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You need to know about revenue recognition (when a company can record sales revenue), the matching principle (matching expenses to revenues), and the accrual principle. The general ledger serves as the eyes and ears of bookkeepers and accountants and shows all financial transactions within a business. Essentially, it is a huge compilation of all transactions recorded on a specific document or in accounting software. Posting dates and amounts with debit to cash, credit to common stock. All expense accounts will have the word expense, such as wages expense, salary expense, rent expense, etc.<\/p>\n<\/p>\n
As such, most assets start with \u201c1\u201d, liabilities with \u201c2\u201d, capital and withdrawals\/dividends as \u201c3\u201d, revenues as \u201c4\u201d and sometimes \u201c5\u201d, and expenses are normally \u201c6\u201d through \u201c9\u201d. Since each business uses different numbers, you don\u2019t need to worry about memorizing the numbers given here. But, do note the first number of each group of account. Accounting is the recording, analysis and reporting of events that are materially significant to a company.<\/p>\n<\/p>\n
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The recording process of accounting takes care of Steps 2 and 3 of the accounting cycle which are journalizing and posting. Analyzing your transactions, determining the accounts affected, whether they should be debited or credited, what the amounts should be, are the difficult parts in accounting. Once the analysis is done in Step 1, everything from now on is simple logic.<\/p>\n<\/p>\n
For each of the above event, note the accounts that need to be debited and credited. In summary, Assets, Withdrawals\/dividends, and Expenses \u2013 increase with debit, decrease with credit. And, Liabilities, Revenues, and Capital \u2013 increase with credit, decrease with debit. Service Revenue10,610 Equipment49,360Owner’s Drawings700 Gasoline… The T-accounts below summarize the ledger of Daggett Landscaping Company at the end of the first month of operations.<\/p>\n<\/p>\n