5.

1: Relationship of Revenue, Expenses, and withdrawals to Owner’s

Equity
→ Revenue, expenses, and withdrawals could be recorded as increases or
decreases directly in the capital account
→ Using Temporary Accounts. Revenue, expense, and withdrawals accounts are
used to collect information for a single accounting period. These accounts are called
temporary accounts.
→ Temporary accounts start each new accounting period with zero balances.
Ex: Utility Expense.
→ Using Permanent Accounts.In contrast to the temporary accounts, the owner’s
capital account is a permanent account. Assets and liability accounts are also
permanent accounts.
→ Permanent accounts are continuous from one accounting period to another.
5.2: Applying the Rules of Debit, and Credit to Revenue, Expense, and
Withdrawals Transactions

6.1: The Accounting Cycle

→ The accounting period of a business is separated into activities called the
accounting cycle.
→ First step: Collecting and Verifying source Documents
- When a business transaction occurs, a paper is prepared as evidence of that
transaction. This paper is a source document.

→ Second Step: Analyzing Business Transactions

- Determine the debit and credit parts of each transaction.
→ Third Step: Recording Business Transactions in a Journal
- Record debit and credit parts of each business transaction in a journal. A
journal is a record of the transactions of a business. The process of recording
business transactions in a journal is called journalizing.
- The journal is the only place where complete details of transactions, including
both the debit and credit parts, are recorded.
 - The journal is sometimes called the book of original entry because it is where
transactions are first entered in the accounting system.

→ What are the different types of accounting periods?

- An accounting period of 12 months is called a fiscal year
- If the fiscal year for a business begins in January 1 and ends on December 31,
it is called a calendar year

6.2: Recording Transactions in the General Journal

→ The general ledger is an all-purpose journal in which all the transactions of a
business may be recorded.

don't forget page number

→ How do you correct errors in the general journal?

- In a manual system, an error should never be erased . It might be seen as an
attempt to cover up a mistake or, worse, to change the accounting records
illegally.
7.1: The General Ledger
→ posting is the process of transferring information from the journal to individual
general ledger accounts.

→ What is a General ledger?

- The general ledger is a permanent record organized by account number
- After journal entries have been posted, a business owner or manager can
easily find the current balance of a specific account

→ The Four-Column Ledger Account Form

- In a manual accounting system, information about specific accounts is
recorded in ledger account forms.

(Accounts with a normal debit balance–such as asset or expense accounts–use the

Debit balance column. Accounts with a normal credit balance–such as liability or
revenue accounts–use the Credit balance column)
→ How are these records useful to managers?

7.2: The Posting Process

7.3: Preparing a Trial Balance

→ A formal way to prove the ledger is to prepare a trial balance, a list of all the
account names and their current balances.
→ When an error in a journal entry is discovered after posting, make a correcting
entry to fix the error.