Accounting Chapter 2

4 Step Transaction Process (Journal Entries)

1. identify transactions and source documents

2. analyze transactions using accounting equation

3. record journal entry

collection of all accts + balances

Ledger

list of all ledger accts w identification # attached to each

Chart of Accounts

complete record of each transaction in one place

Journal

Posting

transferring journal entry info to the ledger

Balance Column Account

Account with debit and credit columns for recording entries and another column for showing the balance of the account after each entry.

Trial Balance Steps

1. list each account title and its amount from ledger

2. compute total debit and credit balances

3. prove total debits = total credits

Debt Ratio

Liabilities / Assets

COA vs Ledger

• COA: List of all ledger accounts for a business, includes an ID # assigned to each account

• ledger: Collection of all accounts with their activity and balances that exist in a business