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ACC 151 Ch. 2

The accounting process begins with:
analysis of business transactions and events
Early steps taken in the accounting process:
Analyze each transaction, Record relevant transactions, Post journal information to ledger accounts, Prepare and analyze the trial balance
Sales invoice
used by sellers for recording purposes
Source documents include:
sales tickets, checks, purchase orders, bank statements
Source documents
are the sources of accounting information
Various types of documents and other papers that companies use when they conduct their business:
are called source documents, can include sale tickets, are the source of information for recording accounting entries, can be in electronic form
Sellers require customers to have their receipts in order to exchange or return purchase items because
sellers wish to ensure that the sale in question was rung up on the register in the first place
Account
a record of the increases and decreases in a specific asset, liability, equity, revenue or expense
Common Stock
an account used to record the owner’s investment in the business
Retained earnings account
the account used to record the transfers of assets from a business to its stockholders
Accounts payable
promises of future payment
Unearned revenues
liabilities created when a customer pays in advance for products or services before the revenue is earned
Prepaid expenses
assets that represent prepayments of future expenses
Note Payable
a written promise to pay a definite sum of money on a specific future date
Ledger
a collection of all accounts (with account balances) used by a business – a record containing increases and decreases in a specific asset, liability, equity, revenue or expense item
Cash accounts include:
the value of any medium of exchange that a bank accepts for deposit
Chart of Accounts
a list of all accounts used by a company and the identification number assigned to each account
General ledger of a business
a collection of all accounts used in a company’s information system
Debit
the left- hand side of a T- account (receiving)
Credit
the right side of a T- account (losing)
A credit is used to record:
an increase in an unearned revenue account
T- account
a simple account form widely used in accounting to illustrate how debits and credits work

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