Lecture 2 - The Accounting Cycle (cont.)

The Accounting Cycle (continued)
In the standard accounting cycle, transactions are first recorded in journals in a uniform, systematic way and then (after transactions are checked for accuracy) they are transferred to the actual accounts.

The standard form of a journal entry has both debits and credits, which must equal each other. Debits are listed first, followed by credits. Credits are traditionally indented. Explanations are typically appended to the end of the journal entry.

The process of moving transactions from journal entries to the general ledger is called "posting".

Additional Terms

The Chart of Accounts is a listing of all the accounts the company uses in its General Ledger. Usually the listing is in the following order:

1. Assets
   
2. Liabilities
3. Owners' Equity
4. Revenues
5. Expenses

A Trial Balance is a listing of the accounts and their respective balances. Typical balances are:

• Assets - Debit
• Liabilities - Credit
• Owners' Equity - Credit
• Revenues - Credit
• Expenses - Debit