Accounting 225 Week 2 Notes
Accounting 225 Week 2 Notes ACCT 225
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This 3 page Class Notes was uploaded by Taylor Hall on Saturday August 27, 2016. The Class Notes belongs to ACCT 225 at University of South Carolina taught by Shannon D McCutchen in Fall 2016. Since its upload, it has received 10 views.
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Date Created: 08/27/16
Accounting 225 Chapter 2: The Accounting Cycle: During the Period Focusing on External Transactions Transactions: o Source Document: give proof that the transaction occurred Not all transactions involve cash (harder to understand when there isn’t cash) Analyze Transaction o Did cash trade hands because of the transaction? Cash doesn’t have to change hands, because there can be notes payable (which would then mean that liabilities would increase) Do I have more or less cash because of this transaction? (make sure things have balanced out) Why do I have less or more cash? Or what did I have now that I didn’t have before? o What is one account affected by the transaction? Does this account increase or decrease? o What is the second account affected by the transaction? Record it in a Journal: the business diary (play-by-play) Post it to the general ledger: o Show the individual transactions that affect a particular account o T-Account: A visual representation of what is happening in an account (they are not required) Trial Balance: list of all of the accounts and the transactions in the accounts Create the Financial Statements Accounting Terms: Debits and Credits o Debits and credits differ depending on the side of the equation Assets side: Debit (dr) means increase and Credit (cr) means decrease Liabilities and Equity side: debit means decrease and credit means increase Exceptions: dividends and expenses are opposite since they are subtracted in the equation Assets = Liabilities + Stockholder’s Equity Stockholder’s equity = Retained earnings + Common stock Retained Earnings= revenue – Expenses – dividends st Wednesday, August 31 Capturing Transactions in Accounts o Account: Summary of all transactions related to a particular item over a period of time Asset Accounts: Examples: cash, supplies, and equipment Liability Accounts Examples: accounts payable, salaries payable, utilities payable and taxes payable Stockholder’s Equity Accounts: Examples: common stock and retained earnings o Chart of accounts: list of all the accounts and the associated account number (similar to a table of contents) Revenue Recognition Principle: recognize revenue when you earn it, not when you receive it Deferred Revenue: when received cash in advance to earning it (unearned revenue) they are considered liabilities Recording Transactions in the Journal o Journal: provides a chronological record of all transactions (* think of the journal as a business diary) o Journal entry: format used for recording transactions Start with the account we are debiting and then indent the account you are crediting Posting to the Ledger: o Posting: process of transferring the debit and credit information form the journal to individual accounts in the general ledger o General Ledger: provides in a single location the list of transactions affecting each account and the account’s balance Trail Balance: o A list of all accounts and their balances at a particular date Shows that total debts equal total credits Assists in preparing adjusting entries (chapter 3) o Used for internal purposes only Not published to external parties Not required to follow an order of listing
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