Summary: Chapter 6 The Bookkeeping Process

Read the summary and the most important questions on Chapter 6 The bookkeeping process

• 6.1 The bookkeeping process

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• Evidential matter: Source documents

  • checks
  • bills from suppliers
  • purchase orders
  • bank statements
  • sales ticketsales

• Double entry accounting

  Every Business transaction affects two ore more bookkeeping accounts (duality of effects)
  
  Most transactions with external parties involve an exchange where the business entity both gives up something and receives something in return.

• 6.2 Analyzing transactions

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• Cash food sales for the day total $8,000

  Cash (assets) increases
  Food sales (Revenue)  increases

• On June 1, a restaurant purchases advertising for $1,000 on open account. The Newspaper ad will run on June 11 and 12

  Advertising (Expense) increase
  Account Payable (liability) increase

• The restaurant in example C pays the open account of $1,000.

  Cash (assets) decrease
  Account payable (liability) decrease

• A lodging operation writes a $1,500 check on August 1, paying its rent for August.

  Cash (asset) decreases
  Rent expense (expense)  increases

• A customer’s invoice was $50 for meals, plus $3 for sales tax. The customer uses an open account authorized by the restaurant

  Account receivable (asset) increases
  Food sales (Revenue) increases
  Sales tax payable (liability)  increases

• One week after the transaction of Example 5 the restaurant receives personal check for $53 from the customer.

  Cash (asset) increases
  Account receivable (asset) decreases

• the hotel in example 8 remits a check for $1,200 to the supplier in payment of inventory purchase made on open account.

  Account payable (liability) decreases
  Cash  (asset) decreases

• A hotel buys $55 worth of food provisions for its storeroom and pays cash on delivery. The periodic inventory is system.

  Food purchase (expense) increase
  Cash (asset) decrease