Accounting Fundamentals

Accounting Fundamentals - Accounting Fundamentals: Lesson 2...

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Accounting Fundamentals: Lesson 2 (printer-friendly version) Your Instructor: Charlene Messier INSTRUCTIONS: To print this page, wait for the page to fully load. Once the document is ready to print, simply click your browser's File menu and choose Print . To save this page, click your browser's File menu and choose Save As . Select a disk drive and folder to receive the file, and change the name of the file to less02.htm . To view the file while you are offline, just go to the drive and folder you selected when you saved the file and double-click the file named less02.htm . Your browser will start and you will have access to the file. Chapter 1 Introduction When you have finished this lesson, you will be able to analyze various business transactions, enter the amounts into General Ledger accounts, and prepare a Balance Sheet. In Lesson 1 you learned about T-accounts and how to increase and decrease various accounts. This lesson will reinforce that concept, as you'll be entering dollar amounts into the increase and decrease sides of various accounts. You'll also be preparing a Balance Sheet, which proves the accounting equation: The accounts that you are going to use in this chapter are slightly different from those used in Lesson 1. Look at the General Ledger account forms, one of the forms you printed out, while I explain it to you. Each account has a section at the very top of the account for the account name and the account number. There are also two columns for the date entries. Please disregard the Item column at this time. The Post Ref. column will be explained in detail later and should be left blank for now. Important points to remember: A debit entry in an account with a debit balance will have a larger debit balance because you add the debit entry to the debit balance. A credit entry in an account with a credit balance will have a larger credit balance because you add the credit entry to the credit balance, giving the account a larger credit balance.
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When you're entering an amount into an account with the opposite balance, the account balance is carried by the larger number. For example, if you enter a debit entry of $500.00 into an account with a credit balance of $300.00, the account would have a debit balance of $200.00. Because the debit entry is greater than the credit, the debit takes over the balance. You would subtract the credit balance from the debit entry to get your new account balance. Likewise, if you have an account with a $700.00 debit balance and you make a credit entry of $1,000.00, the account would have a new credit balance of $300.00. The balance is the difference between the debit balance and the credit entry. As we continue this lesson and you enter amounts into the General Ledger pages, you will see how the entries affect the account balances. Below is an illustration of an account from the General Ledger. Notice how the account title,
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This note was uploaded on 10/12/2009 for the course ACCTG Accounting taught by Professor Messier during the Spring '09 term at Santa Monica.

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Accounting Fundamentals - Accounting Fundamentals: Lesson 2...

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