International Accounting

Chapter 1: Recording Business Transactions

MINISTRY OF INDUSTRY AND TRADE INDUSTRIAL UNIVERSITY OF HO CHI MINH CITY FACULTY OF ACCUONTING-AUDITING

INTRODUCE

MA.Nguyen Quoc Nhat

1

• Code modules: 2127407

• Credits: 3

•

Texbook:

• Reference material:

- Accounting, Charles T. Horngren, Walter T. Harrison Jr. and M.

Suzanne Oliver, 2012, Prentice hall.

-

PRINCIPLES OF ACCOUNTING Published by McGraw-Hill/Irwin,

a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of

the Americas, New York, NY, 10020. Copyright © 2009.

- Website: http://www.ifrs.org/IFRSs/Pages/IFRS.aspx

www.iasplus.com

2

INTRODUCE

Learning objective:

• Presenting the basic knowledge about accounting cycle

from record economic transactions arising in their

diary, to take notes on ledger, trial balance spreadsheet

program, implementing adjustments.

• Applying the knowledge to create a good platform for

students to acquire academic accounting research

deeper, higher.

3

INTRODUCE

MA. Nguyen Quoc Nhat –nhatnq.faa@gmail.com

1

International Accounting

Chapter 1: Recording Business Transactions

Table of content:

Chapter 1 2 3 4 5 6 7 8 9

10

11

12

RECORDING BUSINESS TRANSACTIONS THE ADJUSTING PROCESS COMPLETING THE ACCOUNTING CYCLE MERCHANDISING OPERATIONS MERCHANDISE INVENTORY INTERNAL CONTROL AND CASH RECEIVABLES PLANT ASSETS AND INTANGIBLES CURRENT LIABILITIES AND PAYROLL LONG-TERM LIABILITIES, BONDS PAYABLE, AND CLASSIFICATION OF LIABILITIES ON THE BALANCE SHEET CORPORATIONS: PAID-IN CAPITAL AND THE BALANCE SHEET PARTNERSHIPS

4

INTRODUCE

CHAPTER1: RECORDING BUSINESS TRANSACTIONS

Explain accounts, journals, and ledgers as they relate to

recording transactions and describe common accounts

Define debits, credits, and normal account balances, and use

double-entry accounting and T-accounts

List the steps of the transaction recording process Journalize

and post sample transactions to the ledger

Prepare the trial balance from the T-accounts

5

Learning of objective:

CHAPTER1: RECORDING BUSINESS TRANSACTIONS

Table of content:

1.1 The Account, the Journal, and the Ledger

1.2 Debits, Credits, and Double-Entry Accounting

1.3 List the Steps of the Transaction Recording Process

1.4 Journalizing Transactions and Posting to the Ledger

1.5 Preparing the Trial Balance from the T-Accounts

6

MA. Nguyen Quoc Nhat –nhatnq.faa@gmail.com

2

International Accounting

Chapter 1: Recording Business Transactions

1.1 The Account, the Journal, and the Ledger

1.1.1 The Accounting Cycle

(9) Prepare the post closing trial balance

(1) Identify and analyze transactions as they occur

Start with the balances in the ledger at the beginning of the period

(8) Journalize and post alize an the closing entries

(2) Record transactions in a journal

(7) Prepare the financial statements

(3) Post (copy) from the journal to the ledger accounts

OPTIONAL: Worksheet

(4) Prepare the unadjusted trial balance

(6) Prepare an adjusted trial balance

(5) Journalize and post adjusting entries

7

1.1 The Account, the Journal, and the Ledger

1.1.2 The Accounting Equation :

Assets = Liabilities + Owner’s Equity

8

1.1 The Account, the Journal, and the Ledger

1.1.2 The Accounting Equation (continue)

• An asset is any resource controlled by the business that has

measurable value and is expected to provide future benefits.

• A liability is a measurable amount that a business owes to a

creditor.

9

• Owner’s equity represents the owner’s claim to the business.

MA. Nguyen Quoc Nhat –nhatnq.faa@gmail.com

3

International Accounting

Chapter 1: Recording Business Transactions

1.1 The Account, the Journal, and the Ledger

1.1.2 The Accounting Equation (continue)

• A T-account is a quick way to show the effect of transactions on

a particular account—a useful shortcut or tool used in

accounting. T-accounts are not part of the formal accounting

10

records.

1.2 Debits, Credits, and Double-Entry Accounting

1.2.1 Double-entry accounting

The T-acount: The form of account used for most

illustrations in this book is called the T-account because it takes the

form of the capital letter “T.”

(left side) (left side)

(right side) (right side)

cashcash

Debit Debit

Credit Credit

11

1.2 Debits, Credits, and Double-Entry Accounting

1.2.1 Double-entry accounting (continue)

12

The type of an account (asset, liability, owner’s equity) determines how we record increases and decreases. For any given type of account, all increases are recorded on one side, and all decreases are recorded on the other side. Increases in assets are recorded in the left (debit) side of the account. Decreases in assets are recorded in the right (credit) side of the account. Conversely, increases in liabilities and owner’s equity are recorded by credits. Decreases in liabilities and owner’s equity are recorded by debits .

MA. Nguyen Quoc Nhat –nhatnq.faa@gmail.com

4

International Accounting

Chapter 1: Recording Business Transactions

1.2 Debits, Credits, and Double-Entry Accounting

1.2.1 Double-entry accounting (continue)

13

Revenues are increases in owner’s equity from providing goods and services to customers. Expenses are decreases in owner’s equity from using assets or increasing liabilities in the course of operating the business.

1.3 List the Steps of the Transaction Recording Process

14

1.4 Journalizing Transactions and Posting to the Ledger

Learning objective:

• Record transactions in the journal

• Post from the journal to the ledger

15

MA. Nguyen Quoc Nhat –nhatnq.faa@gmail.com

5

International Accounting

Chapter 1: Recording Business Transactions

1.4 Journalizing Transactions and Posting to the Ledger

Learning objective:

• Record transactions in the journal

• Post from the journal to the ledger

16

1.4 Journalizing Transactions and Posting to the Ledger

Brief explanation

Enter the account number

Date of the transaction (from invoice)

Debit account name and dollar amount. Debits are always listed first.

Credit account name and dollar amount. The credit account name is indented.

17

Post the debit figure from the journal as a debit figure in the ledger account.

Transfer the date of the transaction from the journal to the ledger.

Transfer the page number from the journal to the journal reference column of the ledger.

Enter the account number in the posting reference column of the journal once the figure has been posted to the ledger. 18

1.4 Journalizing Transactions and Posting to the Ledger

MA. Nguyen Quoc Nhat –nhatnq.faa@gmail.com

6

International Accounting

Chapter 1: Recording Business Transactions

19

20

1.4 Journalizing Transactions and Posting to the Ledger

Transactions of Hoa Hong in june 2016:

1. 6/1 The owner invested $100,000 cash.

2. 6/8 Purchase Truck costing $20,000 with $5,000 cash and a Note

21

payable for $15,000.

MA. Nguyen Quoc Nhat –nhatnq.faa@gmail.com

7

International Accounting

Chapter 1: Recording Business Transactions

1.4 Journalizing Transactions and Posting to the Ledger

Transaction 1: 6/1 The owner invested $100,000 cash.

22

1.4 Journalizing Transactions and Posting to the Ledger

Transaction 1: 6/1 The owner invested $100,000 cash.

23

1.4 Journalizing Transactions and Posting to the Ledger

Transaction 1: 6/1 The owner invested $100,000 cash.

Cash

Capital Stock

24

(1) $100,000 $100,000 (1)

MA. Nguyen Quoc Nhat –nhatnq.faa@gmail.com

8

International Accounting

Chapter 1: Recording Business Transactions

1.4 Journalizing Transactions and Posting to the Ledger Transaction 2: 6/8 Purchase Truck costing $20,000 with $5,000

25

cash and a Note payable for $15,000.

1.4 Journalizing Transactions and Posting to the Ledger

Transaction 2: 6/8 Purchase Truck costing $20,000 with $5,000 cash and a Note payable for $15,000.

26

1.4 Journalizing Transactions and Posting to the Ledger

Transaction 2: 6/8 Purchase Truck costing $20,000 with $5,000 cash and a Note payable for $15,000.

…

…

…

27

… … …

MA. Nguyen Quoc Nhat –nhatnq.faa@gmail.com

9

International Accounting

Chapter 1: Recording Business Transactions

1.5 Preparing the Trial Balance from the T-Accounts

Learning objective: Prepare and use a trial balance

28

1.5 Preparing the Trial Balance from the T-Accounts

1.5.1 The concept of trial balance. A trial balance summarizes the ledger by listing all accounts with their balances-assets first, followed by liabilities, and then owner’s equity. Before computers, the trial balance provided an accuracy check by showing whether the total debits equalled the total credits. The trial balance is still useful as a summary of all the accounts and their balances. A trial balance may be created at any time the postings are up to date. The most common time is at the end of the accounting period.

29

1.5 Preparing the Trial Balance from the T-Accounts

1.5.2 Method of trial balance.

HOA HONG Co., Ltd Unadjusted Trial Balance June 30, 2016

Balance

Account Number

Account

Debit

Credit

Total

30

MA. Nguyen Quoc Nhat –nhatnq.faa@gmail.com

10

International Accounting

Chapter 1: Recording Business Transactions

31

32

33

MA. Nguyen Quoc Nhat –nhatnq.faa@gmail.com

11

International Accounting

Chapter 1: Recording Business Transactions

34

35

MA. Nguyen Quoc Nhat –nhatnq.faa@gmail.com

12