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Lecture 3

ADM1340 Lecture 3: Chapter 3 note

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University of Ottawa
Lamia Chourou

Chapter 3 The Recording Process ╭① analyze business transactions ╮ 分析业务事务 The recording process │② journalize the transactions │ 写入日记的事务 ╰③ post to general ledger accounts ╯总分类账账户 ④ prepare a trial balance 准备试算表 ① Transaction Analysis (first step) Accounting transactions occur when assets, liabilities, or shareholders’ equity items change as a result of some economic event Each transaction has a dual eff双重效应 on the accounting equation Assets= Liabilities + Shareholders’ Equity Transaction Assets = Liabilities + Shareholders’ Equity 1. Issue of common shares cash Common share for cash 2. Issue of note payable cash Notes payable 3. Purchase of equipment in Equipment cash cash 4. Receipt of cash in cash Unearned advance from customers revenue 5. Payment of rent in cash cash RE (expenses) 6.Prepaid insurance in cashCash prepaid insurance 7. Purchase of supplies on Supplies Accounts account payable 8.Service performed on A/R RE (revenues) account 9. Payment of salaries Cash RE (expenses) 10. Payment of dividends Cash RE (dividends) 11. Collection of account Cash A/R RE: retained earnings A/R: account receivable Debits and Credits An account is an individual accounting record of increases and decreases in a specific asset, liability, or shareholders’ equity item. The normal balance of an account id always on its increase side Debit = Credit Liabilities Equity Assets • common share • retained earnings Expense Dividend Revenue AD (average depreciation) ② The Journal Second step in the recording process The journal has a place to record the debit and credit effects on specific accounts for each transaction Transactions are entered in the journal in chronological order GENERAL JOURNAL Date Account titles and explanation Debit Credit Oct 1 Cash 100,000 Common shares 100,000 (issue common shares) ③ The Ledger Contains all of the asset, liability and shareholders’ equity accounts, as well as revenue and e
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