ISH3F3 Accounting System and Finance Management
Recording
Process:
Account, Debit, Credit
Muhardi Saputra.
Information System Department
2019
Learning Objective
Describe how accounts, debits, and credits are used to record
1 business transactions..
Steps in the Recording Process
Analyze each transaction Enter transaction in a journal Transfer journal information to
ledger accounts
Business documents, such as a sales slip, a check, or a bill,
provide evidence of the transaction.
Account
⚫ An account is an individual accounting record of increases
and decreases in a specific asset, liability, or owner’s equity
item.
⚫ A company will have separate accounts for such items as
cash, salaries expense, accounts payable, and so on.
Account
◆ Record of increases and decreases in a
The specific asset, liability, owners’ equity,
Account revenue, or expense item.
◆ Debit = “Left”
◆ Credit = “Right”
An account can be
illustrated in a T-
account form.
Debit and Credit
⚫ The terms debit and credit mean left and right, respectively.
⚫ The act of entering an amount on the left side of an account is
called debiting the account and making an entry on the right
side is crediting the account.
⚫ When the debit amounts exceed the credits, an account has a
debit balance; when the reverse is true, the account has a
credit balance.
Debiting An Account
Cash
15,000
Example: The owner makes an initial investment of $15,000 to
start the business. Cash is debited and the owner’s
Capital account is credited.
Crediting An Account
Cash
7,000
Example: Monthly rent of $7,000 is paid. Cash is credited
and Rent Expense is debited.
Debiting and Crediting
an Account
Cash
15,000 7,000
8,000
Example: Cash is debited for $15,000 and credited for
$7,000, leaving a debit balance of $8,000.
Double-entry System
⚫ In a double-entry system, equal debits and credits
are made in the accounts for each transaction.
⚫ Thus, the total debits will always equal the total
credits and the accounting equation will always stay
in balance.
Assets Liabilities Equity
Normal Balance
Every account classification has a normal balance, whether it is a
debit or credit.
Normal Balance
Assets ◆ Assets - Debits should exceed
Debit / Dr. Credit / Cr.
credits.
Normal Balance
◆ Liabilities – Credits should
Chapter
exceed debits.
3-23
◆ Normal balance is on the
Liabilities
Debit / Dr. Credit / Cr.
increase side.
Normal Balance
Chapter
3-24
Debit and Credit Balance
If the sum of Debit entries are greater than the sum of Credit
entries, the account will have a debit balance.
Account Name
Debit / Dr. Credit / Cr.
Transaction #1 $10,000 $3,000 Transaction #2
Transaction #3 8,000
Balance $15,000
Debit and Credit
If the sum of Credit entries are greater than the sum of Debit
entries, the account will have a credit balance.
Account Name
Debit / Dr. Credit / Cr.
Transaction #1 $10,000 $3,000 Transaction #2
8,000 Transaction #3
Balance $1,000
Tabular Summary Compared
to Account Form
Tabular Summary Account Form
Cash Cash
$15,000 Debit Credit
- 7,000 15,000 7,000
1,200 1,200 600
1,500 1,500 900
- 600 600 200
- 900 250
- 200 1,300
- 250
600
- 1,300
Balance 8,050
$8,050
Expanded Basic Equation And
Debit/Credit Rules And Effects
Assets = Liabilities + Owner’s Equity
Owner’s Owner’s
Assets = Liabilities + -
Capital Drawings
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
+ - - + - + + -
+ Revenues - Expenses
Dr. Cr. Dr. Cr.
- + + -
Chart of Accounts
• Most companies have a chart of accounts. This chart lists the
accounts and the account numbers that identify their location
in the ledger.
• The numbering system that identifies the accounts usually
starts with the balance sheet accounts and follows with the
income statement accounts
Chart of Accounts
Chart of Accounts
• Accounts 101–199 indicate asset accounts;
• 200–299 indicate liabilities;
• 301–350 indicate owner’s equity accounts;
• 400–499, revenues;
• 601–799, expenses;
• 800–899, other revenues; and
• 900–999, other expenses.
Accounting
