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Chapter 4-1

Chapter 4-1. Preparing a Chart of Accounts. 5-1. Journal provides a permanent record of debit and credit parts of a transaction--in chronological order. However, a journal does not show, in one place, all the changes in a single account.

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Chapter 4-1

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  1. Chapter 4-1 Preparing a Chart of Accounts

  2. 5-1 • Journal provides a permanent record of debit and credit parts of a transaction--in chronological order. • However, a journal does not show, in one place, all the changes in a single account. • If only a journal is used, a business must search through all journal pages to find items affecting a single account balance. • Instead, a form is used to summarize in one place all the changes to a single account. • Consequently, after transactions are journalized, the journal entries have to be copied, or posted, to the individual accounts. Chapter 5

  3. Balance columns Account Forms -- pg. 98 • An account form is based on and includes the debit and credit sides of a T account. • In addition, space is provided for recording the transaction date and journal page number. • The form also has Debit and Credit Balance columns. Chapter 5

  4. Chart of Accounts • A list of all of the accounts • Each account title used also represents an account in a group of accounts. • Balance Sheet Accounts • Assets, Liabilities, Capital and Drawing Accts • Income Statement Accounts • Revenue and Expenses Chapter 5

  5. CHART OF ACCOUNTS page 99 Chart of Accounts--Accounts are arranged in the same order as they appear on financial statements. Chapter 5

  6. BALANCE SHEET ACCOUNTS (100) ASSETS 110 Cash 120 Petty Cash 130 A.R. -- Kids Time 140 A.R. – Learn & Play 150 Supplies 160 Prepaid Insurance (200) LIABILITIES 210 A.P. -- Ling Music 220 A.P. -- Sully Office Supp. (300) OWNER’S EQUITY 310 Barbara Trevino, Capital 320 Barbara Trevino, Drawing INCOME STATEMENT ACCTS. (400) REVENUE 410 Sales (500) EXPENSES 510 Advertising Expense 520 Insurance Expense 530 Misc. Expense 540 Rent Expense 550 Supplies Expense 560 Utilities Expense Chart of Accounts--There are five general ledger divisions. Chart of Accounts--A three-digit account number is assigned to each account. (The first number indicates the general ledger division.) Chapter 5

  7. ACCOUNT NUMBERS page 92 Chapter 5

  8. BALANCE SHEET ACCOUNTS (100) ASSETS 110 Cash 120 Petty Cash 130 A.R. -- Kids Time 140 A.R. – Learn & Play 150 Supplies 160 Prepaid Insurance (200) LIABILITIES 210 A.P. -- Ling Music 220 A.P. -- Sully Office Supp. (300) OWNER’S EQUITY 310 Barbara Trevino, Capital 320 Barbara Trevino, Drawing INCOME STATEMENT ACCTS. (400) REVENUE 410 Sales (500) EXPENSES 510 Advertising Expense 515 Gasoline Expense 520 Insurance Expense 530 Misc. Expense 540 Rent Expense 550 Supplies Expense 560 Utilities Expense 570 Water Expense Numbering system is determined by size of company. New accounts are assigned the middle, unused account number between the numbers of the existing accounts. Chapter 5

  9. New Vocabulary Ledger • A group of accounts. General Ledger • A ledger that contains all accounts needed to prepare financial statements. Chapter 5

  10. Account Number:The number assigned to an account. • File Maintenance: The procedure for arranging accounts in a general ledger, assigning account numbers, and keeping records current. • Opening an Account: Writing an account title and number on the heading of an account. Chapter 5

  11. General ledger accounts must be opened before they can be used. page 94 1 2 1. Write the account title. 2. Write the account number. Chapter 5

  12. Audit Your Understanding Describe the two parts of an account number. • 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. Chapter 4

  13. Assignment • Work Together—Aplia.com Chapter 4

  14. 4-2 Posting • Transferring information from a journal entry to a ledger account. Chapter 4

  15. Posting • Amounts in general amount columns of the journal are posted individually. • Amounts in the special amount columns are posted as part of the total of the amount column. • There are five steps for posting an amount from a general debit column. Chapter 4

  16. 1 5 3 2 4 POSTING AN AMOUNT FROM A GENERAL DEBIT COLUMN page 96 1. Write the date. 4. Write the new account balance. 2. Write the journal page number. 5. Return to the journal and write the account number. 3. Write the debit amount. Chapter 4

  17. 1 5 2 3 4 POSTING A SECOND AMOUNT TO AN ACCOUNT page 97 1. Write the date. 4. Write the new account balance. 2. Write the journal page number. 5. Return to the journal and write the account number. 3. Write the debit amount. Chapter 4

  18. 5 1 3 2 4 POSTING AN AMOUNT FROM A GENERAL CREDIT COLUMN page 98 1. Write the date. 4. Write the new account balance. 2. Write the journal page number. 5. Return to the journal and write the account number. 3. Write the credit amount. Chapter 4

  19. Audit Your Understanding List the five steps of posting from the general columns of a journal to the general ledger. • 1. Write the date in the Date column. • 2. Write the journal page number in the Post. Ref. Column. • 3. Write the debit amount in the Debit amount col. • 4. Write the new account balance in the Balance Debit Column. • 5. Return to the journal and write the account number in the Post. Ref. Column. Chapter 4

  20. Audit Your Understanding Are the totals of the General Debit and Credit columns posted? Why or why not? • 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. Chapter 4

  21. Working Together • Aplia.com Chapter 4

  22. Section 4 - 3 Posting Column Totals Chapter 4

  23. Posting Column Totals--pg. 100 • The General Debit and General Credit columns are not special amount columns because the column headings do not contain the name of an account. • All separate amounts in these columns are posted individually. • Therefore, the column totals are not posted individually. • Place a check mark under the end-of-month total to indicate that the general amount columns are not posted. Chapter 4

  24. Check mark indicates that amounts ARE NOT posted individually. Check mark indicates that general amount column totals ARE NOT posted. CHECK MARKS SHOW THAT AMOUNTS ARE NOT POSTED page 100 Chapter 4

  25. Posting--pg. 101 • Only the totals of the special amount columns are posted. • 3-Special Amount Columns. • Sales Credit • Cash Debit • Cash Credit • Amounts in the special amount columns are posted as part of the total of the amount column. Chapter 4

  26. 3 5 1 2 4 POSTING THE TOTAL OF THE SALES CREDIT COLUMN page 101 1. Write the date. 4. Write the new account balance. 2. Write the journal page number. 5. Return to the journal and write the account number. 3. Write the column total. Chapter 4

  27. 1 2 3 5 4 POSTING THE TOTAL OF THE CASH DEBIT COLUMN page 102 1. Write the date. 4. Write the new account balance. 2. Write the journal page number. 5. Return to the journal and write the account number. 3. Write the column total. Chapter 4

  28. 3 1 5 2 POSTING THE TOTAL OF THE CASH CREDIT COLUMN page 103 4 1. Write the date. 4. Write the new account balance. 2. Write the journal page number. 5. Return to the journal and write the account number. 3. Write the column total. Chapter 4

  29. 4-4 JOURNAL PAGE WITH POSTING COMPLETED page 105 Chapter 4

  30. Audit Your Understanding Which column totals of a journal are posted? • Sales Credit • Cash Debit and Cash Credit Chapter 4

  31. Assignment • Work Together 4-3-Aplia.com Chapter 4

  32. 4-4 Correcting Entry • A journal entry which corrects an improperly recorded transaction. Chapter 4

  33. MEMORANDUM FOR A CORRECTING ENTRY page 108 Chapter 4

  34. November 13. Discovered that a payment of cash for advertising in October was journalized and posted in error as a debit to Miscellaneous Expense instead of Advertising Expense, $140.00. Memorandum No. 15. 1 Date 2 Debit 4 Source Document 3 Credit JOURNAL ENTRY TO RECORD A CORRECTING ENTRY page 108 Chapter 4

  35. Audit Your Understanding What is a correcting entry? • A journal entry made to correct an error in the ledger. When is a correcting entry necessary? • When a transaction has been improperly journalized and posted to the ledger. Chapter 4

  36. The phenomenal power of the human mind I cdnuolt blveiee taht I cluod aulaclty uesdnatnrd waht I was rdanieg. The phaonmneal pweor of the hmuan mnid! Aoccdrnig to a rscheearch at Cmabrigde Uinervtisy, it deosn't mttaer inwaht oredr the ltteers in a wrod are, the olny iprmoatnt tihng is taht the frist and lsat ltteer be in the rghit pclae. The rset can be a taotl mses and you can sitll raed it wouthit a porbelm. Tihs is bcuseae the huamn mnid deos not raed ervey lteter by istlef, but the wrod as a wlohe. Amzanig huh? Yaeh, and I awlyas thought slpeling was ipmorantt. NOTE: I read this somewhere and I just had to pass it around. I do not know the origins of the text Chapter 4

  37. A Few Pictures to Make You Smile! Chapter 4

  38. Chapter 4

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  49. The End Chapter 4

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