LESSON 4-1

LESSON 4-1Preparing a Chart of Accounts

ACCOUNTING IN THE REAL WORLD & INTERNET ACTIVITYWhat’s My Balance?Record Sales Volume at Amazon.comAnswer the two critical thinking questions.

Internet Activitywww.sec.gov

AMAZON.COM Might have thought that customers would

appreciate these two features and that the benefits of these might outweigh the “slightly reduced sales”

Amazon might not be able to process all the orders in a timely manner. The suppliers could run out of some of the products, increasing the number of late shipments. In extreme situations, the web site might not be able to handle the high volume of sales, and some customers might not come back to try again.

SEC Securities Act of 1933 Securities Exchange Act of 1934

Two acts that created the SEC

What are the purposes of these two acts????

PREVIOUSLY…. Define Accounting terms related to posting

from a journal to a general ledger. Identify accounting concepts and practices

related to posting from a journal to a general ledger

Prepare a chart of accounts for a service business organized as a proprietorship

REMEMBER! Each account title used for recording entries

in a journal also represents an account in a group of accounts.

The group of accounts is not in random order. There is a standard way of organizing this group of accounts.

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RELATIONSHIP OF A T ACCOUNT TO AN ACCOUNT FORM page 91

Balance columns•The general ledger account form also contains the T previously shown in the accounting equation, balance sheet, and T account.•The benefit of using the balance-ruled account form is that an up to date account balance is always available.

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CHART OF ACCOUNTS

•A group of accounts is called a ledger. •A ledger that contains all accounts needed to prepare financial statements is called a general ledger.•The number assigned to an account is called an account number

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ACCOUNT NUMBERSThe first digit of each account number shows the general ledger division in which the account is located.

Example-the asset division accounts are numbered in the100s.Therefore, the number for the asset account, Supplies begins with a 1.

The second two digits indicate the location of each account within a general ledger division. The 50 in the account number for Supplies indicates that the account is located between account number 140 and 160. (Sequence of 10s)

REMEMBER….

Expenses are listed in Alphabetical OrderAssets are listed by the order of their liquidity.

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1. Write the account title.2. Write the account number.REMEMBER: The general ledger accounts must be opened before they

can be used.

OPENING AN ACCOUNT IN A GENERAL LEDGER page 94

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ALSO…

•Each account is kept on a separate card•Ledger cards are kept in chart of accounts number order.•A new card can be inserted for a new account

LESSON 4-2Posting Separate Amountsfrom a Journal to aGeneral Ledger

ACCOUNTING IN THE REAL WORLD & INTERNET ACTIVITYWhat’s My Balance?Record Sales Volume at Amazon.comAnswer the two critical thinking questions.

Internet Activitywww.sec.gov

LESSON 4-1

TERMS REVIEW Ledger-A group of accounts general ledger-an ledger that contains all

accounts needed to prepare financial statements

account number-The number assigned to an account

file maintenance-the procedure for arranging accounts in a general ledger, assigning account numbers, and keeping records current

opening an account-Writing an account title and number on the heading of an account

TODAY… Post separate amounts from a journal to a

general ledger.

Posting-transferring information from a journal entry to a ledger

In this lesson, we will now transfer the information from the journal entries, recorded in Chapter 3, to the general ledger accounts we just opened. This process is called Posting.

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1. Write the date. 4. Write the new account balance.2. Write the journal page number.3. Write the debit amount.

5. Return to the journal and write the account number.

POSTING AN AMOUNT FROM A GENERAL DEBIT COLUMN page 96

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POSTING A SECOND AMOUNT TO AN ACCOUNT page 97

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1. Write the date. 4. Write the new account balance.2. Write the journal page number.3. Write the debit amount.


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POSTING AN AMOUNT FROM A GENERAL CREDIT COLUMN page 98

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1. Write the date. 4. Write the new account balance.2. Write the journal page number.3. Write the credit amount.


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LESSON 4-2

TERM REVIEW Posting-transferring information from a

journal entry to a ledger account. (p. 96)

page 99

APLIA Work Together 4-2 Own your Own 4-2 Application Problem 4-2

EXIT TICKET List the five steps of posting from the general

columns of a journal to the general ledger? Are the totals of the General Debit and

General Credit columns posted? Why or why not?

Answers: 1. Write the date2.Write the journal page number.3.Write the debit amount.4.Write the new account balance5.Return to the journal and write the account number

No. Each separate amount in the General Debit and General Credit columns of a journal is posted to the account written in the Account Title column.

BELL RINGER Take this time to finish up the “What’s My

Balance Scenario” Work on Drill #4 Handout. This should be a

review of the pervious two classes Turn in to Mr. K when done.

LESSON 4-3Posting Column Totalsfrom a Journal to aGeneral Ledger

OBJECTIVES FOR TODAY…. This lesson is about posting journal column

totals. Why are journal columns totaled?

To prove equality of debits and credits.

In this lesson, we will post the totals of the special amount columns.

LET ME EXPLAIN… The totals brought forward from the pervious

page of a journal are not posted individually. Remember that separate amounts in the special

amount columns are not posted individually. Post Reference Columns-

An entry in the account can be traced to: Its source in the journal Where it was posted into the account OR if posting was interrupted, the accounting personnel

can easily see which entries in the journal still need to be posted.

A check mark in the Post Ref column means that nothing on that line is posted individually.

LESSON

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CHECK MARKS SHOW THAT AMOUNTS ARE NOT POSTED page 100

Check mark indicates that amounts ARE NOT posted individually.

Check mark indicates that general amount column totals ARE NOT posted.

POSTING THE TOTAL OF THE SALES CREDIT COLUMN

The type of journal amount column an amount is recorded in determines how that amount is posted to the general ledger.

The amounts in the special amount columns are posted as part of the total of the amount column

Posting totals saves time and reduces errors because only the total of many of the same kinds of transactions must be posted, as opposed to posting each amount each time a frequently occurring transaction is journalized.

Here are the five steps for posting the total of the sales credit column.

LESSON

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POSTING THE TOTAL OF THE SALES CREDIT COLUMN page 101

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1. Write the date. 4. Write the new account balance.2. Write the journal page number.3. Write the column total.


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LESSON

4-3

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POSTING THE TOTAL OF THE CASH DEBIT COLUMN page 102

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LESSON

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POSTING THE TOTAL OF THE CASH CREDIT COLUMN page 103

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REMEMBER

Whenever the debits in an account exceed the credits, the account balance is a debit.

Whenever the credits in an account exceed the debits, the account balance is a credit.

APLIA-4-3

4-3 WORK TOGETHER AND ON YOUR OWN4-3 APPLICATION PROBLEM

LESSON 4-4Completed Accounting Forms and Making Correcting Entries

REMINDER!!!! WHEN MANUAL JOURNAL ENTRIES ARE

MADE, THEY ARE USUALLY ENTERED IN INK SO THAT THE RECORDS ARE MORE PERMANENT.

THE FOUR STEP PROCESS WILL AGAIN BE FOLLOWED TO RECORD TRANSACTIONS IN THE JOURNAL.

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JOURNAL PAGE WITH POSTING COMPLETED page 105

With the exception of the Totals line, notice that the Post Ref. Column is completely filled in with either an account number or a check mark.

EXPLANATION Examine the ledger accounts illustrated on

this page (106-107) Notice that in the Supplies account, three entries

are from the first page of the journal and one is from the second page.

Notice that in the Accounts Payable-Supply Depot, the debit entry on August 11 reduced the credit balance of the account.

QUESTION… Does the one entry in the Sales account

mean that only one sale was made all month?

Answer: No, it is the posting of the Sales Credit Column total, which includes may sales during the month.

QUESTION #2… How can you tell whether this is a new

company or not?

Answer: There was no previous balance in the owner’s capital account, so it is a new company.

QUESTION #3 & # 4… How can you tell whether any of the entries

on this page are the posting of column totals?

Answer: You cannot tell just from the posting entries but the credit to sales in a column total.

Why are there no special amount columns in the journal for any of the expense accounts?

Answer: Because the accounts do not have frequent entries during the month.

LESSON

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MEMORANDUM FOR A CORRECTING ENTRY page 108

A correcting entry is made to correct an error in the ledger. The error is not merely crossed out.

A Memorandum is used as the source document for a correcting entry.

A correcting entry requires that the error first be analyzed to determine what accounts need to be debited and credited to correct the error. Once this analysis is done, an entry can be recorded in a journal.

LESSON

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JOURNAL ENTRY TO RECORD A CORRECTING ENTRY page 108

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Source Document3Credit

1 Date 2 Debit

November 13. Discovered that a payment of cash for advertising in October was journalized and posted in error as a debit to Miscellaneous Expense instead of Advertising Expense, $140.00. Memorandum No. 15.

APLIA

•WORK TOGETHER 4-4•OWN YOUR OWN 4-4•WA NT A CHALLENGE? *Try the mastery problem

EXPLORE ACCOUNTING

DEVELOP A CHART OF ACCOUNTS FOR AN IMAGINARY BUSINESS. WRITE A DETAILED DESCRIPTION OF THE COMPANY AND A RATIONAL FOR THE ACCOUNT NUMBERING SYSTEM YOU HAVE DEVELOPED.

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LESSON 4-1