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STARTING AN ACCOUNTING SYSTEM (The Accounting Cycle (Analyzing Source …
STARTING
AN ACCOUNTING SYSTEM
The Accounting Equation
Equity of persons to whom
a business owes money
liability
Equity of the owner
capital
Assets = Liabilities + Capital
The Double-Entry
Bookkeeping System
each financial transaction is recorded
as two separate accounting entries
the left (asset) side
the right (liabilities + owners’ equity)
side
The Accounting Cycle
Posting
Transactions
general ledger
T account
Left or debit side
Right or credit side
Title of Account
Preparing the
Trial Balance
a summary of the balances of
all general ledger accounts
Journalizing the
Transactions
specialized journal
general journal
Preparing Financial Statements
and Closing Books
information is presented in a standardized
format to make the statements
as generally accessible
as possible to the various parties
Analyzing Source
Documents
cash register tapes
sales slips
invoices
receipts