Accounting I Review The Accounting Cycle: Steps 1 through 5

Pages 6-11

Vocabulary  Assets  Items of value owned or controlled by a business.  Liabilities  Creditors’ claims to the assets of a business.  Debts of a business  Equity  Owner’s claims to assets  Sole Proprietorship – owner’s equity  Corporation – stockholder’s equity

Vocabulary  Account  Record of increases and decreases and the balance for a specific item (ex: supplies)  Double-entry  Business transactions affecting two accounts  Debit, left  Credit, right

Permanent Accounts  Assets  Liabilities  Owners Equity Balances are carried forward from one accounting period to the next.

Temporary Accounts  Used for one year  End of year, balances are transferred to the stockholder’s equity account Retained Earnings.  Revenue, cost of merchandise, and expenses

Write the increase and decrease side (t-account) for each of the following in your notes…  Assets  Liabilities  Stockholder’s Equity  Revenue  Cost of Merchandise  Expenses

Chart of Accounts  Open your textbook to page 8  Backcountry Outfitters Chart of Accounts  Take a photo with your iPad if needed

The Steps in the Accounting Cycle Step #1 – Collecting and Verifying Source Documents (receipts, memos, check stubs, sales slips) Step #2 – Analyzing Business Transactions (determine the debit and credit parts of the transaction – use the seven-step method p.10) Demonstration Problem 1-1 (On Your Own) Purple Handout

Accounting Cycle Review Ch. 1.2 Review Pages 12-15

Step 3: Preparing General Journal Entries  Journal  A chronological record of the transactions of a business  General Journal  Two-column journal where all types of business transactions are recorded

Example  On December 1, Backcountry Outfitters sold merchandise on account to Alex Post for $187 plus $7.48 sales tax, Sales Slip 92.  Record in your notes… 1. Identify the affected accounts. 2. Classify each of the accounts. 3. Determine the amount that is increased or decreased for the accounts. 4. Debit or Credit? 5. Draw the T-Accounts 6. Complete the General Journal.