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Definitions

Account: A record of increases and decreases in a specific asset, liability, or owners equity item.
Chart of Accounts: a list of accounts and the account number which identify their location in the ledger.
Compound Entry: An entry that involves two or more accounts.
Credit: The right side of an account.
Debit: The left side of an account.
Double-entry system: A system that records the dual effect of each transaction in appropriate accounts.
General Journal: A ledger that contains accounts for all assts, liabilities, equities, revenues, and
expenses.
Journal: An accounting record in which transactions are recorded in chronological (date) order.
Journalizing: The entering of transaction data in the journal.
Ledger: A book or final entry that contains all accounts for the company or specialized accounts
supporting other ledgers.
Posting: The procedure of transferring journal entries to the ledger accounts.
T accounts: A form of account resembling the letter T with the title above the horizontal line. Debits are
shown to the left of the vertical life, credits to the right.
Trial Balance: A list of accounts and their balances at a given time, usually at the end of the accounting
period.









The Accounts:
In its simplest form, an account consists of three parts:
1. Title of account,
2. Left/Debit side,
3. Right/Credit side.
The custom of having debits on the left and credits on the right is an accounting custom or rule.
This rule applies to all accounts.
An account will have a debit balance if the total of the debit amount exceeds the total of the
credit amounts. (And vice-versa).
For each transaction, debits must equal credits.
Expanding the Basic Accounting Equation
Assets = Liabilities + Owners Capital Owners Drawings + Revenues - Expenses
Steps in the Recording Process
1. Analyse each transaction in terms of its effect on the account.
2. Enter the transaction information in a journal.
3. Transfer the journal information to the appropriate accounts in the ledger.
The Journal
The journal makes several significant contributions to the recording process:
1. Discloses, in one place, the complete effect of a transactions.
2. Provides a chronological record of transactions.
3. Helps to prevent and locate errors, because the debit and credit amounts for each entry cam
ne easily compared.
4. It provides an explanation of the transaction and, where applicable, identifies the source
documents.
A complete entry consists of the following:
1. The date of the transaction
2. The accounts and amounts to be debited and credited
3. A brief explanation of the transaction
Equation analyses summarize the effects of the transactions on the three elements of the
accounting equation.
It is important to use correct and specific account titles in journalizing.




Posting
Posting involves the following steps:
- General Ledger: Enter the date, journal page, and debit or credit amount shown in the journal.
-General Journal: Write the account number to which the debit and credit amounts were
posted.
The numbers in the reference column in the journal indicate the entries that have been posted.
The explanation space for the ledger account is rarely used

Miscellaneous
The ledger should be arranged in order in which accounts are presented
The purpose of transaction analysis is first to identify the type of account involved, and then to
determine whether a debit pr a credit to the account is required.
The primary purpose of a trial balance is to prove (check) that the debits equal the credits after
posting. If the debits and credits do not agree, the trial balance can uncover errors in
journalizing and posting. In addition, it helps one prepare the financial statements.
To prepare a trial balance:
1. List the account titles and their balances, using separate columns for debits and credits.
2. Total the debit and credit column.
3. Ensure the two columns are equal.
A trial balance does not prove that all transactions have been recorded or that the ledger is
correct.
Reversing the order of numbers is called a transposition error

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