MGRL-1200 Lecture Notes - Lecture 2: Financial Statement, Retained Earnings

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In other words, record revenues and the related expenses in the same accounting period: conservatism avoid overstating assets or income, but remain unbiased. Accounting cycle: analyze transactions (what accounts are affected and how?, record the effects of the transactions (i. e. journal entries) How we record transactions is based on the accounting equation, Account record showing increases and decreases of a financial statement item (e. g. cash, accounts payable, sales rev, salary expense, etc. ) Ledger group of accounts and their balances (see pp. T accounts teaching tool to show increases & decreases to accounts using debits & credits. Also can be used like a ledger to determine account balances. See page 85 for examples note debits are always shown on the left, credits are always shown on the right. Debits and credits represent increases and decreases in an account. When a debit or credit means increase or decrease depends on the account we are using at the time.

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