Accounting Cycle

• Economie

Give the steps of the morning activity before coming to school

Chapter 6

Section 1:The Accounting Cycle

Pages 135-138

Objectives

Explain the first three steps in the accounting cycle

Analyze the examples of source document 

Discuss the purpose of journalizing

 

A cycle is a sequence of events that occurs over and over. How have you heard the word cycle used?

Accounting Cycle

The accounting period of a business is separated into activities called the accounting cycle. These activities help the business keep its accounting records in an orderly fashion.

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Arrange the steps in order
1. Analyze each transaction
2. Collect and verify source documents
3. Journalize each transaction

Why do you think an arrow points from Step 5 back to Step 1?

Answer

Steps 1 through 5 occur many times throughout the accounting period— typically every day. Steps 6 through 9 occur only once in each accounting period.

Source document

When a business transaction occurs, a paper is prepared as evidence of that transaction. This paper is a source document.

Types of source document

The invoice lists specific information about a business transaction involving the buying or selling of an item on account.

A receipt is a record of cash received by a business.

A memorandum is a brief written message that describes a transaction that takes place within a business.

The check stub lists the same information that appears on a check: the date written, the person or business to whom the check was written, and the amount of the check

What problems might arise if you did not keep source documents? Write the importance of keeping source documents for your personal records.

Answer

Keeping receipts to obtain a refund on a purchased item or to plan a monthly budget, keeping paycheck stubs to compare with the amount reported on the Form W-2

Examine Figure 6-2. Would the buyer and seller use the identical invoice?

What is that lists specific information about a business transaction involving the buying or selling of an item on account?

General Journal 

The process of recording business transactions in a journal is called _____________

1. Check stub
2. Invoice
3. Journalizing
4. Receipt

A chronological record of the transactions of a business _____________.

1. Ledger
2. Journal
3. Receipt
4. Invoice

What is the purpose of a journal?

Answer

A journal is the only place where complete details of a transaction, 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.

Important terms of the lesson