1. PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
Chapter 02
ANALYZING AND RECORDING
TRANSACTIONS
McGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.

2. 2 - 2
Analyze each transaction and
event from source documents
ANALYZING AND RECORDING
PROCESS
Record relevant transactions
and events in a journal
Post journal information
to ledger accounts
Prepare and analyze
the trial balance
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3. 2 - 3
Sales
Tickets
Bank
Statements
Purchase
Orders
Checks
SOURCE DOCUMENTS
Bills from
Suppliers
Employee
Earnings
Records
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4. 2 - 4
JOURNALIZING &
POSTING TRANSACTIONS
Step 1: Analyze
transactions and source
documents.
LiabilitiesLiabilities EquityEquityAssetsAssets = +
Step 2: Apply double-
entry accounting
(Left side) (Right side)
Debit Credit
T- Account
ACCOUNT NAME: ACCOUNT No.
Date Description PR Debit Credit Balance
Step 4: Post entry to ledger Step 3: Record journal entry
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5. 2 - 5
LEDGER AND CHART OF
ACCOUNTS
The ledger is a collection of all accounts for anThe ledger is a collection of all accounts for an
information system. A company’s size and diversityinformation system. A company’s size and diversity
of operations affect the number of accounts needed.of operations affect the number of accounts needed.
The ledger is a collection of all accounts for anThe ledger is a collection of all accounts for an
information system. A company’s size and diversityinformation system. A company’s size and diversity
of operations affect the number of accounts needed.of operations affect the number of accounts needed.
The chart of accounts is a list of all accounts and includes an
identifying number for each account.
The chart of accounts is a list of all accounts and includes an
identifying number for each account.
Account Number Account Name Account Number Account Name
101 Cash 302 C. Taylor, Withdrawals
106 Accounts receivable 403 Revenues
126 Supplies 406 Rental revenue
128 Prepaid insurance 622 Salaries expense
167 Equipment 637 Insurance expense
201 Accounts payable 640 Rent expense
236 Unearned revenue 652 Supplies expense
301 C. Taylor, Capital 690 Utilities expense
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6. 2 - 6
An account is a
record of
increases and
decreases in a
specific asset,
liability, equity,
revenue, or
expense item.
An account is a
record of
increases and
decreases in a
specific asset,
liability, equity,
revenue, or
expense item.
THE ACCOUNT AND ITS
ANALYSIS
The general
ledger is a record
containing all
accounts used by
the company.
The general
ledger is a record
containing all
accounts used by
the company.
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7. 2 - 7
DEBITS AND CREDITS
A T-account represents a ledger account andA T-account represents a ledger account and
is a tool used to understand the effects ofis a tool used to understand the effects of
one or more transactions.one or more transactions.
(Left side) (Right side)
Debit Credit
Account Title
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8. 2 - 8
LiabilitiesLiabilities EquityEquityAssetsAssets = +
DOUBLE-ENTRY ACCOUNTING
Debit Credit Debit Credit Debit Credit
ASSETS
+ -
LIABILITIES
- +
EQUITIES
- +
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NormalNormal NormalNormal NormalNormal

9. 2 - 9
RevenuesRevenuesRevenuesRevenues ExpensesExpensesExpensesExpenses
Owner’sOwner’s
CapitalCapital
Owner’sOwner’s
CapitalCapital
Owner'sOwner's
WithdrawalsWithdrawals
Owner'sOwner's
WithdrawalsWithdrawals
_
+
_
Debit Credit
Owner’s
Capital
- +
Debit Credit
Owner's
Withdrawals
+ -
Debit Credit
Expenses
+ -
Debit Credit
Revenues
- +
DOUBLE-ENTRY ACCOUNTING
EquityEquityEquityEquity
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10. 2 - 10
ANALYZING TRANSACTIONS
Analysis:
(1) Cash 101 30,000
C. Taylor, Capital 301 30,000
Double entry:
(1) 30,000
Cash 101 301
(1) 30,000
C. Taylor, Capital 301
Posting:
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11. 2 - 11
DOUBLE-ENTRY ACCOUNTING
An account balance is the difference between the increases
and decreases in an account. Notice the T-Account.
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12. 2 - 12
After processing its remaining transactions for
December, FastForward’s Trial Balance is prepared.
After processing its remaining transactions for
December, FastForward’s Trial Balance is prepared.
Debits Credits
Cash 4,350$
Accounts receivable -
Supplies 9,720
Prepaid Insurance 2,400
Equipment 26,000
Accounts payable 6,200$
Unearned consulting revenue 3,000
C. Taylor, Capital 30,000
Owner's Withdrawals 200
Consulting revenue 5,800
Rental revenue 300
Salaries expense 1,400
Rent expense 1,000
Utilities expense 230
Total 45,300$ 45,300$
FastForward
Trial Balance
December 31, 2009
The trial balance
lists all account
balances in the
general ledger. If
the books are in
balance, the total
debits will equal the
total credits.
The trial balance
lists all account
balances in the
general ledger. If
the books are in
balance, the total
debits will equal the
total credits.
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13. 2 - 13
END OF CHAPTER 2