Identify asset contra liabilities SE revenue expense accounts Ability to Apply the debit and credit rules when recording events Post journal entries to ledger preparing Trial Balances Understand of why accruals are necessary Prepare adjusting entries correcting entries Prepare closing entries Prepare Financial Statements Follow Instructions How to identify type of accounts 1 All resources are assets account names that have the word receivable prepaid all assets except Cash will lose its value over time 2 Monies owed to creditors are liabilities account names that have the word payable or unearned notes payable usually carries an interest expense accounts payable unearned revenue 3 Revenue Accounts 4 Expense Accounts 5 Stockholder s Equity Common Stock retained earnings dividends Debit and Credit Rule Asset Expense Dividend accounts are debited when increased Liabilities Revenue Common Stock Retained Earnings are credited when increased T Account Left side is always debit Right side is always credit Ledger Date Account Title Ref Dr Cr Balance Significance of a Trial Balance Cash Notes Payable Debits Credits Adjusting Journal Entries COMPANY S NAME CAPS Trial Balance Date 15 200 15 200 15 200 15 200 To record usage wear and tear of assets To record expense incurred but not paid for To record revenue earned but not billed yet revenue recognition matching Closing Entries To transfer revenue and expense account balances to Retained Earnings STUDY General Journal Closing Entries Income Summary Chapter 4 Financial Statements Income Statement revenue and expenses Retained Earnings Statement Balance Sheet Find all assets and total then all liabilities total then SE total Softbyte Inc receives a bill for 250 for advertising but postpones payment Purchase of Advertising on Account Advertising Expense 250 Accounts Payable 250 Softbyte Inc pays its advertising bill in Cash Payment of Accounts Payable Accounts Payable Cash 250 250 Softbyte Inc provides 3 500 of programming services for customers They get 1 500 cash and the other 2 000 is billed on account Services Rendered for Cash and Credit Cash Accounts Receivable 1500 2000 Service Revenue Softbyte Inc receives 600 in cash from its customer who was billed 2000 Receipt of Cash on Account Cash 600 Accounts Receivable 3500 600