What are the 4 steps in the recording process?
- Analyze each transaction to determine its effect on accounts
- Record transaction as journal entry in general journal
- Transfer journal entries recorded to appropriate accounts in general ledger
- Prepare a trial balance
What is an accounting transaction?
Economic events that must be recorded the financial statements. (Only if it affects assets, liabilities, etc.)
What must always balance when analyzing transactions?
The accounting equation (Assets = Liabilities + shareholders Equity)
What is an account?
An record of increases or decreases in a specific asset, liability or shareholders’ equity item.
What are the three parts of a T account?
The title, The left side (debit), the right side (credit).
What is important about naming an account?
Nothing! Just name it what works or what it is.
What goes on the left side?
The debit
What goes on the right side?
The credit
What is a debit balance?
When debit amount exceeds credit amount
What is a credit balance?
When credit amounts exceed debit amounts.
What has to happen in every transaction?
Debit must equal credits.
What is a normal balance?
Whichever side the increase happens on. ig. Assets, Debit for increase = Normal balance, Liabilities, Credit for increase = Normal balance.
What is the Normal Balance for Assets?
Debit
What is the normal balance for Liabilities?
Credit
What is the normal balance for Common shares?
Credit
What is the normal balance for retained earnings?
Credit
what is the normal balance for revenues?
Credit
What is the normal balance for Expenses?
Debit
What is the normal balance for dividends declared?
Debit
How does the DEALER nemonic device work?
Dividends
Expenses
Assets
= Debits Increase
Liabilities
Equity
Revenue
= Credits increase
