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Ac221 Ch2 Notes

by: Destiny Notetaker

Ac221 Ch2 Notes AC 221

Destiny Notetaker
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Chapter two notes
Principles of Accounting I
Class Notes




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This 3 page Class Notes was uploaded by Destiny Notetaker on Monday February 1, 2016. The Class Notes belongs to AC 221 at Southeast Missouri State University taught by Carney in Spring 2016. Since its upload, it has received 38 views. For similar materials see Principles of Accounting I in Accounting at Southeast Missouri State University.

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Date Created: 02/01/16
Principles of Accounting Chapter 2 Book notes The Recording Process Steps In the The Account Recording The Trial Process Balance • Debits and • Journal • Limitations Credits • Ledger of a Trial Balance • Owner's • Posting Equity • Chart of • Locating Relationships Accounts Errors • Summary of • Use of Dollar • The Debit/Credit Recording Signs Rules Process Illustrated Account­individual accounting record of increases and decreases in a particular asset,  liability, or owner’s equity item.  The Account  Record of increases and decreases in a specific asset, liability, equity, revenue, or  expense item.   Debit=”left”  Credit=”right”  An account can be illustrated in a “T­account” form.  i) Debit (to put in) ii) Credit (to take out) iii) Pg. 63 (example of T account) Debits and Credits Double Entry System  Each transaction must affect 2 or more accounts to keep the basic accounting equation in  balance.  Recording done by debating at least 1 account and crediting another Debits MUST equal credits  If debit amounts are GREATER than credit amounts, the account will have a debit  balance.  Assets­debits should exceed credits  Liabilities­credits should exceed debits  Normal balance­is on the increase side  Owner investments and revenues increase owners’ equity (credit)  Owners drawings and expenses decrease owners’ equity (debit)  Because revenues increase owners’ equity, a revenue account has the same debit/credit  rules as the owner’s capital account.  i) Expenses have the opposite effect  The purpose of earning revenues is to benefit the owner   The effect of debits and credits on revenue accounts is the SAME as their effect on  owners’ capital. Debit/Credit Rules  Steps in the recording process 1. Analyze each transaction 2. Enter transaction in a journal 3. Transfer journal information to ledger accounts  Business discounts, such as sales slip, checks, a bill, or a cash register tape, provide evidence  of the transaction The journal  Book of original entry  Transactions recorded in chronological order  Contributions to the recording process General journal  illustration on page 60 (figure 2­13)  Journalizing­entering transaction data in the journal Simple & compound entries  General ledger/ G/L­contains the entire group of accounts maintained by a company.   Page 63 (figure 2­15)­examples of such


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