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MU ACC 221 - Getting to Know the Accounting System

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ACC 221 1st Edition Lecture 2 Outline of Previous Lecture- Chapter 1:  Assets, Liabilities, and owner’s equity Accounting Formula, Additional Factso Assets = Liability + Owner’s Equityo Additional Facts About Accounting CycleOutline of Current Lecture - Chapter 2: Getting to know the Accounting System Accounting Systemo Accounting system reportingo Staying in balance o Common Stocko General JournalCurrent Lecture- Chapter 2: Getting to know the Accounting System Accounting Systemo Accounting system reporting1. General Journal – Post individual transactions with descriptions2. General Ledger – Post individual transactions to accounts3. Trial Balance – Compares all debits with all credits- Used to make sure debits and credits are balanced- Internally used to make sure in balance – public never sees this report4. Balance Sheet – Point in time o Staying in balance Accounting Balance – Assets = Liabilities + Owner’s Equity- Debits and credits must stay in balance Even if system is in balance, it may still be wrong- Enter the wrong number- Entry is in the wrong time- Forget an entry- Put entry in wrong claims accounts- Make entries backwards (Dr. where should Cr., Cr. Where should Dr.) Normal Balance of Account – always the side that increases the accountThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.- Beginning balance always goes here- Assets side: normal balance of account on lef- Liabilities and owner’s equity sides: normal balance of account on righto Common Stock Common stock – used with corporations, Owner’s claim to assets- Used with corporations: Get shares of stock that shows ownership, not individuals who have direct access to money- Common stock account replaces cash account on owner’s equity sideo General Journal  List form, feature date, what accounts debit, what accounts credit, and details of transaction- List debits first, credits second – credits indented on list Generally work on a monthly basis Post directly to general


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