Management and Organizational Studies 1023A/B Lecture Notes - Lecture 3: Accounting Equation, Financial Statement, Trial Balance

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 1023A/B
• Professor: Barry Hawn

Document Summary

A business carries on economic exchanges with six basic types of entities: Analyzing transactions: transaction analysis determines impact on the accounting equation, the accounting equation must always balance, therefore, each transaction has a dual (double-sided) effect on the equation. The t account: total the entries to each side. If the debits exceed the credits (ie the greater sum is on the left), then the account has a debit balance: total the entries to each side. If the credits exceed the debits (ie the greater sum is on the right), then the account has a credit balance. General journal step 2 of accounting cycle: accounting record where the transactions are recorded in chronological order, general journal is most common, other journals can include, cash receipts, cash disbursements, sales, purchases. Recording transactions: each transaction always affects at least two different accounts, one account has a debit effect, the second account has a credit effect, this methodology was named double-entry accounting.