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Each account in the chart of accounts is typically
assigned a name and a unique number by which it
can be identified.

| 
10200 Cash
10600 Petty Cash Fund
12100 Accounts Receivable
17300 Equipment
17800 Vehicles
18100 Accumulated Depreciation - Buildings

$ % 
20200 Notes Payable
22100 Wages Payable
23100 Interest Payable
24500 Unearned Revenues
25600 Bonds Payable
 '|(|

jypically listed in this order:

   & |


Assets
Liabilities
Owner's (Stockholders') Equity


    |


Operating Revenues
Operating Expenses
Non-operating Revenues and Gains
Non-operating Expenses and Losses
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Each account in the chart of accounts is typically
assigned a name and a unique number by which
it can be identified.


)&

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27100 Common Stock, No Par
27500 Retained Earnings
29500 jreasury Stock

,
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31010 Sales - Division #1, Product Line 010

#.,  
50100 Marketing Dept. Salaries
59200 Payroll Dept. Supplies
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O
 

are documents, such as Y



,  Y

, etc. that form the
Y
of (and
serve as proof for) a transaction.

Invoices, cash slips, receipts, check counterfoils,

bank deposit slips and even internet payment
confirmations are all
Y
 Y

.
 J|$

jhese are chronological (date-order) records of

transactions entered into by a business.

Journals are that first basic entry of debit and

credit for each transaction.
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J

 
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jhe 

 is a collective term for the YY 

of a business.

jhe accounts are in the shape of a ¶j and thus

are often referred to as  YY 


|


  


 
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1. Assets are always:

increased (½! by debits and decreased (½! by credits

2. Liability and Owner s Equity accounts are always:

increased ½! credits and decreased ½! by debits

3. Owner s Equity for a corporation includes:

Capital Stock and the Retained Earnings accounts

4. Revenues, expenses and dividends relate to Owner s

Equity through the Retained Earnings account
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5. Expenses and dividends are

increased (½! by debits and decreased (½! by credits

6. Revenues are
increased ½! credits and decreased ½! by debits

7. jhe difference between jotal Revenues and jotal

Expenses for a period is Net Income or Net Loss which
increases ½!
or decreases ½! Owner s Equity
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2
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  '
 

 
     


   

 
 
   

(    )  

 
 
   

) 

 
 
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A sheet displaying all the accounts of a

business, drawn up as a  

 of whether
the total of all the
  Y

equal the
total of all the Y
  Y

jhe    Y
is prepared as a final check
just before the  Y 
 


are drawn
up.
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Adjusting entries are accounting journal entries

that convert a company's accounting records to
the accrual basis of accounting.

An adjusting journal entry is typically made just

prior to issuing a company's financial statements.

.
 |J !# #

jhere are two scenarios where adjusting journal entries

are needed before the financial statements are issued:

 

34

Nothing has been entered in the accounting records for

certain expenses or revenues, but those expenses
and/or revenues did occur and must be included in
the current period's income statement and balance
sheet.
 |J !# #

jhere are two scenarios where adjusting journal entries

are needed before the financial statements are issued:

 

3

Something has already been entered in the accounting

records, but the amount needs to be divided up
between two or more accounting periods.
|J !# #
 ( | |$|##

ß Y 
 



are the most important
reports of a business. jhese statements are
prepared from the information in the    Y
.

jhe purpose of these statements is to show the

user the  Y 
 ,  Y 
  Y

and Y
 
of a business, as well as other

useful information concerning the business.
 |$|#'##

jhe balance sheet presents a company's financial

position at the end of a specified date.

Some describe the balance sheet as a "snapshot"

of the company's financial position at a point (a
moment or an instant) in time.
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 #|##

jhe income statement is important because it

shows the profitability of a company during the
time interval specified in its heading.

jhe period of time that the statement covers is

chosen by the business and will vary.
#|##
 $ !|

jhese journal entries are made after the financial

statements have been prepared at the end of the
accounting year.

Most of the closing entries involve the income

statement accounts (revenues, expenses, gains,
losses, and summary/clearing accounts) whose
balances will be transferred to the owner's capital
account or the corporation's retained earnings
account.
 $ !|

jwo-fold purpose:

1. Closing is a mechanism to update the retained

earnings account in the ledger to equal the end-
of-period balance.

.
 $ !|

jwo-fold purpose:

2. Revenue, expense, and dividend accounts

represent amounts for a period of time; one must
"zero out" these accounts at the end of each
period (as a result, revenue, expense, and
dividend accounts are called temporary or
nominal accounts). In essence, by zeroing out
these accounts, one has reset them to begin the
next accounting period.

In contrast, asset, liability, and equity accounts

are called real accounts, as their balances are
carried forward from period to period. For
example, one does not "start over" each period
accumulating assets like cash and so on -- their
balances carry forward.
 (/#""#(
$ !|

1. Close revenue accounts (to a unique account

called Income Summary -- a non-financial
statement account used only to facilitate the
closing process)

2. Close expense accounts to Income Summary

3. Close the Income Summary account to

Retained Earnings

4. Close the Dividend account to Retained

Earnings
$ !|
 (/#""#(
$ !|

By doing this, all revenues and expenses are

"corralled" in Income Summary (the net of which
represents the income or loss for the period).

In turn, the income or loss is then swept to

Retained Earnings along with the dividends.
Recall that beginning retained earnings, plus
income, less dividends, equals ending retained
earnings; likewise, the closing process updates the
beginning retained earnings to move forward to
the end-of-period balance.
| !"#
 '|51

Maria Arlene (Bam) j. Disimulacion