LESSON 4-1 Preparing a Chart of Accounts All transactions are recorded in a journal A journal does not show, in one place, all the changes in a single account An Account Form is used to summarize in one place all the changes to a single account A separate Form is used for each account Ledger – a group of accounts General Ledger – a ledger that contains all accounts needed to prepare financial statements Account number – number assigned to an account GREEN

RELATIONSHIP OF A T ACCOUNT TO AN ACCOUNT FORM page 91 Balance columns Balance – ruled account form has columns for the debit and credit balance account balance is calculated and recorded as each entry is recorded in the account

CHART OF ACCOUNTS A list of account titles and numbers showing the location of each account in a ledger page 92 All accounts in the chart of accounts will have an account form in the General Ledger LESSON 4-1

ACCOUNT NUMBERS Divisions Assets = 100 page 92 Divisions Assets = 100 Assets are listed by order of liquidity Liabilities = 200 Liabilities are listed in alphabetical order Owners Equity = 300 Capital , drawing, income summary Revenue = 400 Sales Expenses = 500 Expenses are listed in alphabetical order LESSON 4-1

Assigning Account Numbers The account numbering system is determined by the size and nature of the business A three-digit account number will be assigned to each account Initial account numbers are assigned by 10s so new accounts can be added easily A new account listed between two existing accounts is assigned the middle, unused account number A new account listed at the end of a section is assigned the next number in the sequence of 10s File Maintenance – the procedure for arranging accounts in a general ledger, assigning account numbers, and keeping records current LESSON 4-1

Assigning Account Numbers Example: 510 Advertising Expense 520 Insurance Expense -Add a new account, Gasoline Expense 510 Advertising Expense 515 Gasoline Expense 520 Insurance Expense Example: 550 Supplies Expense 560 Utilities Expense -Add a new account, Water Expense 550 Supplies Expense 560 Utilities Expense 570 Water Expense LESSON 4-1

OPENING AN ACCOUNT IN A GENERAL LEDGER LESSON 4-1 OPENING AN ACCOUNT IN A GENERAL LEDGER page 94 1 2 1. Write the account title after the word Account in the heading. 2. Write the account number after the words Account No. in the heading. LESSON 4-1 GREEN

TERMS REVIEW ledger general ledger account number file maintenance page 95 ledger general ledger account number file maintenance opening an account LESSON 4-1

LESSON 4-2 4/13/2017 LESSON 4-2 Posting – transferring information from a Journal entry to a Ledger account. GREEN

POSTING AN AMOUNT FROM THE DEBIT COLUMN OF A GENERAL JOURNAL page 96 2 1 3 5 4 1. Write the date. 4. Write the new account balance. 2. Write the journal page number. 5. Return to the journal and write the account number. 3. Write the debit amount. LESSON 4-2

POSTING AN AMOUNT FROM THE CREDIT COLUMN OF A GENERAL JOURNAL LESSON 4-2 4/13/2017 POSTING AN AMOUNT FROM THE CREDIT COLUMN OF A GENERAL JOURNAL page 97 2 1 5 3 4 1. Write the date. 4. Write the new account balance. 2. Write the journal page number. 5. Return to the journal and write the account number. 3. Write the credit amount. LESSON 4-2 GREEN

POSTING A DEBIT AMOUNT TO AN ACCOUNT WITH A DEBIT BALANCE page 98 2 1 3 5 4 1. Write the date. 4. Write the new account balance. 2. Write the journal page number. 5. Return to the journal and write the account number. 3. Write the debit amount. LESSON 4-2

POSTING A DEBIT AMOUNT TO AN ACCOUNT WITH A CREDIT BALANCE page 99 2 1 3 5 4 1. Write the date. 4. Write the new account balance. 2. Write the journal page number. 5. Return to the journal and write the account number. 3. Write the debit amount. LESSON 4-2

JOURNAL PAGE WITH POSTING COMPLETED (continued on next slide) LESSON 4-2

JOURNAL PAGE WITH POSTING COMPLETED LESSON 4-2 4/13/2017 JOURNAL PAGE WITH POSTING COMPLETED page 100 (continued from previous slide) LESSON 4-2 GREEN

TERM REVIEW page 101 posting LESSON 4-2

Completed General Ledger, Proving Cash, and Making Correcting Entries LESSON 4-3 4/13/2017 LESSON 4-3 Completed General Ledger, Proving Cash, and Making Correcting Entries GREEN

GENERAL LEDGER WITH POSTING COMPLETED LESSON 4-3 4/13/2017 GENERAL LEDGER WITH POSTING COMPLETED page 102 (continued on next slide) LESSON 4-3 GREEN

GENERAL LEDGER WITH POSTING COMPLETED page 103 (continued on next slide) LESSON 4-3

GENERAL LEDGER WITH POSTING COMPLETED page 103 (continued on next slide) LESSON 4-3

GENERAL LEDGER WITH POSTING COMPLETED page 104 (continued on next slide) LESSON 4-3

GENERAL LEDGER WITH POSTING COMPLETED page 104 (continued on next slide) LESSON 4-3

GENERAL LEDGER WITH POSTING COMPLETED page 105 (continued on next slide) LESSON 4-3

GENERAL LEDGER WITH POSTING COMPLETED page 105 (continued from previous slide) LESSON 4-3

PROVING CASH page 106 Proving Cash – determining that the amount of cash as shown in the checkbook agrees with the balance of the cash account in the accounting records LESSON 4-3

MEMORANDUM FOR A CORRECTING ENTRY page 106 Correcting Entry A journal entry made to correct an error in the ledger LESSON 4-3

JOURNAL ENTRY TO RECORD A CORRECTING ENTRY page 107 November 13. Discovered that a payment of cash for advertising in October was journalized and posted in error as a debit to Miscellaneous Expense instead of Advertising Expense, $140.00. Memorandum No. 15. 2 Debit 1 Date 4 Source Document 3 Credit LESSON 4-3

TERMS REVIEW page 108 proving cash correcting entry LESSON 4-3