Please enable JavaScript.

Coggle requires JavaScript to display documents.

Chapter 4: Recording external transactions, The accounting process,…

- - - - Owner's equity
        :warning: remember there are only 4 transactions that affect OE, & investments and distributions to owner does not affect statement of profit or loss
        ∴ increases in OE as a result of investment by owner are recorded on the right side of the capital account as a credit (+)
        decrease in OE as a result of distributions to owner are recorded on the left side of the distributions account as a debit (-)
        
        :warning: the earning of income and incurral of expenses affects the statement of profit or loss and ∴ OE:
        ∴ increase in income is recorded on the right side of income account as a credit (+)
        decrease in income is recorded on the left side of income account as a debit (-)
        decrease in expenses is recorded on the right side of expenses of the account as a credit (-)
        (because a decrease in expenses INCREASES OE, &OE increases on right (credit) side)
        increase in expenses is recorded on the left side of expenses account as a debit(+)
        (because an increase in expenses DECREASES OE, OE decreases on left (debit) side)
- - - - Prepare a pre-adjustment trial balance
        
        Process adjusting entries
        
        Prepare the post-adjustment trial balance
        
        Prepare financial statements
        
        Process closing entries