The Recording Process

Debits and Credits

Double-entry accounting system

1. Each transaction must affect two or more accounts to keep the basic accounting equation in balance.
2. Recording done by debiting at least one account and crediting another.
3. DEBITS must equal CREDITS.

Demonstration Problem

Bob Sample opened the Campus Laundromat on September 1, 2005. During the first month of operations the following transactions occurred.

1. Invested $20,000 cash in the business.
2. Paid $1,000 cash for store rent for the month of September.
3. Purchased washers and dryers for $25,000, paying $10,000 in cash and signing a $15,000, 6-month, 12% note payable.
4. Paid $1,200 for one-year accident insurance policy.

10. Received bill from the Daily News for advertising the opening of the Laundromat $200.

20. Withdrew $700 cash for personal use.

30. Determined that cash receipts for laundry services for the month were $6,200.

Instructions

(a) Journalize the September transactions. (Use J1 for the journal page number.)

(b) Open ledger accounts and post the September transactions.

(c) Prepare a trial balance at September 30, 2005