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Accounting 225 Week 2 Notes

by: Taylor Hall

Accounting 225 Week 2 Notes ACCT 225

Marketplace > University of South Carolina > ACCT 225 > Accounting 225 Week 2 Notes
Taylor Hall
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This covers Chapter Two: The Accounting Cycle, which addresses the different types of transactions and how they are recorded into the books. It is important to note the differences between debit an...
Intro to Financial Accounting 225
Shannon D McCutchen
Class Notes
Accounting, financial accounting
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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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