2.  Accounting Cycle  Source Document › Invoice › Receipt › Memorandum › Check Stub  Journal  Journalizing  Calendar Year  Fiscal Year  General Journal

3. 1. Collect and verify source documents 2. Analyze each transaction 3. Journalize each transaction

4. Source documents are the evidence of business transactions.  Invoice – records date, quantity, description, delivery, etc.. About a transaction  Receipt – a record of cash received by a business  Memorandum – Internal document used  Check Stub – used by business for cash transactions. Contains data about transaction. Also lists account balance before and after transaction.

5. Ask the following questions when analyzing a source document: 1. What is the date of the transaction? 2. What is the amount of the transaction? 3. What type of source document is it? 4. What are the payment terms (cash, check, on account, etc..) 5. What is the name of the other party?

6.  Calendar Year – January 1 – December 1 of a year.  Fiscal year – An Accounting period of 12 months, not starting on January 1.

7.  It is a permanent record of the financial transactions of a business.  A place where all of the business transactions are recorded. › Kind of like a daily diary.

9. Analysis Identify Classify +/- Balance 1. Identify the accounts affected. 2. Classify the accounts affected. 3. Determine the amount of increase or decrease for each account affected. 4. Make sure the accounting equation remains in balance.

10. Analysis Identify Classify +/- Debit-Credit T - Accounts 1. Identify the accounts affected. 2. Classify the accounts affected. 3. Determine the amount of Inc. or Dec. 4. Which account is debited? Amount? 5. Which account is credited? Amount? 6. What is the entry in T- account form?

11. Analysis Identify Classify +/- Debit-Credit T - Accounts Journal Entry 1. Identify the accounts affected. 2. Classify the accounts affected. 3. Determine the amount of Inc. or Dec. 4. Which account is debited? Amount? 5. Which account is credited? Amount? 6. What is the entry in T- account form? 7. What is the entry in General Journal form?

12.  An error should never be erased!  A single line placed through the error with the correction on top. GENERAL JOURNALPAGE _______ DATEDESCRIPTION POST REF. DEBITCREDIT 1 2011 1 2 Oct1Cash in Bank 52 00000 2 3 John Smith, Capital 52 00000 3 4 Memorandum 1 4 5 5

13.  Each page should be totaled and balanced.  For each debit there must be an equal credit.  If columns do not balance – check source documents for errors.