By Dr. Wilfred Funk, Norman Lewis
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Extra info for 30 Days To A More Powerful Vocabulary
Debiting an account is often referred to as charging the account. 2 RECORDING TRANSACTIONS The first step in the accounting cycle is the execution of a transaction. Information pertaining to the transaction is then placed on a document. Utilizing the debit and credit scheme, the transaction is then recorded in the journal. Journalizing requires that the transaction is analyzed to determine which accounts are affected, whether the effect is an increase or decrease, and finally, if this increase or decrease is represented by a debit or credit.
In a corporation, the emphasis is on reports of changes in retained earnings (net income retained in the business). Those changes are reported in the retained earnings statement. BALANCE SHEET: A list of the assets, liabilities and owner’s equity of a business entity as of a specific date, usually at the close of the last day of a month or a year. Assets are usually listed first, followed by a list of liabilities and a section detailing owner’s equity. Asset accounts (known as the left-hand side of the balance sheet) carry debit balances.
Generally Accepted Accounting Principles require the use of the accrual basis so that revenues recognized during a given accounting period are matched with related expenses incurred in that same period. This process if facilitated by an adjusting process performed at the end of each accounting period. 1 ADJUSTMENT OF PREPAID ASSET ACCOUNTS Many accounts do not require adjustment at the end of an accounting period. Accounts that are usually updated upon each transaction such as cash, accounts receivable or accounts payable, will probably reflect the true existing balance at the end of a period.
30 Days To A More Powerful Vocabulary by Dr. Wilfred Funk, Norman Lewis