BAT4m
Unit 1: Chapter 1
September 11 2014
Quiz on Friday September 12, 2014
The Simple Ledger
• An ACCOUNT is a specially ruled page
designed to record the changes in
each individual item affecting the
financial position
• Business transactions (we learned in unit 1)
are recorded in General Journal first and then
the numbers will be transferred to each
account.
• Usually there is one account for each asset or
each liability.
Simple Ledger
 The
T-accounts (or General Ledger
pages) are kept in the order in which
the items are found on the balance
sheet.
 At the front of the ledger there is a
Chart of Accounts (like table of
contents of a book) which lists all the
account names and account numbers.
 NOTE:
Asset accounts usually start
with a “1”; Liabilities accounts
usually start with a “2” & Owner’s
Equity accounts usually starts with
a “3”
The Simple Ledger
• LEDGER is a group of accounts
• Ledger is like a book or computer file
• Ledger is a permanent summary of all
transactions.
• A company's financial statements are
generated from summary totals in the ledgers
(Just as the ending balance of Equation
Analysis Sheet was used to make Balance
Sheet.)
The Simple Ledger
• A book that has a separate page for each
account (item found on the B/S) and has
each transaction recorded in it is called a
GENERAL LEDGER
• T-Account: Simple type of account. This
is used to help you understand accounting
theory.
Account Name
Left
Right
Four important features
of all ledger accounts (or T accounts):
1.
Each individual balance sheet item (such as
cash) is given its own page (space) with the
name of the item at the top. These individual
sheets are called accounts.
2. The dollar figure of each item is recorded in the
account on the first line
Assets
Beginning $
Value
Debit and Credit Theory


As we learned in chapter 1, every transaction must
affect the accounting equation min twice!
Every account has two sides and they are
referred to as the Left Side (Debit) and the Right
side (Credit). The two sides allow the accountant
to show an increase or a decrease in its amount.
T- Accounts
Left Side
Right Side
(Debit)
(Credit)
Dr.
Cr.
Debit Credit Accounting Rap song
by Colin Dodd

http://www.youtube.com/watch?v=j71Km
xv7smk

High School - Accounting Rap
The Rule of Debit and Credit
• Increases are shown on the same
side as normal beginning balance
of the account appears in the equation
• Decreases are shown on the
opposite side
• For example, for cash account, when
the transaction increase the balance,
the amount should be recorded in the
left side (debit) of the T account.
The Rule of Debit and Credit
• Increases are shown on the same side as normal
beginning balance of the account appears in the
equation
• Decreases are shown on the opposite side
A
=
Assets
Debit
Credit
L
+
OE
Liabilities Owner’s Equity
Debit
Debit
Credit
Credit
The Rule of Debit and Credit
• Increases are shown on the same side as normal
beginning balance of the account appears in the
equation
• Decreases are shown on the opposite side
A
=
Expense
Debit
Credit
L
+
OE
Revenue
Debit
Debit
Credit
Credit
Double Entry System of
Accounting
Every transaction in business is recorded
both as a debit in one or more accounts
and as a credit in one or more accounts.
 Under this system, the total of the debit
entries equals the total of the credit
entries

Steps in the Recording Process
1.
2.
3.
Source Document – Analyze each
transaction for its effects on the accounts.
Enter the transaction information in a
journal (book of original entry)
Transfer (post) the journal information to
the correct accounts in the ledger (book
of accounts)
Class work / Homework
P82 E2-3, E2-5, E2-6
P85 P2-2A, P2-3A (tomorrow’s HW)