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information related to the transactions and other events of a business enterprise.To understand theaccounting process, the following basic terminology, make up theaccounting cycle:Transactions -Transactions are events that transfer or exchange goods or services between two or more entities.Real accounts – are balance sheet accounts(asset, liability, or equity account)Nominal accounts - are income statements accounts(revenue or expense account).Journal -sometimes referred to asthe book of original entry.Ageneral journalis merely a chronological listingof transactions expressed in terms of debits and credits to particular accounts.Ledger– refer to the book of final entry.It summarizes the total credits and total credits posted per account.Posting –Transferring amounts from a journal to the ledger.Transactions recorded in a general journal must beposted individually, whereas entries made in specialized journals are generally posted by columnar total.Trial balance -A trial balance is a list of all open accounts in the general ledger and their balances.It proves theequality of total debits and total credits.Work sheet -serves as an aid to the accountant in adjusting the account balances and preparing the financialstatements.The work sheet provides an orderly format for the accumulation of information necessary forpreparation of financial statements.Use of a work sheet does not replace any financial statements, nor does it alterany of the steps in the accounting cycle.Adjusting entries -Adjusting entries are entries made at the end of accounting periods to bring all accounts up todate on an accrual accounting basis so that correct financial statements can be prepared.Closing entries -All nominal accounts are reduced to zero by closing them through theIncome Summaryaccount.Reversing entries -A reversing entry is made at the beginning of the next accounting period and is the exactopposite of the adjusting entry made in the previous period.The recording of reversing entries is an optional step inthe accounting cycle that may be performed at the beginning of the next accounting period.The entries subject toreversal are the adjusting entries foraccrued revenues and accrued expensesinitially entered in expense or incomeaccounts.Overview of the Accounting ProcessRecording PhaseA.Analyze business documents—ascertain what transactions and events should be recorded.B.Record transactions—originally record debits and credits in chronological order in a journal.C.Post transactions—transfer debits and credits to ledger accounts which summarize changes in financialstatement elements (assets, liabilities and owners’ equity, revenues, and expenses).Reporting PhasePageof211
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Chapter 4 / Exercise 1
Financial Accounting: The Impact on Decision Makers
Norton/Porter
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A.Prepare a trial balance—a list of balances in general ledger accounts; first two columns of a worksheet.

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Financial Accounting: The Impact on Decision Makers
The document you are viewing contains questions related to this textbook.
Chapter 4 / Exercise 1
Financial Accounting: The Impact on Decision Makers
Norton/Porter
Expert Verified

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