Module 2Accounting

Mechanics
Journal, Ledger and Trial balance

Accounting Procedures
This module describes some of the accounting

procedures that are used in practice.

Mechanical means that makes it easier to
record and summarize transactions.
Manual and computer based systems.
Basic steps are the same.

Account
Account is a device used of calculating the

net change of an item

T account

T account

Debit Credit rules

Debit = Credit
Assets = Liabilities + Owners Equity
Assets=Liabilities+(Capital-

withdrawals+Revenue-Exp)
Assets+withdrawals+Exp=
Liabilities+Capital+Revenue

Normal balance
Debit
Assets
Expenses
Withdrawals
Dividend

Credit
Liabilities
Owners Equity
Capital
Revenues

Normal balance
Increases same as normal balance
Decreases Opposite of normal balance

Rules of debit and credit

Debit [dr.] and Credit [cr.] denote entry on left

side and right side of an account.

No value connotations.
Increase in assets
Debit
Decrease in assets
Credit
Increase in Liabilities and OE
Credit
Decrease in Liabilities and OE
Debit

Rules of Debit and Credit

Revenues

Expenses
Dividends
Drawings

Credit
Debit
Debit
Debit

Recording Process

Transaction ---------Documentation-----------

Journal------Ledger---------Trial balance--------Financial statements.

Journal is a chronological record of transactions.
Ledger contains the records for a group of
related accounts.
Trial balance is a list of all the accounts with
their balances.