Table Of Contents

1. Introduction 1–1

2. Chapter Objective 1–1

3. The Journal Entry 1–2

4. The Trial Balance 1–2

5. The Balance Sheet 1–3

A. Assets 1–4

B. Liabilities 1–4

6. Profit and Loss Items 1–5

7. Chart of Accounts 1–6

8. The Wide Scope of Double-Entry Accounting 1–7

9. Types of Journal Entries 1–8

A. The Diagonal Journal Entry 1–8

B. The Horizontal Journal Entry 1–9

C. Section Summary 1–10

10. Practice Questions 1–11

11. Examples of Journal Entries and Posting to the Trial Balance 1–14

12. Practice Journal Entries 1–18

13. Calculating Profits or Loss 1–44

14. Journal Entries versus Books of Accounts 1–48

Chapter 2

1. Introduction 2–1

A. General Ledger 2–1

B. Chart of Accounts 2–4

2. Subsidiary Ledgers 2–5

A. Types of Subsidiary Ledgers 2–8

B. Intermediate Items 2–9

C. Location of Columns 2–10

D. Accounting’s Limitation 2–11

E. Journal Entry Flow Chart 2–13

F. Observations 2–14

3. The Purchase Journal 2–14

A. Function of the Subsidiary Ledger 2–19

B. Observations 2–20

4. The Check Disbursement Journal 2–21

5. Creating a Check Disbursement Journal from the Checking Account  2–33

6. Student Exercise 2–34

7. Bank Reconciliation 2–39

8. Finding Errors 2–40

9. The Cash Receipts Journal 2–41

A. Summary 2–45

B. Observations 2–46

10. Purchase Journal and the Accounts Payable Ledger 2–46

11. The Sales Journal and Accounts Receivable Ledger 2–51

12. The Commission Ledger 2–55

13. Establishing a Petty Cash Book 2–59

Chapter 3

1. Introduction 3–1

2. Student Practice Sessions 3–1

A. The Check Disbursement Journal 3–1

B. The Cash Receipts Journal 3–8

C. The Purchase Journal and Accounts Payable Ledger 3–11

D. The Sales Journal and Accounts Receivable Ledger 3–13

Chapter 4

1. Introduction 4–1

2. The Star Company General Ledger 4–1

3. Preparing the Trial Balance 4–6

4. Adjusting Entries 4–7

5. Accrual Basis of Accounting 4–12

6. Prepaid Expense Account4–13

7. Cash Basis of Accounting 4–13

8. Deferrals 4–13

9. Interim Financial Statements 4–14

A. Balance Sheet 4–14

B. Profit and Loss Statement 4–14

Appendices

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