accounting cycle
a series of steps performed during each accounting period to classify, record, and summarize data for a business
First step of accounting cycle
- Analyze Business Transactions
Second Step of AC
- Prepare a record of business transactions
journal
a diary of business activities.
lists events in chronological order
AKA record of original entry
general journal
a financial record for entering all types of business transactions; a record of original entry
journalizing
recording transactions in a journal
General Journal Steps
- Record the year first, then the month and day
- Record the debit first
- indent about one half inch and record the credit
- Indent again and write the description
audit trail
a chain of references that makes it possible to trace information, locate errors, and prevent fraud
general journal description
include supplier name, invoice number, and check number
compound entry
a journal entry with more than one debit or credit
Ledger
businesses keeps record on a special form, a seperate form for each account. All are kept together in a binder called a ledger
AKA record of final entry
posting
transferring data from a journal to a ledger
3rd step of AC
- Posting transactions after journalized
The General Ledger
a permanent, classified record of all accounts used in a firm’s operation; a record of final entry
GJ vs GL
general journal: record of original entry
general ledger: record of final entry
balance ledger form
a ledger account form that shows the balance of the account after each entry is posted
correcting entry
a journal entry made to correct an erroneous entry
