Business Accounting Chapter 7

The Accounting Cycle -helps keep accounting records in order Collect and verify source documents Analyze each transaction Journalize each transaction Posting to the general ledger Preparing a trial balance

The General Ledger book containing accounts a business uses

Opening Account with No Balance account title account number chart of accounts has this info

Opening an Account with a balance (ending balance from last period) account title account number date “Balance” as description check mark in post ref. Enter balance

The Posting Process Frequency of posting depends on the size of the business. Large businesses post daily Information posted from general journal to general ledger. For every journal entry you will post to at least two ledger accounts.

Post from left to right date source document as explanation (some businesses leave this blank) journal abbreviation and page number in POST REF column in the ledger debit or credit amount update new balance record account number in POST REF column in the journal

Source Document Memo 1 Memo 1

Updating Account Balance if normal balance is debit, debits increase and credits decrease balance -if normal balance is credit credits increase and debits decrease balance indicate zero balances with dash on normal balance side

Usefulness of Journals & Ledgers chronological listing of all business transactions provide information to managers about specific transaction Ledgers: where you find accounts information increase, decrease and balance of specific account provide detailed information on a specific account Posting: must be accurate and timely to be useful to accountants and managers who are making the business decisions.

The Trial Balance Listing of all accounts and balances Prove equality of total debits credits