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Accounting Concepts

Learn about key Accounting Concepts like Business Entity and Objective Evidence, and understand the Accounting Cycle including Journal, Ledger, and Worksheets. Prepare a Trial Balance and Term Review.

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Accounting Concepts

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  1. Accounting Concepts • Page 152: two new Accounting Concepts: • Business Entity – keep business separate from personal records. • Objective Evidence – documents required to prove that a transaction actually happened (source documents) LESSON 6-1

  2. Accounting Cycle • Journal – everything is recorded; permanent record • Ledger – information taken from the journal and recorded for individual accounts; permanent record • Worksheets – Columnar accounting forms used to summarize general ledger information needed to prepare financial statements – Prepared for 4 reasons: • Summarize ledger and make sure debits equals credits • Plan needed changes to bring accounting balances up to date • Separate general ledger account balances according to financial statements to be prepared • Calculate the amount of net income or net loss during a fiscal period • Not a permanent record and make be completed in pencil LESSON 6-1

  3. LESSON 6-1 Creating a Worksheet

  4. 1 Name of Company 2 Name of Report 3 Date of Report PREPARING THE HEADING OF A WORK SHEET page 153 Fiscal period – length of time for which a business summarizes and reports financial information LESSON 6-1

  5. 2 1 4 3 5 6 PREPARING A TRIAL BALANCE ON A WORK SHEET – proof of equality of debits and credits in general ledger page 154 • Write the general ledger account titles; same order as chart of accounts 2. Write the general ledger debit account balances. Write the general ledger credit account balances. 3. Rule a single line across the two Trial Balance columns. 4. Add both the Trial Balance Debit and Credit columns. 5. Write each column’s total below the single line. 6. Rule double lines across both Trial Balance columns. LESSON 6-1

  6. TERMS REVIEW page 155 • fiscal period • work sheet • trial balance LESSON 6-1

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