2 Recording Transactions.ppt

2 Recording Transactions Learning objectives 1.Understand economic events and business documents 2.Understand T-account and debit credit 3.Journalize and post transactions 4.Prepare a trial balance 5.Understand practices in China 6.Use the information-the debt ratio 2.1 Economic Events and Business Documents 1.Economic events External transactions Internal transactions 2.Source documents Also called business papers, provide evidence of transactions and are the basis for recording the transactions. Checks, sales invoices, bank statements, purchase orders, customer bills, employee earnings records and cash register tapes. 2.2 T-accounts and Debit Credit 1.Account(账户，会计科目) an accounting record in which the results of transactions are accumulated; shows increases, decreases and a balance. T-account: a simplified depiction of an account in the form of a letter T. An account has three parts. First, each account has a title, which is the name of the item recorded in the account. Second, each account has a space for recording increases in the amount of the item. Third, each account has a space for recording decreases in the amount of the item. The simplest form of the account is known as the T account, because it resembles the letter T. the left side of the account is called the debit side, and the right side of the account is called the credit side. 2.Types of accounts Six categories Assets, liabilities, owner’s equity, revenues and expense account Asset account Examples: cash, receivables, prepaid expense, equipment, buildings and so on. Liability accounts Such as payables, unearned revenues, and other liabilities. Equity Accounts Equity Accounts Owner’s equity account Separate accounts affecting owner’s equity: investments, withdrawals, revenues, and expenses. Capital account Used to record the original and additional investment. Owner investments: the amounts an owner puts into the company Right for increases and left for decreases Owner withdra