Accounts in Accounting Cycle

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Accounts in Accounting Cycle

Lecture number:
Lecture Note
Miami University, Oxford
Acc 221 - Intro to Financial Accounting
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Lecture 5 Outline of Previous Lecture  Chapter 3: Basic Transactions in Accounting System  Accounting System o Shareholders o Accounting Periods  Differences in Assets o Inventory v. Equipment  Basic Transactions Outline of Current Lecture  Chapter 4: Accounts in Accounting Cycle  Detailing Accounts o Revenue and expense accounts begin at zero each period o New asset accounts o New liability accounts o New owner’s equity accounts Current Lecture  Chapter4:  Detailing Accounts o Revenue and expense accounts always begin at zero for each new accounting period  Closing accounts – accounts that end at the end of accounting cycle; amounts do not roll over to next cycle, accounts begin at zero.  Ending balances for each revenue and expense account always tells total transactions of the month  Numbers used to produce the changes report (account summary)  At end of the month, the ending balances of each revenue and expense account is translated into the retained earnings account, whose balance rolls over to the next cycle. o New Assets Accounts:  Cash  Accounts Receivable – used when customers pay on credit  Inventory  Equipment o New Liability Accounts  Note Payable – money leaned from bank  Interest Payable – interest owed to bank ACC 221 1st Edition

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