THE

CHAPTER 3
RECORDING
PROCESS

THE RECORDING
PROCESS
Characteristic of an account
The rules of debit and credit
The steps in recording process
Preparing of trial balance

DEFINITIONS
Book of first entry

Account

Separate record showing

increases and decreases for
each Fin Stmnt item

Chart of
accounts

A list of the accounts in a

ledger

Ledger

A group of accounts for a

business entity
3

Journal

DOUBLE ENTRY CONCEPT OF

ACCOUNTING
Based

on a simple concept: each party in

a business transaction will receive
something and give something in return.
* The two sides of a coin
*

Receive & Give

* Left versus Right

DEBITS AND CREDITS

A T-account represents a ledger account and is a tool used
to understand the effects of one or more transactions.

TRANSACTION ANALYSIS
Determine which account is affected by the transaction.
Determine whether the account increases or decreases.

Determine whether the account should be debited or credited.

Record the transaction using journal entry.
Post the journal entries to the accounts in the ledger.

Prepare an unadjusted trial balance at the end of the period.

JOURNAL ENTRIES
Every transaction would first be recorded in a journal
The process of recording a transaction in the journal is called
journalizing
Journal

Date

Description

Pg

PR

Debit

Credit

JOURNALIZING
STEPS
1. Record the date.
2. Record the title of the account debited in
the Description column.
3. Enter the amount in the Debit column.
4. Record the title of the account credited in
the Description column.

5. Enter the amount in the Credit column.

ASSETS = LIABILITIES + OWNERS EQUITY

Assets

Debit

INCRE
ASE

Credit

DECRE
ASE

Debit

LIABILITY

DECRE
ASE

Credit

INCRE
ASE

Debit

Sales

Credit

Owners Capital
INCREASE

Additional
Capital
Revenues/Sales

DE
C
RE
AS
E

IN
C
RE
AS
E

Equity
Wage Exp

Debit

Withdrawal
DECREASE

Expenses

IN
C
RE
AS
E

Credit

DE
C
RE
AS
E

OE {Cap, Add, Rev}

Debit

Credit

DECRE
ASE

INCRE
ASE

OE {Expenses & Withdrawal}

Debit

INCRE
ASE

Credit

DECRE
ASE

Journal, Ledger, Trial Balance

1. Transactions are analyzed

and recorded in journal.
Documents

Journal

2. Transactions are posted

from journal to ledger.
Journal

3. Trial balance is prepared.

Trial Balance

Ledger

JOURNAL ENTRIES
(a) On July 1, Luna Mayor opens a new
business and deposits RM500,000 in a bank
account in the name of Sea-Link.

Journal
Pg
Date

Description

Jul 1 Cash
Luna Mayor, Capital
Invested cash in Sea-Link.

PR

Debit

Credit

500,000
500,000

On July 5, Sea-Link bought a piece of land

for RM200,000 by paying cash.
Date

Description

PR

Nov 5 Land

Debit

Credit

200,000

Cash

200,000

Purchased land for cash.

Dt
Jul 5 Land

Land
200,000

Ct

Dt

Cash

Ct

Jul 5 Cash 200,000

July10, Sea-Link purchased supplies on

account for RM13,500.
Date

Description

PR

Jul10 Supplies

Debit

Credit

13,500

Accounts Payable

13,500

Purchased supplies on
account.

Dt
Jul 10 A/C Pay

Supplies
13,500

Ct

Dt

A/C Payable

Ct

Jul 10 Supplies 13,500

July 30, Sea-Link paid creditors RM9,500.

Date

PR

Description

Jul 30 Accounts Payable

Debit

Credit

9,500
9,500

Cash
Paid creditors.

Dt
Jul 30

Cash

A/C Payable
9,500

Ct

Dt

Cash

Ct

Jul 30 A/C Pay

9,500

July 30 Sea-Link purchased a truck for

RM64,500 paying RM18,000 cash and the
remainder on account.
Date

Description

Jul
30

Truck

Cash
A/C Pay

Credit

64,500

Cash

18,000

Accounts Payable

46,500

Dt
Jul 30

Debit

Truck

Ct

Dt

18,000
46,500

Cash

Ct

Jul 30 Truck
18,000
Dt

A/C Payable

Ct

Jul 30 Truck
46,500

Aug 18, Sea-Link received fees of RM27,500

from customers for services provided for the
month of July 2011
Date

Description

PR

Aug 18 Cash

Debit

Credit

27,500

Fees Earned

27,500

Received fees from

customers.
Dt
Aug 18 Fees Earned

Cash
27,500

Ct

Dt

Fees Earned
Aug 18

Ct
Cash

27,500

Aug 30 incurred the following expenses:

wages RM20,500 to be paid on Sept 5; and
rent RM3,000 paid by cash.
Date

Description

PR

Aug 30 Wages expense

Debit

Credit

20,500

Wages Payable

20,500

Aug 30 Rent expense

Dt
Aug 30 Wages Pay

Dt
Aug 30

Cash

Cash

Wages Exp

3,000
Ct

Dt

20,500

Rent Exp
3,000

Wages Payable

3,000
Ct

Aug 30 Wages Exp

20,500
Ct

Dt

Cash

Ct

Aug 30 Rent Exp

3,000

A count revealed that RM8,000 of the

supplies inventory had been used during
August.
Date

Description

PR Debit

Aug Supplies expense

30

Credit

8,000

Supplies

8,000

Supplies used during

the month of August.
Dt
Aug 30 Supplies

Supp. Exp
8,000

Ct Dt

Supplies

Ct

Aug 30 Supp. Exp

8,000

August 27 issued an invoice for the sum of

RM45,000 to Abd Halim for a completed
consultation work. He has promised to settle the
amount before the year ends.
Aug Accounts Receivable
27

45,000

Fees earned
Dt
Aug 27 Fees Earned
45,000

A/C Rec

45,000
Ct Dt

Fees Earned

Ct

Aug 27 A/C Rec

45,000

Aug 30, Luna Mayor withdrew RM2,000 in

cash from Sea-Link for personal use.

Aug 30 Luna Mayor, Withdrawal

2,000

Cash

2,000

Owner withdrew cash for

personal use.
Dt
Aug 30 Cash

Wthdrwl
2,000

Ct Dt

Cash

Ct

Aug 30 Wthdrwl

2,000

DEBIT & CREDIT RULE AND

ACCOUNTS NORMAL BALANCES
Increase

Decrease

Normal
balance

FP accounts:
Asset

Debit

Credit

Debit

Liability

Credit

Debit

Credit

Capital

Credit

Debit

Credit

Drawing

Debit

Credit

Debit

Revenue

Credit

Debit

Credit

Expense

Debit

Credit

Debit

Owners equity

25

CI accounts:

TRIAL BALANCE

A list of all the accounts maintained

A
list
of
all
the
accounts
maintained
by the business entity, along with
by
therespective
business balances
entity, along with
their
their respective balances

TYPES OF ERRORS
Transposition - occurs when the order of the digits is
changed mistakenly, such as writing RM542 as RM452 or
RM524.
Slide - the entire number is mistakenly moved one or more
spaces to the right or the left, such as writing RM542.00 as
RM54.20.