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Accounting I ReviewThe Accounting Cycle: Steps 1 through 5
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Pages 6-11
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VocabularyAssets
Items of value owned or controlled by a business.
Liabilities Creditors’ claims to the assets of a business. Debts of a business
Equity Owner’s claims to assets
Sole Proprietorship – owner’s equityCorporation – stockholder’s equity
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Vocabulary Account
Record of increases and decreases and the balance for a specific item (ex: supplies)
Double-entry Business transactions affecting two
accounts Debit, left Credit, right
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Permanent Accounts
Assets Liabilities Owners Equity
Balances are carried forward from one accounting period to the next.
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Temporary Accounts Used for one year
End of year, balances are transferred to the stockholder’s equity account Retained Earnings.
Revenue, cost of merchandise, and expenses
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Write the increase and decrease side (t-account) for each of the following in your notes…
Assets
Liabilities
Stockholder’s Equity
Revenue
Cost of Merchandise
Expenses
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Chart of Accounts Open your textbook to page 8
Backcountry Outfitters Chart of Accounts
Take a photo with your iPad if needed
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The Steps in the Accounting CycleStep #1 – Collecting and Verifying Source Documents (receipts, memos, check stubs, sales slips)
Step #2 – Analyzing Business Transactions(determine the debit and credit parts of the transaction – use the seven-step method p.10)
Demonstration Problem 1-1 (On Your Own)Purple Handout
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Accounting Cycle ReviewCh. 1.2 ReviewPages 12-15
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Step 3: Preparing General Journal Entries Journal
A chronological record of the transactions of a business
General Journal Two-column journal where all types of business
transactions are recorded
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Example On December 1, Backcountry Outfitters sold
merchandise on account to Alex Post for $187 plus $7.48 sales tax, Sales Slip 92.
Record in your notes…1. Identify the affected accounts.2. Classify each of the accounts.3. Determine the amount that is increased or
decreased for the accounts.4. Debit or Credit?5. Draw the T-Accounts6. Complete the General Journal.