ACCTG 101, CHAPTER 3 : RECORDING BUSINESS TRANSACTION

Transactions and events

starting points in accounting cycle

Identify Transaction from source document

Transaction Analysis — 1st, IT

Indicate Accounts, either assets, liabilities, equity, income, or expenses, affected by transaction

Transaction Analysis — 2nd, IA

Ascertain Whether each account is increased or decreased by transaction

Transaction Analysis — 3rd, AW

Using Rules of debit and credit, determine whether to debit or credit account to record its increase or decrease

Transaction Analysis — 4th, UR

Source Documents

identify and describe transactions and events entering the accounting process

Sales Invoices, Cash Register Tapes, Official Receipts, Bank Deposit Slips, Bank Statements

common source documents

Accounting Cycle

series of sequential steps or procedures performed to accomplish accounting process

Identify Events to be Recorded

Accounting Cycle — 1st, IER

Transaction are Recorded in Journal

Accounting Cycle — 2nd, TRJ

Journal Entries are Posted to Ledger

Accounting Cycle — 3rd, JEPL

Preparation of Trial Balance

Accounting Cycle — 4th, PTB

Preparation of Worksheet including Adjusting Entries

Accounting Cycle — 5th, PWAE

Preparation of Financial Statements

Accounting Cycle — 6th, PFS

Adjusting Journal Entries are Journalized and Posted

Accounting Cycle — 7th, AJEJP

Closing Journal Entries are Journalized and Posted

Accounting Cycle — 8th, CJEJP

Preparation of Post-Closing Trial Balance

Accounting Cycle — 9th, PPCTB

Reversing Journal Entries are Journalized and Posted

Accounting Cycle — 10th, RJEJP

General Journal

book of original entry

Ledger

grouping of accounts; classify and summarize transaction to prepare data for basic financial statements

Posting

transferring amounts from general journal to appropriate accounts

Trial Balance

listing of all ledger accounts with respective balances

Journal

chronological record of entity’s transactions

General Journal

simplest journal

Date, Account Titles and Explanation, P.R., Debit, and Credit

standard contents of general journal

Simple Entry

two accounts are affected

Compound Entry

three or more accounts affected

Journalizing

process of recording transaction

General Ledger

also reference book

assets, liabilities, and owner’s equity

balance sheet or permanent accounts

income and expenses

income statement or temporary accounts

balance sheet and income statement

two general classifications of general ledger

Chart of Accounts

all accounts and their accounts numbers in ledger

Footing

adding all debits and credits

Trial Balance

all accounts with their respective debit or credit balances

Trial Balance

control device that helps minimize accounting errors

Transposition

a type of error, reversing order of numbers

Slide

a type of error, moving of decimal point