Chapter 2 notes

An asset increases and a claims account
increases

an asset decreases and a claims account
decreases

one asset increases and another asset decreases

1.
one claim increases and another claim decreases

entry made at the end of the period to update the accounts
before preparing the financial statements . The entries do not affect cash.

is when cash is received or paid before revenue is earned or
an expense is incurred.

Business event and then Cash exchange

Cash exchange then Business event and

is a liability
account (example used in class was a magazine subscription) we would have to
provide magazines to subscribers.

·
Recognize the expense before the cash is paid

·
Cash will be paid at a later date

Example prepaid Rent or insurance ( Assets)

STEP 1

Record the entries as they occur in the general journal –
these are journal entries.



Step 2

Entries are “posted” to the general ledger from the general
jounal

T-Accounts



Step 3

Prepare Adjusting
entries---



Step 4

Prepare the trial balance—list of all of the accounts and
their balances .


Step 5



Prepare the financial statements

Step 6

Close the accounts with Journal entries

Temporary (income statement accounts )

Permanent (balance sheet accounts)