Week 2- ACCT1101

• Transactions

  Economic events that occur within a business, involving the exchange of goods, services, or resources
• Purpose of transactions

  Recorded to track the financial activities of a business and provide information for decision-making, reporting, and compliance
• Evidence for transactions

  • Invoices
  • Receipts
  • Contracts
  • Bank statements
  • Other documents that support the occurrence and details of the transaction
• Accounting cycle


  1. Analyzing transactions

  2. Journalizing entries

  3. Posting to ledger accounts

  4. Preparing a trial balance

  5. Making adjusting entries

  6. Preparing financial statements

  7. Closing accounts
• Debit

  Increases in assets, expenses, and dividends; decreases in liabilities, equity, and revenue
• Credit

  Increases in liabilities, equity, and revenue; decreases in assets, expenses, and dividends
• The application of debit and credit rules ensures that each transaction is recorded with equal debits and credits, maintaining the accounting equation (Assets = Liabilities + Equity)
• Purpose of the general journal

  Used to record transactions that don't fit into specialized journals, such as sales or purchases journals
• Format of the general journal


  Includes columns for the date, accounts debited and credited, explanation of the transaction, and reference numbers for posting to ledger accounts
• Recording transactions in the general journal and transferring to the general ledger

  1. Transactions are recorded in the general journal using double-entry accounting, ensuring each transaction has at least one debit and one credit entry

  2. After journalizing, entries are posted to respective ledger accounts in the general ledger, where account balances are summarized
• Purpose of the trial balance


  • A summary of all ledger account balances at a specific point in time
  • Ensures that total debits equal total credits, serving as a preliminary check on the accuracy of the recording and posting of transactions
  • Helps in identifying errors in the ledger accounts before preparing financial statements
• Preparing a trial balance

  1. List all ledger accounts and their balances (debit or credit)

  2. Total the debit and credit columns separately

  3. Verify that the total debits equal the total credits. If they don't match, investigate and correct any errors before proceeding with financial statement preparation