CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 4-1 Preparing a Chart of Accounts Original created by M.C. McLaughlin, Thomson/South-Western Modified by Deborah L. Burns, Johnston County Schools, West Johnston High School

CENTURY 21 ACCOUNTING © Thomson/South-Western 2 LESSON 4-1 RELATIONSHIP OF A T ACCOUNT TO AN ACCOUNT FORM page 91 Balance columns An account form is used to summarize in one place all the changes to a single account A separate form is used for each account

CENTURY 21 ACCOUNTING © Thomson/South-Western 3 LESSON 4-1 CHART OF ACCOUNTS page 92 A group of accounts is called a ledger A ledger that contains all accounts needed to prepare financial statements is called a general ledger The name given to an account is known as an account title The number assigned to an account is called an account number

CENTURY 21 ACCOUNTING © Thomson/South-Western 4 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 There are usually 5 general ledger divisions: Assets Liabilities Owner’s Equity Revenue Expenses

CENTURY 21 ACCOUNTING © Thomson/South-Western 5 LESSON 4-1 ACCOUNT NUMBERS page 92  The 1 st digit of each account number shows the general ledger division in which the account is located  The second 2 digits indicate the location of each account within a general ledger division  The procedure for arranging accounts in a general ledger, assigning account numbers, and keeping records current is called file maintenance  Account #s are initially assigned by 10s so that new accounts can be added later

CENTURY 21 ACCOUNTING © Thomson/South-Western 6 LESSON 4-1 ACCOUNT NUMBERS page 92  Expense accounts are usually arranged in alphabetical order  The number selected for new accounts should leave some unused numbers on either side of it for other accounts that might need to be added

CENTURY 21 ACCOUNTING © Thomson/South-Western 7 LESSON 4-1 OPENING AN ACCOUNT IN A GENERAL LEDGER page 94  Writing an account title and number on the heading of an account is called opening an account  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 © Thomson/South-Western 8 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 © Thomson/South-Western 9 LESSON 4-1 TERMS REVIEW ledger general ledger account number file maintenance opening an account page 95