Beginning The Accounting cycle

Accounting Cycle:

Accounting Cycle Collect and Verify Source Documents –Source Documents Invoice Memorandum ReceiptsCheck Stub

Invoice What is it A Bill listing –Quantity –Description –Unit price –Total price Used for When charging items that usually packaged in merchandise or mailed for services rendered

Receipt What is it Written message describing a business transactions Used for When cash or check has been received

Memorandum What is it Written message describing a business transactions Used for Use only if no other source document exists for a business transaction.

Check Stub What is it Completed when writing a check, information from the check is copied onto a small stub that stays in the check book. Used for When paying by cash, a check is written, the information on the check is copied on to the stub for documentation of payment. It carries the bank balance.

Analyze Business Transactions Step 2

Steps to Analyzing Business Transaction 1.Determine the two accounts affected 2.Determine the classification of those accounts 3.Determine if the accounts are increasing or decreasing 4.Is the accounting equation balance?

Why ask questions Determine either an increase or decrease in assets, liabilities, or owner’s equity

General Journal Step 3

General Journal Journalizing is the recording a business transaction.

Recording Transactions 1.Write the date 2.Write the debited account on the second line of the description.

Recording Transactions (continued) 3.On the next line, indent and write the account credited. [INDENT] 4.Write both amounts on the appropriate balance column.

Recording Transactions (continued) 5.Identify the source document 6.On the next line, indent and write the source document

The Use of General Journal All purpose journal All transactions are recorded in Used for posting to the General Ledger accounts

Example of a General Journal Entry  This is not filled in until Posting to the Ledger

Example of a General Journal Entry Aug. 1 Received $25,000 from owner, as an investment, Memorandum 1.

Items to Remember  The Debit must go first; then indented the Credit  No skipping lines  Yes, it must be in chronological order.  Yes, page numbering is important so pay attention to it.