Adjusting Journal Entries

Journal entries made at the end of the accounting period (month, quarter, and/or year) to recognize transactions that have occurred prior to the statements’ issue date, but which have not yet been recorded in the journal. Examples of these entries include: depreciation; salaries earned, but not yet paid; adjustments to prepaid items, like insurance and interest on the mortgage which has not yet been paid.

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The General Ledger and Trial Balance

During the month, the journal entries made to record the January transactions would be posted from the general journal to the general ledger. The general ledger is a book containing a record of each account. (See boxed section below Figure 6.8.) Posting is simply the process of transferring the information from the general journal to the individual account pages in the general ledger.

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The General Journal (Double-Entry Accounting)

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The terms “debit” and “credit” are enough to induce fear in even the most intrepid non-accountant. But even though you may never become an accountant, you will need to understand these concepts in order to have a solid grasp of accounting and business. In this chapter you’ll learn what these terms mean and how they are used in the world of accounting.

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Income Statement Illustrated and Transactions That Effect it

icome statment

The Income Statement presents a summary of an entity’s Revenues (what the company earned from sales of products and services) and Expenses (what was expended to earn this revenue) for a specific period of time, such as a month, a quarter, or a year. This period of time is known as the accounting period. One key difference between the Income Statement and the Balance Sheet is that the Income Statement reflects a period of time rather than a single moment in time as with the Balance Sheet. The Income Statement is also called a Statement of Earnings or a Statement of Operations.

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