Chapter 2
Conceptual Learning Objectives
C2: !escribe source docu"ents and their purpose
C#: !escribe an account and its use in recording transactions
C$: !escribe a ledger and a chart o% accounts
 
 Analytical Learning Objectives
accounts and %inancial state"ents
its use in analyzing %inancial condition
 
(rocedural Learning Objectives
post entries to a ledger 
(2: (repare and eplain the use o% a trial
balance
External Transactions occur between the
organization and an outside party.
Internal Transactions occur within the
organization.
bet)een t)o parties*
Analyze each transaction and event from source documents
 Analyzing and Recording
ost journal information
the trial balance
Sales
Tickets
Bank
Statements
Purchase
Orders
Checks
increases and decreases in a speci%ic asset, liability, e-uity,
revenue, or epense ite"*
 
increases and decreases in a speci%ic asset, liability, e-uity,
revenue, or epense ite"*
The Account and its Analysis
The general ledger is a record
containing all accounts used by
the co"pany*
containing all accounts used by
the co"pany*
C 3
Assets Accounts
+ !iability
Accounts
!and
Accrued !iabilities
E"uity Accounts
Liailities
$ommon &toc(
Ledger and Chart o% Accounts
The ledger is a collection o% all accounts %or an
in%or"ation syste"* A co"pany.s size and
diversity o% operations a%%ect the nu"ber 
o% accounts needed*
The ledger is a collection o% all accounts %or an
in%or"ation syste"* A co"pany.s size and
diversity o% operations a%%ect the nu"ber 
o% accounts needed*
The chart o% accounts is a list o% all accounts and
includes an identi%ying nu"ber %or each account*
 
The chart o% accounts is a list o% all accounts and
includes an identi%ying nu"ber %or each account*
C 4
© The McGraw-Hill Companies, Inc., 2010 McGraw-Hill/Irwin
  A T'account represents a ledger account and is a tool used to understand the e%%ects o% one or "ore transactions*
!ebits and Credits C 5
 
!iabilities
A&&ET&
Re%enues
!ouble'Entry Accounting
  An account balance is the di%%erence bet)een the increases
and decreases in an account*
Notice the T-Account 
/ournalizing 0
 (osting Transactions
A$$+'%T %A,E- A$$+'%T %o.
!ate !escription (R !ebit Credit 1alance
Step 4: ost entry to ledger Step 3: !ecord "ournal entry
1
 
/ournalizing Transactions
Transaction )ate
  T'accounts are use%ul illustrations, but balance
colu"n ledger accounts are used in practice*
alance Colu"n Account (1
)
 
(osting /ournal Entries(1
*
 

 
(osting /ournal Entries(1
,
 
(osting /ournal Entries(1
-
 
Enter the ledger re%erence*.
 
.
 Analyzing Transactions
 Analyzing Transactions
 Analyzing Transactions
!ouble entry:
 Analyzing Transactions
 Analyzing Transactions
 A%ter processing its re"aining transactions %or !ece"ber,
3ast3or)ard.s Trial alance is prepared*
 
3ast3or)ard.s Trial alance is prepared*
Debits Credits
$ash 4506/7
Correcting Errors
error5s6 "ust be %ound and corrected*
7a4e sure the trial balance
colu"ns are correctly added*
colu"ns are correctly added*
accounts are "ista4enly
 
accounts are "ista4enly
Reco"pute each account
entry is posted correctly*
entry is posted correctly*
 journal entry has e-ual
 journal entry has e-ual
9sing a Trial alance to (repare 3inancial
+tate"ents
nco"e +tate"ent(#
+tate"ent o% Retained Earnings (#
alance +heet
a"ounts o% the co"pany.s liabilities
and assets*
co"pany )ill %ail to pay its debts*
!ebt Ratio A2
End o% Chapter 2