Owners equity debit decrease credit increase o income

This preview shows page 84 - 87 out of 97 pages.

Owner’s equityDebit: Decrease (-)Credit: Increase (+)oIncome statement accountsRevenueDebit: Decrease (-)Credit: Increase (+)ExpenseDebit: Increase (+)Credit: Decrease (-)The accounting cycle:The accounting process:oRecording Phase:1.Business documents are analyzed.2.Prepare a T-account for the transaction.3.Transactions are recorded in the general journal (in chronological order).4.Transactions are posted on the general ledger (in each specific ledger account).oReporting Phase:5.A trial balance of the accounts in the general ledger is prepared.6.Adjusting entries are recorded (for special changes or mistakes).7.Financial statements are prepared.8.Nominal (income statement) accounts are closed.9.A post-closing trial balance is prepared with the remaining real (balance sheet) accounts.The accounting process: Flowchart:1.1. Analyze Source DocumentC:\Users\sfurner\Desktop\Accounting Final Needed Materials\Final Exam Study Guide ACCT 701.docx
2.2. Create a T-Account for the transaction3.3. Record the transaction on the journal (aka “journalize” the transaction)4.4. Record the transaction on the general ledger (aka “post” the transaction)5.5. Prepare trial balance with the sum of all debits and credits on the general ledger6.6. Prepare adjusting entries (if necessary)7.7. Prepare the Financial Statements8.8. Close Nominal (Income Statement) Accounts9.9. Prepare a post-closing trial balance with the sum of all debits and credits on the general ledger (only Real Accounts are left)Step 1: Analyzing business documents:1.Normally, a business document, or source document, is the first record of each transaction.2.The business document provides support for the data to be recorded in the journals.3.Documents underlying each recorded transaction provide a means of verifying the accounting records and thus form a vital part of the information and control systems.Step 2: Prepare a T-Account for Transaction:1.Jim Jones Accounting FirmChart of AccountsChart:101 - Cash- Title: (name of the impacted account)105 - Accts Receivable- Debit in left column110 - Office Supplies- Credit in right column150 - Equipment201 - Accounts Payable210 - Wages Payable305 - Common Stock320 - Retained Earnings401 - Consulting Fees410 - Tax Return Preparation Fees501 - Lemon ExpenseC:\Users\sfurner\Desktop\Accounting Final Needed Materials\Final Exam Study Guide ACCT 701.docx
505 - Wages Expense510 - Office ExpenseStep 2: Prepare a T-Account for the Transaction 1:1.A company purchases $800 of office supplies using cash.2.CashDR. +CR. - $8003.Office SuppliesDR. + $800CR. –Step 2: Prepare a T-Account for the Transaction 2:1.A company purchases $3,000 of equipment on account.2.EquipmentDR. + $3,000CR. -3.Accounts PayableDR. –CR. + $3,000Step 2: Prepare a T-Account for the Transaction 3:1.The owner of a business invests another $25,000 into her business.

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture