Accounting Part 1

T ACCOI.]NTS 6. Utilities Expense Cash in Bank

On October 29 Roadrunnerwrote 105 for $600 to have the office repailpted.

ANALySIS tdentify l. accounts Maintenance Expense and Qash in Bank are affected.

Classify 2. Expense is an expense accognt. Cash in Bank is an asset

+/- 5. nce Expense is increased by $60p. Cash in Bank is decreased

DEBIT-CREDIT RULE 4. I in expense accounts are recordefl as debits. Debit

5. in asset accounts are recorded qs credits. Credit Cash in
for $600.

T ACCOUNTS Maintenance Expense Cash in Bank

On October 31 Maria Sanchez Check 106 to withdraw $500 cash forbersonal use.

ANALYSIS tdentify l. 1
Clossify 2.
+/- 5. accounts Maria Sanchez,lMthdrawals and Cash in Bank are

Sanchez,lMthdrawals is an ownefls equity account. Cash in
k is an asset account.

Sanchez, Withdrawals is increasefl by $s00. Cash in Bank is
sed by $s00.

DEBIT.CREDIT RULE 4. I in the owne/s withdrawals accpunt are recorded as debits.
Maria Sanchez, Withdrawals for $500.
ases in assets are recorded as credils. Credit Cash in Bank

tt4 Chapter 5 Transactions That ffect Revenue, Expenses, and Withdrawall

T ACCOUNTS 5. Maria Sanchez, Withdrawals

Debit I Credit t I Credit

* I .soo

Testing for the Eq lity of Debits

and Credits Ledger Is ln Balance?

Why Should You Make Sure

In a double-entry accounting s m, correct analysis and recording o
husiness transactions should result i total debits being equal to total cred
its. Testing for the equality of debits and credits is one way of finding
whether you have made any errors in rding transaction amounts. To tes
for the equality of debits and credi follow these steps:

Step 1. Make a list of the accou t names used by the business.

Step 2. To the right of each ac unt name, list the balance of th

account. Use two colum , one for debit balances and the othe

for credit balances.

Step 3. Add the amounts in column.

If you have recorded all the am nts correctly, the total of the debi
column will equal the total of the it column. The test for equality
debits and credits for the transacti in Chapters 4 and 5 shows that tota
debits are equal to total credits, so t ledger is in balance.

101 Cash in Bank $ 21.,L25 Showing Cents When
105 Accounts Receivable-City Ne writing amounts of
110 Accounts Receivable-Green t,450
115 Computer Equipment money, be consistent
pany 3,000 $7s in showing cents. lf one
72O Office Equipment 200 amount includes cents,
lsmg 1L,650 show cents for all the
725 Delivery Equipment Auto 72,OOO amounts. Be sure to
zOL AccountsPayable-Beacon 25,4O0 align the amounts on the
s00
2OS Accounts Payable-North Sho decimalpoints.
lncorrect:
301 Maria Sanchez, Capital
S zt,tzs
3OZ Maria Sanchez, Withdrawals
1,450.77
303 Income Summary
Corred:
4O7 Delivery Revenue
5 21,125.00
501 AdvertisingExpense
505 MaintenanceExpense \ 1,450.77
510 RentExpense
515 Utilities Expense 75 2,650
600 $ 39,77 5

700
725
$ 39,77s

Section 2 Applying the Rules of t and Credit to Revenue, Expense, and ithdrawals Transactions 115

$tITr[il 2

Reinforce the Main ldea

Use a chart like this to
organize the test for the
equality of debits and credits.
Write each of these terms
in the appropriate box:
ossets, lio b ilities, owner's
copito l, own er's with drowa ls,
revenue, expenses. (Don't use
the shaded boxes.)

Do the Math $14,000
12,000
This bar chart shows th first 10,000
8,
quarter's revenue and ex se. 6,000
4,
In approximate amo nts,
January Februaq First Quarter
what month had the t
revenue and what wa the

amount? What month h the

highest expense and w t was
the amount? Overall, d the
business have a profit loss?

What was the amount?

Problem 5-2 Accounts Affectpd

Transactions

John Albers uses the fol wing accounts in his business.

General Ledger John Albers, Capital Advertising Expense
Cash in Bank John Albers, Withdrawals $ent Expense
Utilities Exoense
Accounts Receivab Service Fees
Office Equipment
Accounts Payable

lnstructions In your papers:

1. Identify the two nts affected by each of the following transactions.

2. Indicate whether eac account is debited or credited.

k 543 to pay the electric bill for the month.
tomer for services provided on account.
rs took cash from the business for his personal use.

544 to pay for an advertisement.

116 Chapter 5 Transactions That t Revenue, Expenses, and Withdrawals

'.. !i;i ,,' -''a'!

Eeurv Resenncrt Tips from ''" '

Eaton Vance Man ement, Boston, Massach
Rukma Raybardha

What does Eaton Management do?

We manage portfolios, groups of investments.

responsibilities?

I conduct preliminary rch for analysts who cover certain ''*,j-i,"i',1:nfrfr!f:*ix'ii'nfiftftil.'
industries and build maintain financialmodels. My job
involves reviewing and il:rs.il;il-'il$iiiil;
attending meetings. ng financial statements and td$;ffi;:;fii,l1'h

What do you find *[o it uUft to helP You'

I love the fact that I get see the results of my work by
of our investments. I enjoy learning
about various industries companies, and I learn something
new every day-

llllhat advice do have for accounting students

careers?

Work hard and get good grades. Also, concentrate on finding

in my favor when I was looking for my

finance. Try to network much as possible. You never know

your career adva and open doors for you.

Nature of Work: st analysts with investment research.
A bachelor's degree with a concentration in accounting

skills; attention to An understanding of the sto[k market; strong analytical
Salary Range:
Careerfalh: Start and up, depending on experience and employer.
into higher-level an entry-level position. As you gain experience and PrePare to move
becoming a cha ;, consider obtaining a maste/s degree in business administration or
people working in
financial analyst (CFA). The CFA title is an important credential for
investment field.

Chapter 5 Accounting Careers in Focus 177

IllAPTIIt 5

Key Concepts

1. The accounts used by a busi can be separated into permanent alcounts and temporary

accounts. forward from one accounting peribd to the next. The
permanent accounts:
Permanent accounts carry bala
following types of accounts

. assets
. liabilities
. owner's capital

Temp orary accounts accumula dollar amounts for only one accounling period and then start
each new accounting period th a zero balance. The following typds of accounts are temporary
accounts:

. revenue
. expenses
. owner's withdrawals

2- The rules of debit and credit permanent accounts are summarizdd as follows:

ASSETS LIABILITIES + O\ATNER'S EQUITY

Permanent Accounts

Asset Accounts Owner's Capital Account

Debit Debit Credit Debit Credit
+ +
Increase Decrease Decrease
Side Side Increase Side Increase

Normal Side Side
Balance
Normal Normal
Balance Balance

The rules of debit and credi for temporary accounts are summarized as follows:

Accounts

Revenue Expenses Withdrawals

Credit Debit Debit
+ +
Increase
Increase Side Increase
Side Side
Normal
Normal Balance Normal
Balance Balance

118 Chapter 5 Summary

EHAPTTri 5

Revenue Accounts

Rule 1: A revenue accoun is increased (+) on the oedit side.

Rule 2: A revenue accou is decreased (-) on the debit side.

Rule 3: Thenormal for a revenue account isthe increase , or the creditside. Revenue

accounts normal have credit balances.

Expense Accounts

Rule 1: An expense accou t is increased on the debit side.
Rule 2: An expense accou tis decreased on the credit side.
Rule 3: Thenormalbalanc for an expense account isthe increase ide, or the debit side. Expense

accounts normall have debit balances.

The Withdrawals Account

Rule L: The withdrawals nt is increased onth;e debit side. se side or debit side. The
Rule 2: The withdrawals nt is decreased or,tlre credit side.
Rule 3: The normal for the withdrawals account is the
normally has a debit balance.
withdrawals

3. Follow the six-step method learned in Chapter 4to analyzetr nsactions affecting revenue,
expense, and withdrawals.

Step 1: Identify the accoun affected. affected.
Step 2: Classify the accoun affected.
Step 3: Determine the a t of increase or decrease for each acc
Step 4: Determine which
Step 5: Determine which nt is debited and for what amount
Step 6: Use T accounts to nt is credited and for what a
ibe the entry.

4. In a double-entry accounti system, total debits should always I total credits. Use these
steps to test for the equality debits and credits.

Step 1: List the account na the business uses.

Step 2: To the right of each t name, list its account ba Use two colutnns, one for

debit balances and e other for credit balances.

Step 3: Add the amounts i each column.

Key Terms

permanent accounts (p. 105
revenue recognition (p. 113
temporary accounts (p. 10a

Chapter 5 Summary 1'19

IHAPTEI{ 5

Check Your a temporary account and a permanlnt account?
and credit for increasing and decreaslng each of the following
t. Permanent and Temporary
and credit for increasing and decreaslng each of the following
a. Why are temporary
b. What is the difference contains both a permanent account arfd a temporary account?
a revenue account, can the othBr side involve the owne/s
Debit and Credit Rules
equality of debits and credits?
a. State briefly the rules of equality of debits and credits?

types of accounts:

. assets
. liabilities
. owne/s capital

b. State briefly the rules of

types of accounts:

. revenue
. exPenses
. owne/s withdrawals

Temporary Account

a. Which account
b. lf one side of a transaction

capital account? Why or

4. Tests of Equality
a. Why should you test for
b. How would you test for

Apply Key fErms

You have been asked to make

presentation to your company's

the owners to understand the d rence ln

the accounts you manage, you be able

to explain the following key

I permanent accounts I accounts
| ,"r".rr" recognition I

Create three examples that m, a brief
used as overhead transparencies.
example (master) should show a ple.
definition, and an illustration or

I2O Chapter5 Reviewand

Chart of Accounts

a Manual to a Compute

nual Methods

Setting up the ledger usi set up in the general r Accoun are set up using defined
accounts in a forms. general ledger account
general ledger Accounts numbers and account types.
beginning n be set up with or without
. Accoun can be set up with or without

. Accoun ng software programs offer

of sample companies from
which can copy the chart of

instead of creating each
accoun individuallv.

How do I create general theMaintqin menu, select Chart of
the account number in the Account ID
ledger accounts in the account name in the Description

Peachtree? the Account Type drop-down list, select

EQui Save.

QuickBooks Question ks e&A
How do I create general
the lisfs menu, select Chart of Accounts account name in the
ledger accounts in
the Account pull-down menu and choose
QuickBooks? the Type drop-down list, select the accou
the account number in t};'e Number field
field.
oK.

Chapter 5 terized Accounting 121

IHApTtn 5

@ 5-5 ldentifying lncreases

' St p-by-St"p lnstructions: and Decreases in Accounts
Problem 5-5
l. Select the problem set cks uses these accounts in his businesd, Wilderness Renta1s.

for Wilderness Rentals Ledger 301 Ronald Hicks, Capital
Cash in Bank 305 Rodald Hicks, Withdrawals
(Prob. s-3). Accounts Receivable- 401 Eqrlipment Renta1 Revenue
2. Rename the company 505 Maintenance Expense
Helen Katz 525 Utifities Expense
and set the system date. Office Equipment
3. Print a Chart ofAccounts Camping Equipment

using the General Analyze each of the following trai-rsactions using the format
Ledger option in the the example below. Record your answbrs in your working papers.
Reports menu.
4. Review the Chart of in the debit.
Accounts. in the credit.
5. Complete the Analyze
activity manually. 2 Ronald Hicks paid the bill for off,[ce cleaning, $100.
5. End the session. se account 505 Maintenance Eipense is increased.

Peaclrtree' ses in expenses are recorded as debitS.
t account 1O1 Cash in Bank is dec[eased. Decreases in assets
Step-by-Step lnstructions:
Problem 5-4 as credits.

l. Select the problem set L. Ronald Hicks withdrew $500 frbm his business for his own

for Hot Suds Car Wash use, Check 225.
(Prob. s-4).
2. Rename the company 2. The business received $1,200 cdsh in rental fees from
and set the system date,
5. Print a Chart of Accounts various customers.
using the General
Ledger option in the 3. The business paid a telephone hill of $85, Check 226.
Reports menu.
4. Reviewthe Chart of 5-4 Using T Accountp to
Accounts.
5. Complete the Analyze Analyze Tiransactions
activity manually.
6. End the session. gado, owner of Hot Suds Car Wash, irses these accounts:
TIP: You will learn how
to enter transactions into Ledger
the accounts in the next
chapter. 1 Cash in Bank a01 ilash Revenue

t22 Chapter 5 Problems 5 Office Equipment 510 lvXaintenance Expense

5 Accounts Payable- 520 REnt Expense

O'Brian's Office Supply

7 Regina Delgado, Capital

5 Regina Delgado, Withdrawals

IHAPTEIl 5

lnstructions In your working ryPeaclrtree'
1. Determine which accounts a affected for each transaction.
2. Prepare T accounts for the acc j Step-by-Step lnstructions:
3. Enter the amount of the debit and the amount of the credit in the J
Problem 5-5
T accounts.
L Select the problem
L. Received a checkf $1,675 for car wash services.
2. Paid the monthly t of $450 by writing Check21,2. set for Kits & Pups
3. Regina Delgado wi hdrew $250 for her personal use, Crooming (Prob. 5-5).
2. Rename the company
Check 213. and set the system date.
5. Add new general ledger
4. Had the computer ired at O'Brian's Office Supply for accounts using the
Chart of Accounts
$245 and was give until next month to pay. option in the Mointoin
menu.
Problem 5-5 Ana Transactions into 4. Enter beginning
balances using the Chart
and ing, uses the following accounts of Accounts option in
the Mointoin menu.
Abe Shultz, owner of Kits & Pups 5. Print a Chart of Accounts
using the General
record transactions for the month. Ledger option in the
Reports menu.
6. Proof your work.
7. Complete the Analyze
activity manually.
8. End the session.

General Ledger 401 Boarding Revenue TIP: When a report list i
101 Cash in Bank 405 Grooming Revenue appears, double-click a
105 Accounts Receivable- 501 Advertising Expense report title to go directly to
505 Equipment Repair Expense
Juan Alvarez that report.
140 Grooming Equipment 510 Maintenance Expense
205 Accounts Payable- 520 Rent Expense Step-by-Step lnstructions:
530 Utilities Expense Problem 5-5
Dogs & Cats Inc.
l. Restore the Problem
301 Abe Shultz, Capital
305 Abe Shultz, Withdrawal 5-s.QBB file.
2. Add new general ledger
lnstructions For each transaction
accounts using the
1. Prepare a T account for each Chart of Accounts
option in the Lisfs
2. Enter a balance of $15,000 in Cash in Bank account; also enter a
menu.
balance of $15,000 in the Abe hultz, Capital account.
5. Enter beginning
3. Analyze and record each of following business transactions, usi balances using the
Chart of Accounts
the appropriate T accounts. tify each transaction by number. option in the Lisfs
menu.
4. After all the business transacti s have been recorded, write the wo
4. Print a Chart of Accounts
Balance on the normal bala side of each account. by selecting Print List in

5. Compute and record the bal ce for each account. the FiIe menu.
5. Proof your work.
5. Complete the Analyze

activity manually.

Z Back up your work.

Chapter 5 Problems 123

IHAPTIt{ 5

Jan. 1 1. Purchased grooming equipment tor $12,700, Check 283.
2. Wrote Check 284 for advertising,r$tZS.
10 3. Received $1,850 cash for dog boalding services.
12
15 4. Paid $150 for equipment repair, Check 285.
77 5. Purchased a dog cage on account from Dogs & Cats Inc. for

20 $7s.
22
6. Abe Shultz withdrew $150 for pelsonal use, Check 286.
23 7. BilledJuan Alvarez for $775 covering grooming services for

25 all of the dogs boarded at the kertnels he owns. Payment
will be received later.

8. Paid the first two weeks' rent by writing Check 287 for

$32s.

9. Paid the electric bill at a cost of $115, Check 2BB.

Peachtree' 5-6 Analyzing Transactions into Debit

I Step-by-Step Instructions: and Credit Parts
I Problem 5-6
operates Outback Guide Service. She uses the following
i t. Select the problem
; set for Outback Guide o record and summarize her business transactions.
; Service (Prob. 5-6).
Ledger
r 2. Rename the company 1 0 Cash in Bank
301 Jua[rita Ortega, Capital
r and setthe system date. 1 Accounts Receivable- 302 Juanita Ortega, Withdrawals
MaryJohnson
5. Add newgeneral ledger 401 Gufde Service Revenue
Rafting Equipment 505 Mqintenance Expense
ji accounts using the Accounts Payable-
515 Rent Expense
:; Chart ofAccounts Peak Equipment Inc.
option inthe Mointoin 520 UtilitieiE"p"rr"
, menu.
i 4. Print a Chart ofAccounts s For each transaction:
i using the General
: Ledger option in the 1. Pre a T account for each account the business uses.
i Reports menu. 2. Ana yze and record each of the following transactions using the

i1 5. Proof yourwork. app iate T accounts. Identify each transaction by number.
6- Complete the Analyze 3. A recording all transactions, compute and record the account

i activity manually. ba on the normal balance side of each T account.
i 7, End the session. 4. Tes for the equality of debits and credits.

i TIP: You can use General Transactiohs
: Ledger Navigation Aid to
1. Juanita Ortega invested $12,00b cash in her business.
: access the Maintain Chart
i of Accounts window. 2. Purchased two new whitewater rafts on account for $3,750

from Peak Equipment Inc.

3. Billed, but did not collect, $750 for guide services provided

to MaryJohnson.

5L24 Chapter Problems

EHAPTTN 5

ions (cont.)

12 4. Repaired araftata of $123, Check 411.

t4 5. Wrote Check 412 pay the electric bill of $95.

17 6. Received $225for

21 7. Paid the $225 rent the month, Check 413.

24 8. Paid $1,750 the rafts bought on account, Check

414.

27 9. Juanita Ortega wit rew $250 cash for personal use,

Check 41 5.

29 1O. Received guide ice fees of $250.

Problem 5-7 Ana Transactions Peachtrce'

Greg Failla owns Showbiz Video. H uses the following accounts to record Step-by-Step lnsilructions:
Problem 5-7
business transactions.
l. Select the problem
General Ledger 205 Accounts Payable-
101 Cash in Bank set for Showbiz \fideo
105 Accounts Receivable- Computer Horizons (Prob, s-7).
2O7 AccountsPayable- 2. Rename the company
Gabriel Cohen and set the system date.
110 Accounts Receivable- New Media Suppliers 3. Add a new record for
301 Greg Failla, Capital each of the general
James Coletti 305 Greg Failla, Withdrawals ledger accounts.
140 Computer Equipment 401 Video Rental Revenue 4. Print a Chart of
145 VideoTapes 405 VCRRentalRevenue Accounts.
505 Equipment Repair Expense 5. Proof your work.
520 RentExpense 5. Complete the Analyze
530 Utilities Expense activity manually.
7. End the session.
lnstructions For each transaction:
TIP: Peachtree requires
1. Prepare a T account for each unt listed above. that you group accounts by
type: asset, liability, equity,
2. Analyze and record each of t following transactions using the income, and expense.

appropriate T accounts. Identi each transaction by number.

3. After recording all transactions compute a balance for each account.
4. Test for the equality of debits d credits.

Jan. 1 1. Greg Failla inves $17,500 cash in Showbiz Video.
2. Purchased compu equipment on account from
3
Computer Horizon for $2,400.
B
3. Purchased videos o account from New Media Suppliers
10
for $375.

4. Paidmonthlyrent $750, Check 1183.

Chapter 5 Problems 125

IHAPTIt{ 5

Problem 5-8 Problem 5-8 Completing the

l. Select the spreadsheet Accounting Equation

template for Problem tion of temporary accounts, the b4sic accounting equation
5-8.
2. Enteryournameand as follows:
the date in the spaces
provided on the Owner's Equity
template.
5. Complete the bilities + Owner's Capital - Withdrlwals * Revenue - Expenses
spreadsheet using the
instructions in your Dns Using the expanded equation shown above, determine the
working papers. mounts for the following accounting dquations. Use the form in
4. Print the spreadsheet
and proof your work. papers. The first equation is comfleted as an example.
5. Complete the Analyze
activity manually. Owner's
6. Save your work and
exit the spreadsheet : Liabilities * Capital - Withdraiwals * Revenue - Expenses

ProSram. $8,200 $56,300 $ 500 $10,000 $ 9,600
525 18,800 TPoo 72,7OO ?
75 2t,650 4,715 3,250
? 47,840 ? 20,300 17,670
1,150 20,005
2,790 rf soo ? 76,570
? 9s0 67,908 39,749
52,210 42,597
1,988 41,194 1q,750 40,163 2t,637
? 3,840 61,774 q,196

?

nses plus withdrawals equal $27,7 49.) ?

? 49,102 4,875 53,166

owner's equity after adding revenue and subtracting expenses and

rawals is $50,643.)

126 Chapter 5 Problems

IrlAPTTt{ 5

Practice your test king skills! The questions on this pa are reprinted with permission
from national izations:
Leaders of America
o Fufure Busi
ls of America
. Business t of paper to record your answers.

Use a separate sh

/ Future Business of America

FBLq Mtrrrrprr Cnorcr

1. \tVhich of the lowing statements is incorrect?

a. The balance of the receivable account is a
b. The
balance of the or mer's personal nt is a debit.

c. The norma balance of an unearned revenues t is a credit.

d. The norma balance of an expense account is a c

e. All of the a statements are correct.

2. If Tim Jones, t owner of Jones Hardware proprieto hip, uses cash of the business

to purchase a ly automobile, the business should rd this use of cash with

an entry to

a. debit Sala Expense and credit Cash.

b. debitTimJ Salary and credit Cash.

c. debit Cash nd credit TimJones, Withdrawals.

d. debitTimJ Capital and credit Cash.

e. none ofth above.

Business of America

Murrrprn Cnorcr

3. Accounts that a continuous from one accounting to the next and balances

are carried rd are referred to as yment for

a. permanent accounts. use, what account is

b. fiscally Center. Click on Wnning

C. assets. and select Chapter 5.
and Test-Takingfips
d. signature unts. and Terminology
4. Each of the fol g is a business expense except a

a. equipment

b. advertising

c. rent

d. utilitybills
5. If the owner of company takes merchandise for pe

debited?

a. Owner's c

b. Owner's wals

c. Purchases

d. Cash Competitive
. Practice
. Concept

--,r1 Chapter 5 Winfring Competitive Events 127

.-r.3=-

IHAPTTt{ 5

Temporary and Accounts

L. What is t normal balance of the owner's withdiawals account?

2. What is t difference between ovwrcls equity and]the owne/s capital account?

3. Your busi s receives a refund check from the utllity company because it
overcha your business in the past. Which u..br.rt is debited? Which

account is redited?

4. Which accounts affect profit or loss fol an accounting period?

5. Write an for owner's equity at the e.ra oh an accounting period.
Start the
w'ith "End ion with "Beginning Owner's Capifal" and end the equation

6. Evaluate g Owner's Equi{."
I
practice of using temporary accountb for recording certain

as opposed to using the owner's capfital account.

cotusl.[I'.DY Service

Colleen . Desk and chair ]
local busi . Bookcases
gramming, . Computer supplies
accountant
n advertising in the local newspu[.t to find new clients. She
Here are
;iness fuom her home and has a sdparate telephone line for the
. Computer

o Printer

. Software

Colleen has
manages the

business.

L. Prepare a l

of accounts for Web Design Sourfe.

2.Explain tolColleen why it is important to collect and organize the financial

informatidn resulting from business transaction$.

Using a Number ]

Many busi offer a toll-free telephone liner for customers and business

associates. ppose you're an accountant for

Ohio. Your

800 number can use to call you. Your company an 800 number, and

you would to hear from Mike. However, yo,, fho know that your company

pays for incoming call.

Ernrclr Mlxnge

L. What are ethical issues? 4. How do the alternatives affect the
2. What are alternatives? partieq?

3. Who are affected parties? 5. What Would you do?

128 Chapter 5 Real-World s and Connections

IHAPTEt{ 5

Promoting ldea

As Southsi Ballet Company's financial directorl you think Southside should

open a balle supply and dancewear shop. Use word processing software to write

a memo to t ballet director and owner, Jonathan Booth, asking him to consider

it. Explaln w you view the impact of additional revenue on his capital account.
Use the ru for revenue accounts in your explanation.

S..Sruu-s Beyoruo Acquiring Analyzing Data

IfNmEns- To make a ision, whether business or personali you must be able to acquire

lttrunttrrmrm and analyze ta (information).

-+ 0N rurJon
ACCOUATYING
You are a ior at Highland College, a small libeqal arts college. Eighty percent
.,
-',!- of the stud ts live in campus dorms or in apartments within one mile of the
-
college. The dent activities center closes at 9:00ip.m. during the school week,

and studen complain about the lack of food and ibeverage service for late night

studv sessi s. You decide to analyze the market potential of a limited food and

beverage del very service.

INsrnuct

1. Develop market survey of 5-10 questions related to the opening of an

off-cam food and beverage delivery service.

2. Decide w at type of food and beverage you can provide in a delivery service.

How m investment would you need to begirn? What do you anticipate

vour cust base to be?

Global

When you hink about revenue and expenses for a company, consider how
the Internet makes it faster and cheaper to do bqsiness. Business is conducted

using Web , e-mail, and videoconferencing. Companies like Gap and K-Mart
use Web sit to sell products at lower costs than store locations. Managers can
communica online with vendors or branch locations to avoid the high costs of

travel.
If you owned a small business and wished to expand your market

to a global a nce, discuss how you might use the Internet.

Your Credit

Do you ha a credit card? If you do not use a credit card yet, it is likely you will
use one in t e future. In either case, you need to know how to use your credit

card wisely.

PrnsoNar axcr Actlvlrv Suppose your friend used a credit card unwisely

and Iost the se of the card. You want to help you{ friend avoid future mistakes.

Conduct r rch at the library, on the Internet, or at your local bank. Write some
suggestions
Pnnsowar at will be helpful to your friend.
click on aNcr Owrnm Log on to glencoeaciounting.glencoe.com and

t Center. Click on Making It Personal and select Chapter 5.

Chapter 5 Real-World Applitations and Connections 129

['}l fifTfif{ '$ ording Tran actions

rn General Io rnal

What You'll Learn Predict from personal exPerience?
earlier chapters?
Explain the first three stePs in l. What does the chapter title tell you?
the accounting cYcle' subject?
2. What do you already know about this
Give and describe several 5. What have you learned about this in
examples of source 4. What gaps exist in your knowledge of
documents.
Google lnc.
Explain the purPose of
iournalizing. Think about how often You for information on the
Apply information from Internet, whether it is for school fust something You find
source documents.
interesting. There is a good chance r first stop is Google.
Describe the stePs to make
a generaliournal entry. Larry Page and SergeY Brin were tudents at Stanford

Make general iournal entries. UniversitY when theY met in 1995 During the next few
Correct errors in general
journal entries. years, they worked together on search technologY. TheY

Define the accounting terms developed away to do searches u personal comPuters
introduced in this chaPter.
instead of big, exPensive machi in a garage in 1998.
Why lfs lmPortant The companY Google Inc. was rches a daY. Within two

Every transaction You The site performed about 10,000
have with a business is
documented in some waY. and one-half Years, that number to 100 million. TodaY
Companies keeP Permanent Google is the toP Internet search ine. The comPanY takes
records of transactions. in billions of dollars in advertisin each year, keePing its team

ffi*{hffik# of accountants busY'

What Do You Think? company, what tYPes of

If you were iust starting an In rd?
financial information would You

Chapter6 RecordingTiansact s in a GeneralJournal

i"q;

=ry- 3

Have you ever kept a
that happen during
journal of a business
happenings are recor
Google sells advertisi
equipment, and pays
learn how to record
journal in this

stITl[]t r Accounting Cycle

Main ldea In earlier chapters you learned td use the accounting equation

The accounting cycle is a series of and T accounts to analyze business transactions. In this chapter
steps done in each accounting period you will learn how to record businebs transactions in a journal.

to keep records in an orderly fashion. The Steps of the Aqcounting Cycle

Read to Learn... What Is the Accounting Cycle?

D the steps in the accounting cycle. The accounting period of a busilness is separated into activi-
ties called the accounting cycle . t]hese activities help the busi-
(p. 132) ness keep its accounting records irp an orderly fashion. Take a
look at Figure 6-1, which describds accounting activities and
) the different types of accounting their sequence.

periods. (p. 134) In this chapter you will use Steps 1,2, and 3 of the account-
ing cycle:
Key Terms check stub
journal 1. Collect and verify source dopuments.
accounting cycle journalizing 2. Analyze each transaction.
source document 3. Journalize each transaction.
invoice fiscalyear
receipt calendar year After studying Chapters 3 throlgh 10, you will have covered
memorandum the entire accounting cycle for a sepvice business organized as a

sole proprietorship.

Collect verify Analyze each tou,Jutir" Post to
source transaction the ledger
each transaction
ACCOUNT
I|--reri,rERAL-I

rounrunr I

rm

)

;il

Prepare [f=finT- t| Il--ErriERAL I f Prepare ? preoare a
post .rouarunr work sheet triai balance
trial r
Figure 6-L Steps in the 'Journalize and post
Plgnare finangial
Accounting Cycle with Steps closing entries statements
1,2,3 Highlighted

132 Chapter6 RecordingTr in a GeneralJournal

The First Step in the Cyclet
Collecting and Verifying rce Documents

Most business transactions take lace during the daily operations of a

business. In the course of one day, a iness may pay its rent, place an ad

in a local newspaper, contract to ha a Web site created, pay its employees,

sell products, and purchase new eq pment. When a business transaction Source Documents
Source documents are
occurs, a paper is prepared as ce of that transaction. This paper is evidence of business
transactions.
a source document.

There are several types of source ocuments that can be prepared by

hand, by computer, or by a machine. type of source document prepared

depends on the natute of the tra n. Figure 6-2 describes and illus-

trates commonly used source docu ts.

Invoice reLLY'S OUCE SUPPLIS rllvolcE lto. 479
354 Cnde Ddv€. #150
Lists specific information about a santa Monica, CA 90405 IIATE: Dec. 1.20-
transaction involving the buying or ODER NO.: 150
selling of an item on account. The fRoadrunnerDeliverySeryice SEIPPED BY: TruCK
invoice contains the date of the TO 155 Galeway Alvd.
transaction; the quantity, descripti TERMS: Payable in 30 days
and cost of each item; and the pa L qacramenio, cA 94230

terms.

Receipt

A record of cash received by a busi
It indicates the date the payment
received, the name of the person or
business from whom the payment w
received, and the amount of the

Memorandum RladrunnetDelivervserviee x iIEMORAIIOUMI
r55GdewNBlvl-,
A brief written message that descr
a transaction that takes place within $crammrqCA942s _l':,
business. A memorandum is often u
no other source document exists for TO: Acmuntingole*
FROM] Mada sadez
business transaction. DATE: ftlober1,20-
suBJEcr' conhbuid E$ral tunds + he business

I have @nribud $25,ooo irom my perednd savings to be deFsilsd to ihe
tusines- Foadrunner Oelivery Seruie.

Check Stub $
Dale
The check stub lists the same in tion To

that appears on a check: the date wri ten, Section 1 The Accounting Cycle L33

the person or business to whom the

was written, and the amount of the k.

The check stub also shows the bal 1n

the checking account before and a

each check is written.

Figure 6-2 Source Documents

The siness owner, accountant, or accounting clerk (depending on the
business) uses source documents geperated by business transac-
size of
tions to the records of the business. The accounting cycle starts by
collectin and verifying the accuracy of source documents. One important
activity to check the arithmetic on each source document.

The Step in the Accounling Cycle:
Ana ng Business Transactions

A ng and verifying source documents, the second step in the

accounti g cycle can begin-analyzing information on the source docu-

ments determine the debit and credit parts of each transaction.

You ve already learned how to analyze business transactions using

the rul of debit and credit. When you learrled to analyze transactions,

you given a description of each transaction, such as: Roadrunner

Deliver Service bought a computer system from Info-Systems Inc. for

$3,000 issued Check 101 in payment. 01 the job you will not get a

descripti of the transaction. Instead, you must examine a source docu-

ment to ine what occurred during a buqiness transaction.

The Step in the Accountimg Cycle:

g Business Transactions in a loumal

You re now ready to apply information from source documents. The

third in the accounting cycle is to record the debit and credit parts of

lournal In your each bu ness transaction in a journal. A iournal is a record of the trans-
personal life, a journal actions f a business. Journals are kept in chronological order, that is, the
can be a private diary
of your thoughts order in which the transactions occur. The plocess of recording business

and experiences. ln transac in a journal is called iournalizing. Keeping a iournal can be

accounting a journol compa to keeping a diary in which all imflortant events are written. A
is a formal record of
iournal the only place where complete detaifs of a transaction, including
business transactions. both t debit and credit parts, are recorded. The journal is sometimes called

the book of original entry because it is where transactions are first entered in

the ac nting system.

The nting Period

What re the Different Types of Accounting Pefiods?

As scussed in Chapter 2, accounting records are summarized for a

certain riod of time, called an accounting leriod. An accounting period
may be any designated length of time, suclr as a month, a quarter, or a

ln 1494 Franciscan monk year. t businesses use a year as their accounting period. An accounting
Luca Pacioli published a
mathematics book that period 12 months is called a fiscal year. If the fiscal year for a business
included a section on
double-entry accounting. begins January 1 and ends on December 31, it is
ln his book Pacioli called a calendar year accounting period. Many
described most of the
accounting cycle as we busi start their accounting periods in mpnths
know it today.
other t n January. For example, department stores

often h ve fiscal years that begin on February 1 and

end on anuary 31 of the following year. School dis-

tricts ly have fiscal years that begin on JuIy 1

and en on June 30.

134 Chapter6 RecordingTransact in a GeneralJournal

$tITt []'t I

Do the Math ppliers for the following
at $3.19 perbox
Glen's Catering received
supplies: m paper cups at $8.24 per box
the total for all items.
. 6 cartons of napkins a
. 3 boxes of paper pla following questions.

Calculate the total for e

Problem 6-l

lnstructions Analvze t

TAVMAX OFFICE

554 Town Square
Fort Myers, FL 33902

I Dario's Accounting
TO 5821 Guli Blvd.

\aples, F133940

Fax Machine

1. What is the name of he company providing the service or rchandise?
2. What is the name of he business receiving the service or rchandise?
3. What is the date of e invoice?
4. What is the invoice mber?
5. What item was sold?
6. What is the price for is item?
7. What are the payme terms?

Section The Accounting Cycle 135

$EITtil{ 2 Re ording Transactions in
the General lournal
Main ldea
Section 1 you learned about the first three steps in the account-
You can use the general lng le. Let's apply these steps to business transactions for Roadrunner
journal to record all ofthe
transactions of a business. Deli Service.

Read to Learn... R :ording a General lournal Entry

L how to record a general H Do Vou Record a General fuu),nal Enfiy?

journalentry. (p. 136) any kinds of accounting iournals afe used in business. One of
the t common is the general journai. As its name suggests, the
L how to correct errors
I iournal is an all-purpose journal in which all of the transac-
in the generaljournal.
(p. r48) tion of a business may be recorded. Figure 6-3 shows the general jour-

Key Terms nal will be using throughout the accorunting cycle for Roadrunner

general journal Del ry Service. The general journal has #o amount columns. The first

Normal Debit Balance am nt column, the amount column on the left, is used to record debit

Assets am nts. (Remember that debit means left.) The second amount col-
Expenses
Owner's Withdrawals um the amount column on the right, is r-lsed to record credit amounts.
Normal Credit Balance
Liabilities ( ber that credit means right.) Loo( at Figure 6-3 to find where
Revenue ea component of a general journal entry appears.
Owner's Capital
1Da of the transaction 3 Amount of the debit
I 2 Name of the account debited
t-
I GENERAL JOURNAL
-ll,
1T'
8,,2
-!t+ioYLera"trr,
)4
Jr lrs

lr
;n-

4 ot an explanation 5 Amount of the credit
Figu of the account credited

6-3 Ceneral Journal for Roadrunner Delivery Service

busi apters 4 and 5, you learned a step.lby-51ep method for analyzing
entry
steps transactions. In this chapter you wilf learn to complete the iournal
r a business transaction in the same manner. Review the following

ore you continue.

136 Chapter 6 Recording Tr in a General Journal

B USINESS TRANSA C TIOA/ ANAI : Steps to Success

ANALYSIS tdentifY the accounts affected. se for each account
the accounts affected.
Clossify ine the amount of increase or

+/-

DEBIT.CREDIT RULE account is debited? For what amou
account is credited? For what

T ACCOI,]NTS is the complete entry in T-account

JOURNAL ENTRY t is the complete entry in general

Use these steps to determine the bit and credit parts of each journal
entry. Remember, it is always helpful to use T accounts to analyze transac-
tions. After analyzing many t.ransact s, you will find that you need these
tools less and less to determine the it and credit parts of a journal entry.
After the complete entry is recorded, verify that the total debits and total

credits are equal.
Now, let's examine business tra tions and their analysis for Roadrun-

ner Delivery Service.

1MEM0RANDUM llr

TO: Accounting Clerk

On October 1 Maria Sanchez took FROM: Maria Sanchez

from personal savings and deposited DATE: October 1,20--
to open a business checking account in
SUBJECT: Contributed personal to the business
Rladrun ner De I ive ry Seruice,
I have contributed $25,000 from personal savings for a deposit to the :

'tt

,t:i

ANALySIS ldentify in Bank *r;rri:r:r.:::rillillrliill:i:lil,lltri:r::r:lr:ir:lij..]::ll

Maria Sanchez, Capital are affected.

in Bank is an asset account. Maria Capital is an owner's
Sanchez, Capital is
in Bank is increased by $25,000.

DEBIT-CREDIT RULE in asset accounts are recorded debits. Debit Cash in Bank

in the owner's capital account recorded as credits. Credit
Sanchez, Capital for $25,000.

2Section Recording Transacti in the General Journal 137

T ACCOUNTS 6.

Debit Credit
+

25,000

l

JOURNAL ENTRY 7. DEScRIrEprlolEN rIAP:rS-P-oJ].trTDAtE-rlB.Irlei1oc5lRtE-tD=tr-r1,_

.D,A-rE ,

teit.l',, tt,;ccisrni inn sbaoit i",tl ,z4**'i ^.l^tj^l^l'

- :-, :ryr,ysanchTc.r,y...itat l]l-1 ,'zslotgto!)0,'e
-L- ]|l ].-il n'
,, Me-morandYm1 -

again at the general journal entry shown above. Notice that in the

upper r ht-hand corner there is a line for the page number. Journal pages

are n in consecutive order; that is, 7,2,3, and so on. When you fill

one with journal entries, go on to the next page. Be sure to properly

each new page.

Roadrunner Deliverv Service tr- MEMOBA]IDUM 2
155 Gateway Blv;-r'l
94230 'Sacramento, CA ':

TO: Accounting Clerk

On October 2 Maria Sanchez took FROM: lvlaria Sanchez
telephones valued st $200 each flom
transfened them to the business as DATE: October2,20 -

Memorandum 2. SUBJECT Contribuledpersonalphones

I have contributed two telephones from my home to the business. The
phones are valued at $2Oo each. Tbtal contribution = $400.

ANALYSIS tdentily accounts

Maria Sanchez, Capita! are affected.
Equipment is an asset account. Maria Sanchez, Capital is an
s capital account.
Equipment is increased by $400. Maria Sanchez, Capital is
by $a00.

DEBIT-CREDIT RULE in asset accounts are recorded qs debits. Debit Office
in owner's capital accounts are Jecorded as credits. Credit

Office Equipment

Credit
+

400

138 6Chapter Recording Tran ions in a General Journal

JOURNAL ENTRY 7. GENERAL JOURNAL PAGE ]

$ N0.101
Dale
To 20
For
On October 4 Roadrunner issued 101 for $3,000 to buy a
computer system.

ANALYSIS tdentifY accounts Computer
uipment and Cash in Bank
affected. Balance czirried foruard 22,000

Equipment and
sh in Bank are asset

Equipment is
by $3,0o0. Cash in Bank is decreased by $3,ooo.

DEBIT-CREDIT in asset accounts are recorded debits. Debit Computer
ses in asset accounts are recorded as credits. Credit Cash in

Computer Equipment

JOURNAL BNTRY GENERAL JOURN4L

Cash in Bank

t _ cii* rot

Section 2 Recording Transactiohs in the General Journal 139

North Shore Auto l tNUorcE N0. 200

f1e,..,"*r::,,^, ] DATE: Oct.9,20-
ORDER NO.: 99674
On October 9 Roadrunner bought a truck T_Of IRoadrunner Delivery Service
I SHIPPED BY: n/a
155 Gateway Blvd.
TERMS: lnstallment
Sacramento, CA 94230
]

on account ftom North Shore Auto for $ 2,000, Dodge Truck Used
Invoice 200.

ANALYSIS tdentify accounts

Accounts

Shore Auto are affected.
ry Equipment is an asset account. Agcounts Payable-North
Auto is a liability account.

Equipment is increased by $12,0op. Accounts Payable-
Shore Auto is increased by $12,000.

DEBIT.CREDIT RULE in asset accounts are recorded as debits. Debit Oelivery

in liability accounts are recorded as credits. Credit Accounts
North Shore Auto for $l2,OOO.

Delivery Equipment Accounts Payable-
North Shore Auto

Credit
+

t2,ooo

JOURNAL ENTRY GENERAL J0URNAL pece _ l

DArE DEScHTPToN tSrT ?rr,-. cREDrr

Oct. gDeliveryEquipmenr- . I l- |I
| |121000100 _
11

ll Ll14: Invoice2oo I I I I IAccts. Pav.-.Notttt Snire ,qui ,,
f,..,^!-- aAn

To parate the amounts to be paid to individual creditors, Roadrunner

USES A ifferent account name for each creditor. The account name consists

of unts Payable followed by the name of the creditor. You may have
toa iate the name to fit it on one line of the journal. An acceptable

On Account ln Business a tion in the preceding journal entry is Accts. Pay.-North
Transaction 4,
Roadrunner "bought Shore uto.
a used truck on
account. .. ." what drunner uses the same nam-
does this mean?
mg for the amounts to be paid

by ind vidual customers. The account

name sts of Accounts Receivable

fol by the customer's name.

140 Chapter6 RecordingTr s in a General Journal

MEMOHANDUM 3

On October 11 Roadrunner sold telephone on
account to Green Company for $200, andum 3.

ANALYSIS ldentifY accounts

Company

Office Equip-

are affected. ,:.,.r.:,,:i:.,.i:rr.:.rr.rr.rri:,.:.,:.ir:i;rr:iriii.r.i,.r::r.:.r:.r:ir:i,:.ir,.i,i,il

accounts are asset accounts.
Receivable-Green Company is increased by $zoo. Office

is decreased by $200.

DEBIT-CREDIT RULE Accounts Receivable-Green Company for $200.
Office Equipment for $200.

Accounts Receivable- Office Equipment
Green Company Credit
200

JOURNAL ENTRY

Accts. Rec.-creert Company y'ooloo

On October 12 Roadrunner mai Check 102 for $350 as the first

installment on the truck purchased North Shore Auto on October 9.

ANALySIS tdentify accounts Accounts Payable-
Shore Auto and Cash ln

are affected.
Payable-North Shore

is a liability account. Cash in
is an asset account.
accounts are decreased by

Section 2 Recording Transactiohs in the General Journal l4L

DEBIT-CREDIT RULE Accounts Payable-North Shore Autq for $350.
Cash in Bank for $350.

Accounts Payable- Cash in Bank
North Shore Auto

JOURNAL ENTRY GENERAL J0URNAI- pAGE 1 _

'oT IDlsc.rPrloN_ POST. I , "1t''1.

4. IJ2 -'&; . +.!JLJI
"Ijo,'1

Bank4rr!' Pay.-Nor!! Shore Auto plsqo) 1 L t 1 _f,,
cash in I LI
t checklo2 , lqsp]oo re
I I I I I 1e

Boadtunnet Delivery Service 9a RECEIPT rlr

vo>#15b Carewav B 1No. llt

Sacramento. CA 94230

14 26 '-

RECETVED pg6y Green Corypany -Ocl'
_ $ 200.00 __
On October 74 Roadrunner recei and deposited

a check for $200 from Green Compan Receipt 1. The Two hundred and no/roo DOLLARS

check is full payment for the telephone on account ron leleplgle BECETVED gy Maria,Sarrchpz -

to Green on October 77.

ANALYSIS accounts Cash in Bank and Accounts Receivable-Green

in Bank is an asset account. Accounts Receivable-Green
pany is an asset account.
in Bank is increased by $200. Accounts Receivable-Green

is decreased by $200.

DEBIT-CREDIT RULE Cash in Bank for $200.
Accounts Receivable-Green Company for $200.

Cash in Bank Accounts Receivable-
Green Company

Credit

200

142 Chapter6 RecordingTransac in a General Iournal

JOURNAL ENTRY 7.

Roadrunner Deliverv Service ? RECEIPT
155 Garewav Blvd:-=# No. 2

sacramento. iA 94230

On October 15 Roadnmner Provi delivery Oct 15 29 -- '
$1,200 was
seruices for Sims Corporation. A check RECEIVED FROM Sims Corporation g, 1,200.00 -- .lr
received in full payment, Receipt 2. :li

One thousand two hundred and no/1oo DOLLARS :ll

FOR Delivery relylegs -_
-

BECETVED ay MA.ria, tan ckPz

ANALYSIS tdentifY e accounts -
in Bank

Delivery

are affected.
in Bank is an asset account. Delivery Revenue is a revenue

nt.

in Bank is increased by $'1,200. Delivery Revenue is increased

$1,200.

DERIT-CREDIT RULE ses in asset accounts are recorded as debits. Debit Cash in Bank

in revenue accounts are recorded as credits. Credit Delivery
e for $1,200.

Cash in Bank Deliverv Revenue

JOURNAL ENTRY

DEBITT CFEDIT

Section 2 Recording Transactiohs in the General Journal 143

On October 16 Roadrunner mailed heck 103 for $700 to pay the $
month's rent. Date
To
For

ANALYSIS accounts Rent Expense and
in Bank are affected.
Expense is an expense. Cash Iforward 700 00 rrl
_ .:r:
is an asset.
Expense is increased by 22,350 O0 ,ii
i:,
Cash in Bank is decreased

DEBIT-CREDIT RULE 4. in expense accounts are recorded !s debits. Debit Rent

for $700.

s in asset accounts are recorded as credits. Credit Cash in

Cash in Bank

JOURNAL ENTRY

tglt-% B' d(on qd\err,':nA
A\ t02nn trdrrie lark(a)
Advertising Sacramento, CA 9,1206

TO[Ho1a5d5rGuantnewearyDBellivvde.ry Seruice

On October 78 Beacon Advertising

adv erti s eme nt for Ro a drunne r.
Beacon's $75 fee later, Invoice 729.

ANALYSIS tdentifY l. accounts
and Accounts Payable-Beacon
are affected.

L44 6Chapter Recording Transactio s in a General Journal

DEBIT-CREDIT RULE in expense accounts are record as debits. Debit Advertising

for $75.
in liability accounts are recorded as credits. Credit Accounts

Advertising for $7s.

Advertising Expense Accounts Payable-
Beacon Advertising
Debit I Credit
t I Credit

JOURNAL ENTRY

tl4@A!9t!!r-Ptralyt.-l-rBp9qscl!n!,A-dv._I

lnvoice I 29

Roadrunnet Delivery Service sALEs rNVorcE No.1 ll

155 Gateway BIvd. DATE: Oct.20,20- ;ii
Sacramento, CA 94230 ORDER NO.: 300 lil
] SHIPPED BY: N/A
l= oty t te*s
On October 2O Roadrunner Pro delivery TO '10900 Main St. TEFIMS: Payable in 30 days
services for a customer, CitY News. r billed
City Ne,ws $ 1,450, Sales Invoice 7 . I Sacramento, CA 94230 l

ANALYSIS tdentify l. Del very Seruices

accounts

and Delivery Revenue are account. Delivery
Receivable-City News is an by$1,450. Delivery
is a revenue account.
Receivable-City News is i
is increased by $ 1,450.

DEBIT-CREDIT RULE in asset accounts are recorded debits. Debit Accounts
News for $.l,450. as credits. Credit Delivery

in revenue accounts are
for $1,450.

Accounts Receivable-CitY News Delivery Revenue

Debit I Credit lon I ctedit

Section2 RecordingTransact s in the General Journal L45

JOURNAL ENTRY I GENERAT JOURNAL

I ,l* oEScRrProN t33J DEBrr

il' tlq.

sz Qct. ZO Accts. R?c.-City Ncws I

33 Delivery Revetnte

II Sales Invoile 1

$ 125.00_ No.104 ,
20 --
October 28 '.:,

ro Pacific Bell Telephone

For telephone bill

Clossify accounts Utilities Expense Less this check
Cash in Bank are affected.
+/-
2. Utilities Expense is an expense

actount. Cash in Bank is an

account.

5. Utilities Expense is increased by

$105. Cash in Bank is decreased

$12s.

DEBIT-CREDIT RULE 4. I in expense accounts are recorded as debits. Debit Utilities

5. tor $125.
in asset accounts are recorded as credits. Credit Cash in

for $125.

T ACCOUNTS Utilities Expense Cash in Bank

JOURNAL ENTRY 11 2 5lOO se

t46 Chapter 6 Recording Transactlons in a General Journal

$ No. 105 ,i
Date
On October 29 Roadrunner wrote heck 105 for $600 to have the
office repainted. To Rainbow

For

ANALYSIS tdentifY accounts Maintenance
and Cash in Bank are

Expense is an Total 00 't
account. Cash in Bank
asset account. Less Zt .OZS I OO

IBalance :arried fomard

I

by $600. Cash in Bank rs by $600.

DEBIT-CREDIT as debits. Debit
in asset accounts are recorded credits. Credit Cash in

Maintenance Expense Cash in Bank

Debit I Credit *ltonnI Credit

JOURNAL ENTRY o=r,-",19= _L
":ro,r,
I

oii. m rrlanLenance Expense

Cas;h in Bsnk

On October 31 Maria Sanchez Check 106 to withdraw $500 For withdrawal N0.106
cash for personal use.
accounts Maria Sanchez, Add 20 -L
ANALYSIS tdentify t. Cents ,l:
awals and Cash in Bank
..u
Sanchez, Withdrawals is check
carried forward
owner's withdrawals account. Less atalii,ii'ir.t.:ir:i'!!!,''r.'irlliiit.',

in Bank is an asset account. sed by $500.

Sanchez, Withdrawals is
by $500. Cash in Bank is

Section 2 Recording Transacti in the General Journal 147

DEBIT-CREDIT RULE 4. in the owner's withdrawals account are recorded as debits.
it Maria Sanchez, Withdrawals for $500.

5. Defreases in asset accounts are recorded as credits. Credit Cash in
Bafk for $s00.

T ACCOT]NTS Maria Sanchez, Withdrawals Cash in Bank

JOURNAL ENTRY GENERAL JOURNAT PAGE I

lournal Errors What are I L_ _ TSc*,PIo*_ "3rT I :.?1 I j::lr,

the consequences of an [rIE
error in an amount? ln
an account name? How qt Oct. 3t Maria Satrchc,z,withdrawols lIsOOI lO, o IpOlIlog.,,
are the consequences +z\ t caslinian! I t ] I I i,a]
similar? How are they _r check1Q6 1 ri l-l 44
different? 4o, 4I + I
r-

Co rrecting the General lournal

How Qo You Correct Errors in the General faurnal?

Occlasionally, errors occur when journalizing transactions. When an
error is discovered, iL must be corrected.

In a] manual system, on error shoulcl neyer be erased. An erasure looks sus-
picious. It might be seen as an attempt to cover up a mistake or, worse, to
change the accounting records illegally. To correct errors, use a pen and a

ruler to draw a horizontal line through the entire incorrect item and write
the corfect information above the crossed-out error. A correction for an
erronefus amount is shown in the general journal as follows:

._t IDESc,::R1rpEroNN!j1Lt-J"=1T!BYDLE_Brr_
io?'=
I 04.
cREDrr
t 2o-t--rt t-2l-sIlttoolo-t,o1o Ii,l
.i ,
s l

a, lt MariaMSeollrtorcrqtttqetzllm,,Ct rapi.tut-s4Ilo-ai 41| e+11,rpll4rnrne,1lanen 2

4

To orrect for an erroneous account name, cross out the incorrect infor-
mati and write the correct account name above.

6144 Chapter Recording Transactlons in a General Journal

$tITlIlt 2

Do the Math unt from Tech Wor1d. The

Hania Dance Compan the price by 20 percent for a
entry for this transaction.
regular price for the sy

storewide sale. Answer t

1. Which account is de
2. Which account is

Problem 5-2 ctions

lnstructions The six in the general journal are
shown below, out of
k sheet of paper, indicate the
proper order of these
nsaction
A. Amount of the credi debit
B. Name of the accou account debited
C. Source document

Problem 6-5 Transactions

Glenda Hohn recently rted a day-care center. She uses the lowing accounts.

General Ledger bts Nursery Glenda Hohn, Capital
Cash in Bank Bus Service Glenda Hohn, Withdr wals
Accts. Rec.-Tiny
Day-Care Fees
Office Furniture Utilities Expense
Van Expense
Passenger Van

Accts. Pay.-

lnstructions ln vour ng pape$ or on a separate sheet paper, for each transaction;
Determine which
accounts are being i nts are affected. Classify each unt. Determine whether the

account is credited. or decreased. Indicate which nt is debited and which

Transactions: n for cash.
ll for the month.
1. Bought a passenger stomers for day-care services.
2. Paid the telephone
3. Received cash from

2Section Recording Transac in the General Journal 149

ItIAPTTI{ E

Key Concepts

1. The accounting cycle is pictu below. The first three steps are hig ighted:

Step 1: Collect and verify documents.

Step 2: Analyze each tra

Step 3: Journalize each t nsaction.

Collect and verify each Journalize
source documents each transaction
----T-:'r'r'ACCoUNr...l
:Wm}:fItJi.lrEoRrrnANLn-r-lI
2ltDEBIT ICREDIT

f PosrcL06rr'rG .4.iffii;. Prepare a
trial balance
[:TII rnrar arrrrucr I Prepare a
work sheet
L_lll Prepare financial
statements
Prepare a

post-closing
trial balance

Journalize post

closing entri

2. Source documents are evide of business transactions. Four exam es of source documents are
listed below. on account
escribes the buying or selling of an it

ribes cash received by a business

ribes a transaction that takes place thin a business

ribes a specific check and shows th checking account balance
records of transactions in the order
3. Businesses use journals to k o"r"--!9fl!9!L- t{o. 110 :i
they occur. The process of ing transactions in a journal is ro lnfo-Systems zo.--

called iournalizing. information needed for journalizing Ba ance brought foMard
wn to the right is a source
4. Source documents contain
ormation is used to make the
transactions. The check stub

document. The highlighted i
journal entry.

Less thrs check

00

150 Chapter 6 SummarY

IHAPTEtt E

5. Follow six steps to make a ral journal entry:

GENERAL JOURNAL PAGE-

I DESCRIPTION 3
4
DATE R!B!9!!!
k Stub 110) to the general
Date Q) Account to Debit

Tl (4) Accounl lo Credi
(6) Sourcc Doctrm

Notice how information is a lied from the source document (
journal.

GENERAL JOURNAL POST DEBIT

DESCRIPTION EEi to coffect an error is
plcE I
):o. frr,Ctaqshy!in,nB7arntk a general journal error. The proced
CREDIT
Check 110

,,1,.a,*-a,a:r*'rrrrr:...:rrs*i;rr.rir.l

7. ln a manual system, never

shown below.

GENERAL JOURNAL

DESCRIPTION

I Cash in Bank

-,1',.ttt#54,',*

Key TErms (p.732) iournal (p. 134)
(p. 134) journalizing (p. 134)
accounting cycle (p. 133) (p. 133)
calendar year (p. 13a) memorandum (p. 133)
check stub (p. 136) receipt (p. 133)
fiscal year (p. 133) source document
general iournal
invoice

Chapter 6 Summary 151

IHAPTIfl E

Check Your

l. Accounting Cycle

a. List the first three steps of
b. What would happen if you

2. Source Documents

a. List four source documents nd describe the contents of each.
b. Explain when each source cument is used.
3. lournalizing
a. Why is a journal
called the book of originol entry?

b. What is the purPose of ing transactions in a journal?

4. Applying lnformation

a. Where do you get the needed to make a journal

b. How do you determine the debit and credit parts of a journal

5. Steps to Make a General

a. What six types of informati n are included in each general journal
b. In what order do you

6. Making General lournal Entri dollar amounts?

a. How are the two amount mns of the general journal used to
b. Describe the spacing of information in the Description column.

Correcting General lournal E a general journal entry error in a manual system?

a. What procedure is used to
b. What are the possible
uences of erasing an error in the

Apply Key Terms

Assume you are an accountan who

keeps financial records for small ESSCS.

Write a one-page newsletter that might

send to potential clients describi the

importance of accounting rec Use each .,..ij{.1

of the terms below in Your ne tter. &t ' 1i:,.;,'; triii,:l'

journal &qH::"
journaliz
accounting cycle memoran
calendar year receipt
source
check stub
fiscal year
general journal
invoice

152 Chapter 6 Review and Acti

IrIArTtr{ [

eral Journal Entries

Making the Transition a Manual to a Com

uterized Methods

Recording Analyze source document to the source document to
general journal hich accounts are affected. which accounts are affected.
determine
entries journal form, enter the Enter t transaction details in the
Using a ge general rnal using the account
details of transaction. numbe for each ledger account.
Check for uality of debits and credits.
re will calculate the equality

and credits.

Peachtree Question the Tasks menu, select GeneralJournal
How do I enter general the date of the transaction.
the source document reference.
journal entries in the account number to be debited.
a brief description of the transaction.
Peachtree? the debit amount.
the account number to be credited.
EQui the credit amount.

QuickBooks Question Save.
How do I enter general
ks e&A
iournal entries in
the Company merrLt, select Make Genera Journal Entries.
QuickBooks?
the date of the transaction.

the account to be debited.

the debit amount, source document ce, and description.

the account to be credited.

the credit amount, source document refe nce, and description.

Save & Close.

Chapter 6 mputerizedAccounting 153

IrlAPTTII fi

6-4 Recording lournal

Transactions

j step-by-step Instructions: j Ronald H owns and operates Wilderness Ren als. The following
Problem 6-4 accounts re needed to journalize the month's t nsactions.

l. Select the problem set Genera Ledger

for Wilderness Rentals 101 Cash in Bank

(Prob.6-a). 301 ld Hicks, Capital
Accts. Rec.-Helen Katz 305 R ld Hicks, Withdrawals
2. Rename the company

and set the system date. Accts. Rec.-Polk and Co. 310 Inc Summary

5. Enter all of the general Office Equipment 401 Equ ment Rental Revenue

journal transactions Camping Equipment 501 Ad rtising Expense

using the General Accts. Pay.-Adventure 505 Mai tenance Expense

Journal Entry option in Equipment Inc.

the losks menu. 515 Ren Expense

4. Print a General Journal Accts. Pay.-Digital Tech 520 ies Expense

report. Computers 525 Util ties Expense

5. Proof your work and Accts. Pay.-Greg Mollaro

make any needed !
!. corrections.
5. 1 Record the following transactions page 1 ofthe general
Complete the Analyze
; journal in r working papers. For each transacti
I 7. aaivity. session.
End the 1. Ente the date. Use the current year.
2. Ente the name of the account debited.
t.,^--***.- ***. 3. Ente the amount of the debit.
4. Ente the name of the account credited.
l. Restore the Problem 5. Ente the amount of the credit.
6. Ente a source document reference.

5-4.QBB file.

2. Enter all of the general Jan. 1 Wrote Check 310 for the Part-time ary's salary, $270.

journal transactions 3

using the Make General 5 Bought $2,000 of camping equiP t on account from
7
Iournal Entries option 11 Adventure Equipment Inc., Invoice

in the Company menu. 12 Received $500 from a client for equi nt rental, Receipt 150.
74
5. Print a Journal report. Wrote Check 311 to pay the electrici bill of $110.
76
4. Proof your work and
25
make any needed Billed a client, Polk and Co., $1,700 rental equipment, Sales
30
corrections. Invoice 262.

5. Complete the AnalYze
activtty. Ronald Hicks withdrew $800 for Pet al use, Check 312.
5. Back up yourwork. i Bought a $300 scanner for the office mputer from Digital
j
TEch Computers, on account, Invoic 270.
--.-..--ii
Wrote Check 313 for $1,000 as an in allment payment toward

the amount owed to Adventure Equi
Received $1,700 from Polk and Co. i payment on their

account, Receipt 151.
Paid Digital Tech Computers $300 the amount owed,

Check 314.

154 Chapter 6 Problems

I}lAPTIt{ E

Problem 5-5 Record General Iournal

Regina Delgado owns a business cal Hot Suds Car Wash. She uses the Peaclrtree'
following chart of accounts.

General Ledger 401 Wash Revenue Step-by-Step lnstructions:
101 Cash in Bank 405 Wax Revenue Problem 6-5
105 Accts. Rec.-Linda Brow 410 Interior Detailing Revenue
110 Accts. Rec.-Valley Auto 501 Advertising Expense 1. Select the problem set
125 Office Equipment 505 Equipment Rental Expense for Hot Suds Car Wash
130 Office Furniture 510 Maintenance Expense (Prob.6-5).
135 Car Wash Equipment 520 Rent Expense
201 Accts. Pay.-Allen 525 Salaries Expense 2. Rename the company
530 Utilities Expense and set the system date.
Vacuum Systems
als 5. Enter all of the general
205 Accts. Pay.-O'Brian's journal transactions
using the General
Office Supply lournal Entry option in
301 Regina Delgado, Capital the Tosks menu.

305 Regina Delgado, Withdr 4. Print a General Journal
310 Income Summary report.

lnstructions: Record the followi transactions on page 1 of the general 5. Proof your work and
make any needed
journal in your working papers. corrections.

1 Regina Delgado inves $12,000 in the business, 6. Complete the Analyze
activity.
Memorandum 41.
7. End the session.
5 Purchased $5,000 in chairs, and cabinets from O'Brian's
TIP: You can use Ceneral
Ledger Navigation Aid
as an alternative way to
access the General Journal
Entry window.

Office Supply on accou Tnvoice 1632.

8 Deposited $1,600 for i me received from car washes for the @

week, Receipt 101.

10 Paid the Village Bulletin 7 5 for running an ad, Check 301. Step-by-Step lnstructions:

13 Regina Delgado withdr $900 for personal use, Check 302. Problem 5-5

l7 Billed Valley Auto $400 interior detailing, Sales Invoice 1 l. Restorethe Problem

18 Paid O'Brian's Office Su ly $2,500 as an installment payment 6-5.QBB file.

on account, Check 303. 2. Enter all of the general

20 Regina Delgado transfer to the business an electronic journal transactions

calculator valued at $ , Memorandum42. using the Make General

Wrote Check 304 for $ to Shadyside Realty for the office Journal Entries option
inthe Compony menu.
rent.
5. Print a Journal report.
Purchased $1,500 in car h equipment from Allen Vacuum 4. Proof your work and

Systems on account, I Valley Auto in full payment of its make any needed j
Received a $400 check
corrections. I
account, Receipt 102. \
5. Complete the Analyze
to O'Brian's Office Supply for the
activity.

6. Backupyourwork.

Issued Check 305 for $

balance due on account

Chapter 6 Problems 155

IHAPTEt{ E 6-6 Recording lournal

Step-by-Step lnstructions: Transactions
Problem 6-6
Abe Shu owns and operates a pet grooming siness called Kits & Pups
I. Select the problem Groomi
. The following accounts are used to I rnalize transactions.
set {or Kits & Pups
Grooming (Prob.6-6). Genera Ledger s. Pay.-Pet Gourmet
2. Rename the company 101 Cash in Bank Shultz, Capital
and set the system date. Shultz, Withdrawals
5. Enter all of the general Accts. Rec.--Juan Alvarez
journal transactions. Accts. Rec.-N. Carlsbad e Summarv
4. Print a Ceneral Journal Accts. Rec.-Martha Giles rding Revenue
report. Office Equipment
5. Proof your work and Office Furniture Revenue
make any needed Computer Equipment ising Expense
corrections. Grooming Equipment Eq ipment Repair Expense
6. Complete the AnalYze Kennel Equipment Mr ntenance Expense
activity. Accts. Pay.-Able Store
7. End the session. Re t Expense
Equipment Sal ries Expense
TIP: As a shortcut, You can Accts. Pay.-Dogs &
enter just the day of the Ut ities Expense
month for a transaction Cats Inc.
date.
Record the following transaction on page 7 of the general
journal i your working pape$.

Jan. 1 Received $125 for boarding a client dog for one week,

Receipt 300.
Abe Shultz contributed to the busin a computer valued at

$2,500, Memorandum 33. g his pets, Sales
Billed a client, Juan Alvarez, $80 for

Invoice 21.2. r Co. for $ 150 in payment

Wrote Check 4I1. to AlleghenY
for the month's electricity bill.

Abe Shultz withdrew $700 for perso I use, Check 412.
Purchased kennel equipment for $2 from Dogs & Cats Inc.,

on account, Invoice DC92.
Paid the part-time receptionist's sal of $400 by issuing

Check 413.

Abe Shultz took from the business f his personal use a ten-keY

adding machine valued at $65, M orandum 34.
Juan Alvarez sent a check for $80 in Il payment of his

account, Receipt 30L.
Purchased on credit $250 in groomi g equipment from the Pet

Gourmet, Invoice PG333. llment payment for the
Issued Check 4L4for $1,300 as an i

amount owed to Dogs & Cats Inc.

156 Chapter 6 Problems

IHAPTEI{ E

Problem 6-7 R General lournal

Juanita Ortega is the owner of Ou k Guide Service. The following Peaclrtree'
accounts are used to record the tran tions of her business.

General Ledger 205 Accts. Pay.-Peak Equipment Inc I Step-by-Step lnstructions: i
101 Cash in Bank Problem 6-7
105 Accts. Rec.-M. Johnson 207 Accts. Pay.-Premier Processors
110 Accts. Rec.-Feldman, I. Select the problem
301 Juanita Ortega, Capital
Jones & Ritter 302 Juanita Ortega, Withdrawals set for Outback Cuide
1 15 Accts. Rec.-Podaski 310 Income Summary
401 Guide Service Revenue Service (Prob. 6-7).
Systems Inc. 501 Advertising Expense
2. Rename the company
130 Office Equipment 505 Maintenance Expense
135 Office Furniture and set the system date.
515 Rent Expense
140 Computer Equipment 3. Enter all of the general
520 Salaries Expense journal transactions.
145 Hiking Equipment 525 Utilities Expense
150 Rafting Equipment 4. Print a General Journal
201 Accts. Pay.-A-1
report.
Adventure Warehouse
5. Proof yourworkand

make any needed

corrections.

6. Complete the Analyze

activity.

Instructions: Record the following transactions on page 1 of the general z- End the session. ]
iournal in your working papers.
!l anI flP: Press SHIFT+? in
list.i Account No. field to display ]
i an account i

i "- - . .",,,*.^-,.,- -"-**- --,*.-..-.-,,-. -"*,,.,. "-,.,^",,- "r

Juanita Ortega contribu the following assets to her business:
cash, $1,500; hiking eq ment, $2,000; rafting equipment,

$2,500; and office furni re, $500; Memorandum 2L.

2 Issued Check 515 to 7l News for a $75 ad.

4 Purchased $3,000 in ra ng equipment on account from A-1

Adventure Warehouse, I

6 A group from Feldman, & Ritter went on a hiking trip.

group was billed $4,800 guide services, Sales Invoice 300.

10 Paid $300 to Dunn's Pai ting and Interior Co. for painting the

office, Check 516.

13 Made a $1,000 payment A-1 Adventure Warehouse toward

the amount owed,

15 Received a check for $4, from Feldman, Jones & Ritter in

payment of their accou :, Receipt 252.

18 Juanita Ortega paid lf $600 by issuing Check 518.

22 Billed a client, MaryJoh n, $1,200 for completing guide

services on a hiking ex tion, Sales Invoice 301.

25 Paid the monthlv te bill for $175 by issuing Check 519

30 Purchased a $3,600 com uter system from Premier Processors.

Made a down payment r $1,800 and agreed to pay the

balance within 30 days, heck 520 and Invoice 749.

Analyze

Chapter 6 Problems 157

[ ]tApTE tt I

Problem 6-8 Record General

Transactions

operates Showbiz Video. The foll accounts are used to record

business

Genera Ledger
101 Cash in Bank
Problem 6-8 2O7 Accts. Pay.-New Media Suppliers
105 Accts. Rec.*G. Cohen 209 Accts Pav.-Palace Films
Use the source documents 110 Accts. Rec.-J. Coletti 301 Greg ailla, Capital
in your working papers to 113 Accts. Rec.-S. Flannery 305 Greg illa, Withdrawals
complete this problem.
115 Accts. Rec.-Spring 310 Inco Summary
Peaclrtree'
Branch School District 401 Vide Rental Revenue
@ 130 Office Equipment
135 Office Furniture 405 VCR ental Revenue
I step-by-step lnstructions: i
Problem 5-8 501 Advt sing Expense
1,40 Computer Equipment 505 Equi
l. Select the problem set 145 Video Tapes t Repair Expense

for Showbiz Video 510 Main ance Expense
(Prob.6-8). 150 Video Equipment 520 Rent pense
2. Rename the company
and set the system date. 201, Accts. Pay.-Broad Street 525 Salari Expense
5. Enter all of the general Office Supply
journal transactions. 530 Utili Expense
4. Print a General Journal
report. 205 Accts. Pay.-Computer
5. Proof yourworkand
make any needed Record the following transaction on page 5 of the general
corrections. journal your working pape$.
6. Complete the Analyze
activity. Jan. 1 Deposited $3,400 in receipts. Of that amount, $1,900 was VCR
z. End the session.
.') rentals and $1,500 was video tape tals, Receipt 435.

5 Wrote Check 1250 for $325 of equi
7
Purchased $400 in video tapes from alace Films on account,
10
Invoice PF32.
1.2
Bought from New Media Suppliers 600 in video equipment.
15
18 Made a down payment of $600 and to pay the balance
25
in two installments, Check 7251, a Invoice NM1O1.

Rented videos to Spring Branch Sc District. The school

district agreed to pay $1,800 at a late date, Sales Invoice 1650.

Issued Check 1252for $750 to Com uter Horizons for the

amount owed to them.

Deposited $5,600 in receipts. VCR re tals amounted to $4,400

and video tape rentals were $1,200,

Paid Clear Vue Window Cleaners $1 for monthlywindow

cleaning, Check 1253.

Made a $1,000 installment payment oward the amount owed

to New Media Suppliers by issuing eck 1254.

158 Chapter 6 Problems

IHAPTEt{ E

Practice your test-t ing skillsl The questions on this page re reprinted with permission
from national orga
4 Leaders of America
o Future Busin ionals of America
of paper to record your answers.
. Business

Use a separate sh

Future Business of America

Murrrprn Cnorcn

1. Recording a t information in chronological orde is called

a. posting.
b. journalizi

c. analyzing.

d. processing.

2.Every journal ists of four parts:

a. account tit , date, post reference, amount.

b. date, debit, it, source document.

c. date, page mber, debit, credit.

d. date, post rence, debit, credit. in a iournal in the
3. The amount of ch asset in an opening entry is

a. General it column.

b. General C t column.

c. both a and

d. neither a

4. An example of a business document that indicates a t nsaction has occurred is

a. a journal.

b. a ledger.

c. a memo.

d. a balance

Business of America ment on his/her account
t used when a customer makes a
Murrrprn Cnorcn

5. The source docu
owed would be
a. sales invo
b. check.
c. receipt.
d. memoran

Competitive Center. Click on Winning
. Practice and select Chapter 6,
. Concept and Test-Taking Tips
and Terminology

\-,->/oa - Chapter 6 Win ing Competitive Events 159

II.lAPTII.{ E

CFiMt General lournal Entries

1. What term pescribes any accounting period of 12 months?

2. How is the Seneral journal entry for a cash purch4se different from the entry
for a purch{se on account?

3. It is your fi{st day on a new job. Your task is to jolrrnalize transactions. You

just sat at ypur desk, which is covered with paper$. What do you do next?

4. Compare a fieneral journal entry to a transaction [ecorded in T accounts.
How is it si{nilar? How is it different?

5. What I you need to complete each of the [irst three steps of

itemsldo

the accounling cycle? Include office supplies and forms as well as any

informatiod that will be needed,

6. What is thelvalue of keeping the record of business transactions in

chronologi(al order?

cotusItlDY Service Busine*: Exercise and Fitness

;Eille;n=afRfio*dJri'g*le'rzrrstra,r.tedd a business offeriinngg aann e4ercijse facilirty and personal

physical traihnii[[rrSg. Elena has hired you as a financial 0toonnssuullttaannt to help her set up
her accountinl system. She has rented a space for he1 business, purchased several
exercise machitnes, and hired a part-time exercise iTstructor. Flena's clients can

either pay a fe{ for each visit or purchase a memberstiip.

hvsrnucttoNs I

important fpr Elena to record both the cost of doing business and the income
from the
2. Suggest a c

Gossip in the

Assume that
Farmers Insu
recognize her
that Sally h
lunch you co
if your boss

Errrrc.q.r

1. What are t
2. What are t
3. Who are t

160 Chapter 6 Real-World Applica ns and Connections

IHAPTEl,{ E

Describing Documents
Write a par
and receipts. ph describing the content of invoices| check stubs, memorandums,
plain how to verify and analyze thesE source documents before an
entry is in the journal.

3r6rctt-s Brvouo Creative t'h"do
II'N|Jt'lBIIiS
Congratulat nsl You have been chosen as the lbca1 Business Owner of the

Year! Write a ne-page press release describing you{ business and why you have

been suc rl. Be sure to include a brief descripticin of your business, the skills

vou use ln nning a successful business, and ho# you plan to continue being

successful in he future.

lumu Dating

Source docu ents from different countries can hav0 different date formats:

United States Austialia

Date wri rn out luLy 6,2O1,O 6 Tuli*z 2010
Abbreviat on 617l+o
716110

Format MM/DD/YY DD/MMIYY

As you .ur, ,{" in this example, writing out the mdnth prevents confusion. The

InternationallOrganization for Standardjzation (lSOi promotes the worldwide use

of a single at: YYYY-MM-DD.

Write the date February 17, 2010, .$sing the ISO recommended

format.

Your Personal

Your dav-to

financial

transactions.

financial

home safe,

home compu

PrnsoNar Ac:rrvrrv Imagine a person

your age wh drives to a part-time job and has

a credit card. Make a list of the types of records Transactions in Sports

and docume ts such a person would probably The general iournal can be used
to record all types of transactions.
have. Create plan that describes which records
Visit glencoeaccounting
and ts to store and where to store .glencoe.com and click

them. on Student Center. Click on
WebQuest and select Unit 2 to
PsRsoNA.r ONrrrr Log on to continue your lnternet projecl

g.glencoe.com and click

on Student nter. Click on Making It

Personal an select Chapter 6.

., Chapter 6 Real-World Applidations and Connections \61

.---ra!;.-

"fl,Hfi iTffi @--

Po ting lourna Entries to
Ge eral ledge Accounts

What You'll Learn Predict from personal experience?
earlier chapters?
Describe the steps in the l. What does the chppter title tellyou?
posting process. subject?
2. What do you already know about this
Post general journal entries.
5. What have you legrned about this in
Prepare a trial balance. 4. What gaps exist i4 your knowledge of

Locate and correct trial Los Angeles Angels of
balance errors.
In the big-monpy world of pr ional sports, it is hard
Record correcting entries in
the generaljournal. to imagine the new owner of a maj team actually lowering

Define the accounting terms the prices of tickeis, food, and souv nirs. That is exactly what
introduced in this chapter.
Arturo "Arte" Moieno did when he t baseball's Los
Why lfs lmportant Angeles Angels of Anaheim in
his lower-price strategy.
Upto-date account balances Moreno was a $ig hit with fans 750,000 more paying
provide information for In his first year, the Angels a
reports used by people
both inside and outside the customers than in the previous , when they won the
World Series.
business.
Moreno has been called "the e's owner" because he
t-{rr-rh**s.[h. i*wfu##
likes to meet fans and enjoys seei families having a good
ln.;i'

.t:

time. "For basebal]l to exist as I've it, the kids have to
come to the park,i'he told USA

What Do You fhink? unts that might be used

What are some general ledger
by the Angels?

Chapter 7 PostingJournal En to General Ledger Accounts