Professional Documents
Culture Documents
Table of Contents
Exhibit 5: Balance sheet ...................................................................................................................................................... 2
Exhibit 6: Rules of debit and credit ..................................................................................................................................... 2
Exhibit 7: Steps in the Accounting Cycle ............................................................................................................................. 3
Exhibit 8: Journal Entry ....................................................................................................................................................... 3
MicroTrain Chart of Accounts ............................................................................................................................................. 4
Exhibit 9: Balance sheet ...................................................................................................................................................... 4
Exhibit 10: General Journal and General Ledger ................................................................................................................ 5
Exhibit 11: General journal (after posting) ......................................................................................................................... 6
Exhibit 12: General ledger - Extended illustration.............................................................................................................. 8
Exhibit 13: Trail balance .................................................................................................................................................... 11
Hewlett-Packard Data ....................................................................................................................................................... 12
Key terms .......................................................................................................................................................................... 13
200 Accounts Payable Amounts owed to creditors for items purchased from
them.
Liabilities
216 Unearned Service Fees Amounts received from customers before the training
services have been performed for them.
505 Advertising Expense The cost of advertising incurred in the current period.
506 Gas and Oil Expense The cost of gas and oil used in trucks in the current
Expenses period.
507 Salaries Expense The amount of salaries incurred in the current period.
511 Utilities Expense The cost of utilities incurred in the current period.
JENKS COMPANY
General Journal Page 1
Account Titles and Explanation Post.
Date Ref. Debit Credit
Explanation Post
Date Debt Credit Balance
Ref.
2010 Jan. 1(B) Stockholders Investment G1 1 0 0 0 0 (A) 1 0 0 0 0 Dr
5 Bank loan G1 5 0 0 0 1 5 0 0 0 Dr
Post
Date Explanation Debt Credit Balance
Ref.
Borrowed cash
2010 Jan. 5 G1 5 0 0 0 5 0 0 0 Cr
Post
Date Explanation Debt Credit Balance
Ref.
2010 Jan. (B)1 Cash from stockholders G1 1 0 0 0 0 (D) 1 0 0 0 0 Cr
Cont/…
Post.
Date Account Titles and Explanation Debit Credit
Ref.
MICROTRAIN COMPANY
General Ledger – Page 1
MICROTRAIN COMPANY
General Ledger – Page 2
Prepaid Rent. Account No 112
MICROTRAIN COMPANY
General Ledger – Page 3
MICROTRAIN COMPANY
Trial Balance
December 31, 2010
Hewlett-Packard Data
Increase or Percent of
(Decrease) Total Assets
2000 over 1999 October 31
Property, plant and equipment, net 4,500 4,333 167 4% 13.2% 12.3%
Long-term investments and
other non-current assets 6,265 9,322 (3,057) -33% 18.4% 26.4%
Key terms
Account A • part of the accounting system used to classify and summarize the increases, decreases, and balances
of each asset, liability, stockholders' equity item, dividend, revenue, and expense. The three-column account
is normally used. It contains columns for debit, credit, and balance.
Accounting cycle • A series of steps performed during the accounting period (some throughout the period and
some at the end) to analyze, record, classify, summarize, and report useful financial information for the
purpose of preparing financial statements.
Accrual basis of accounting • Recognizes revenues when sales are made or services are performed, regardless of
when cash is received. Recognizes expenses as incurred, whether or not cash has been paid out.
Business transactions • Measurable events that affect the financial condition of a business.
Chart of accounts • The complete listing of the account titles and account numbers of all of the accounts in the
ledger; somewhat comparable to a table of contents.
Compound journal entry • A journal entry with more than one debit and/or credit.
Credit •The right side of any account; when used as a verb, to enter a dollar amount on the right side of an
account; credits increase liability, stockholders' equity, and revenue accounts and decrease asset, expense,
and Dividends accounts.
Credit balance • The balance in an account when the sum of the credits to the account exceeds the sum of the
debits to that account.
Cross-indexing • The placing of (1) the account number of the ledger account in the general journal and (2) the
general journal page number in the ledger account.
Debit • The left side of any account; when used as a verb, to enter a dollar amount on the left side of an
account; debits increase asset, expense, and Dividends accounts and decrease liability, stockholders' equity,
and revenue accounts.
Debit balance • The balance in an account when the sum of the debits to the account exceeds the sum of the
credits to that account.
Double-entry procedure • The accounting requirement that each transaction must be recorded by an entry that
has equal debits and credits.
Horizontal analysis •The calculation of dollar and/or percentage changes in an item on the financial statements
from one year to the next.
Journal A chronological (arranged in order of time) record of business transactions; the simplest form of journal is
the two-column general journal.
Journal entry Shows all of the effects of a business transaction as expressed in debit(s) and credit(s) and may
include an explanation of the transaction.
Journalizing • A step in the accounting recording process that consists of entering the effects of a transaction in a
journal.
Ledger • The complete collection of all of the accounts of a company; often referred to as the general ledger.
Nominal accounts • See temporary accounts.
Note • An unconditional written promise to pay to another party the amount owed either when demanded or at
a certain specified date.
Permanent accounts (real accounts) • Balance sheet accounts; their balances are not transferred (or closed) to any
other account at the end of the accounting period.
Posting • Recording in the ledger accounts the information contained in the journal.
Real accounts • See permanent accounts.
Simple journal entry An entry with one debit and one credit.
T-account • An account resembling the letter T, which is used for illustrative purposes only. Debits are
entered on the left side of the account, and credits are entered on the right side of the account.
Temporary accounts (nominal accounts) • They temporarily contain the revenue, expense, and dividend
information that is transferred (or closed) to a stockholders' equity account (Retained Earnings) at the end of
the accounting period.
Trial balance • A listing of the ledger accounts and their debit or credit balances to determine that debits equal
credits in the recording process.
Vertical analysis • Shows the percentage that each item in a financial statement is of some significant total such
as total assets or sales.