CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 4-1 Preparing a Chart of Accounts

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Read and define the following terms: Read pgs As you read, stop and define the following terms: ledger general ledger account number file maintenance opening an account 2 LESSON 4-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 3 LESSON 4-1 TERMS REVIEW ledger – a group of accounts general ledger – a ledger that contains all accounts needed to prepare financial statements account number – the number assigned to a specific account file maintenance – the procedure for arranging accounts in a general ledger, assigning account numbers, and keeping records current opening an account – creating a new account by choosing an account number and title page 95

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 4 LESSON 4-1 ACCOUNT FORM A journal is a permanent record of the debit and credit parts of each transaction in chronological order However, journals do not show all the changes in a single account in one place If only using a journal, business must search through all journal pages to find transactions Therefore, a separate form is used for each account page 95

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 5 LESSON 4-1 ACCOUNT FORM An account form is based on and includes the debit and credits Also includes date and journal page number (post ref) Helps trace entries back to journal Up-to-date balance must be calculated each time account is used Balance-ruled account form is used as a permanent record of changes to account balances page 95

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 6 LESSON 4-1 RELATIONSHIP OF A T ACCOUNT TO AN ACCOUNT FORM page 91 Balance columns

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 7 LESSON 4-1 CHART OF ACCOUNTS page 92 Accounts in a general ledger are arranged in the same order as they appear on financial statements: Balance Sheet: Assets, Liabilities, Owner’s Equity Income Statement: Revenue, Expenses

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 8 LESSON 4-1 CHART OF ACCOUNTS page 92

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 9 LESSON 4-1 CHART OF ACCOUNTS page 92 A 3 digit number is assigned to each account First digit shows the general ledger division Second & third digits indicate the location of each account within a general ledger division Companies initially assign account numbers by 10s so that new accounts can be added easily (pg ) Expense accounts are arranged in alphabetical order

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 10 LESSON 4-1 ACCOUNT NUMBERS page 92

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 11 LESSON Write the account title after the word Account in the heading. 2.Write the account number after the words Account No. in the heading. OPENING AN ACCOUNT IN A GENERAL LEDGER page 94 12

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 12 LESSON 4-1 OPENING AN ACCOUNT IN A GENERAL LEDGER page 94 To open an account - write an account title and number on the general ledger (pg.94) A general ledger account is opened for each account listed on a chart of accounts Accounts are opened and arranged in a general ledger in the same order as on the chart of accounts

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 13 LESSON 4-1 Assignment page 94 Complete 4-1 Work Together and On Your Own