Ability to:- Identify asset, contra, liabilities, SE, revenue, expense accounts- 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 InstructionsHow 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 Accounts4. Expense Accounts5. Stockholder’s Equity: Common Stock, retained earnings, dividendsDebit 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, BalanceSignificance of a Trial Balance:COMPANY’S NAME (CAPS)Trial BalanceDateCash 15,200Notes Payable 15,200Debits = Credits 15,200 15,200Adjusting Journal Entries:- 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 250Accounts Payable 250Softbyte Inc. pays its advertising bill in Cash.(Payment of Accounts Payable)Accounts Payable 250Cash 250Softbyte 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 1500Accounts Receivable 2000Service Revenue 3500Softbyte Inc. receives $600 in cash from its customer who was billed $2000. (Receipt of Cash on Account)Cash 600Accounts Receivable