Credit Column

SLIDE 25

Lesson 4-2



3. Write the credit amount.


5

4

2

1

3

LO5



1. List the five steps of posting from the general columns of a journal to the general ledger.

SLIDE 26

ANSWER1. Write the date.2. Write the journal page number in the Post. Ref. column of

the account.3. Write the amount in the Debit or Credit column.4. Calculate and write the new account balance in the Balance

Debit or Balance Credit column.5. Return to the journal and write the account number in the

Post. Ref. column of the journal.

Lesson 4-2



2. Are the totals of the General Debit and General Credit columns posted? Why or why not?

SLIDE 27

ANSWER

No. Each separate amount in the General Debit and General Credit columns of a journal is posted to the account written in the Account Title column.

Lesson 4-2


Lear

nin

g O

bje

ctiv

es


LO6 Post column totals from a journal to ledger accounts.

28


Check Marks = Not Posted

● Totals carried or brought forward are not posted

● Separate amounts in special amount columns are not posted individually

● General amount column totals are not posted

● Post Ref. column shows where the information can be found

SLIDE 29


● Posting totals saves time and reduces errors

● Same 5 step process is used

SLIDE 30


Check Marks Show that Amounts Are Not Posted

SLIDE 31

LO6

Lesson 4-3

Check mark indicates that amounts ARE NOT posted individually.

Check marks indicate that general amount column totals ARE NOT posted.


Posting the Total of the Sales Credit Column

SLIDE 32

Lesson 4-3

5

4

2

1 3



3. Write the column total.


LO6


Posting the Total of the Cash Debit Column

SLIDE 33

Lesson 4-3

5

4

2

1 3





LO6


Posting the Total of the Cash Credit Column

SLIDE 34

Lesson 4-3

5

4

2

1 3





LO6


Journal Page with Posting Completed

SLIDE 35

Lesson 4-3

LO6


General Ledger with Posting Completed

SLIDE 36

Lesson 4-3

LO6



1. Which column totals of a journal are posted?

SLIDE 37

ANSWER

Special amount columns

Lesson 4-3



2. Under what conditions will an account balance be a debit?

SLIDE 38

ANSWER

Whenever the debits in an account exceed the credits

Lesson 4-3



3. Under what conditions will an account balance be a credit?

SLIDE 39

ANSWER

Whenever the credits in an account exceed the debits

Lesson 4-3


Mistakes Happen

● Manual journal entries are recorded in ink so that records are permanent

● Correcting entries require that errors must be analyzed to determine what accounts should be debited and credited to correct the error.

● T accounts could be used to aid this process● A Memorandum is the source document for a

correcting entry● Correcting entries need to be made to correct

errors in the ledger.

SLIDE 40


Lear

nin

g O

bje

ctiv

es


LO7 Analyze incorrect journal entries and prepare correcting entries.

LO8 Demonstrate how to correct errors made during the posting process.

41


Memorandum for a Correcting Entry

● An incorrect journal entry should be corrected with an additional journal entry, called a correcting entry.

SLIDE 42

● A memorandum is prepared as the source document describing the correction to be made.

LO7

Lesson 4-4


Journal Entry to Record a Correcting Entry

SLIDE 43

Lesson 4-4

April 17. Discovered that a payment of cash for advertising in March was journalized and posted in error as a debit to Miscellaneous Expense instead of Advertising Expense, $120.00. Memorandum No. 15.

1

Date2Debit

Advertising Expense

120.00

Miscellaneous Expense

120.00

3 Credit

4 Source Document

LO7


Correcting an Error in Posting to the Wrong Account

SLIDE 44

LO8

Lesson 4-4

1. Draw a line through the entire incorrect entry.

2. Record the posting in the correct account. Recalculate the account balance.

1

2


Correcting an Incorrect Amount

SLIDE 45

1. Draw a line through the incorrect amount.

Lesson 4-4

1 2 3

3. Recalculate the account balance.

2. Write the correct amount just above the incorrect amount in the same space.

LO8


Correcting an Amount Posted to the Wrong Column

SLIDE 46

Lesson 4-4

5 4 6

4. Draw a line through the incorrect item in the account.

6. Recalculate the account balance.

5. Record the posting in the correct amount column.

LO8



1. What is a correcting entry?

SLIDE 47

ANSWER

A journal entry made to correct an error in the ledger

Lesson 4-4



2. When is a correcting entry necessary?

SLIDE 48

ANSWER

When a transaction has been improperly journalized and posted to the ledger

Lesson 4-4



3. What are the three steps for correcting an incorrect amount posted to an account?

SLIDE 49

ANSWER

1.Draw a line through the incorrect amount.

2.Write the correct amount just above the correction in the same space.

3.Recalculate the account balance.

Lesson 4-4



4. What are the three steps for correcting an amount posted to an incorrect column?

SLIDE 50

ANSWER

1.Draw a line through the incorrect item in the account.

2.Record the posting in the correct amount column.

3.Recalculate the account balance.

Lesson 4-4

introduction · 2018-10-10 · lo1 lesson 4-1 a group of accounts is called a ledger. a ledger that...

Documents