Normal Balances & the Accounting Cycle
Normal Balance of Owners Equity (Capital)
Normal balance of a Capital account is credit. To increase, we credit to decrease we debit Ex: T. Smith, Capital
Normal Balance of OE (Withdrawal)
Normal balance of a Drawing account is debit. To increase, we debit to decrease we credit Ex: T. Smith, Drawing
Normal Balance of Revenue
Normal balance of a Revenue account is credit. To increase, we credit to decrease we debit Ex: Fees Income or Earned, Sales Revenue
Adjusted trial balance
a list of accounts and their balances after all adjustments have been made
General Ledger
a permanent record organized by chart of account numbers where all account balances are recorded.
Trial balance
a proof of the equality of debits and credits in a general ledger before adjustments are made and recorded.
Closing entries
journal entries used to prepare temporary accounts for a new fiscal period
Normal Balance of Liabilities
Normal balance of a liability account is credit. To increase, we credit to decrease we debit Ex: Accounts Payable, Notes Payable
Normal Balance of Expense
Normal balance of an Expense account is debit. To increase, we debit to decrease we credit Ex: Advertising, Utilities, Rent, Wages/Salaries
Normal Balance of Assets
Normal balance of an asset account is debit. To increase, we debit to decrease we credit Ex: Cash, Accounts Receivable, Building, Supplies, Equipment
Post AJE
Posting adjustments to the G/L when they are made and recorded.
Post closing G/L
Posting balances after temp accounts are closed
Financial Statements
prepared based on current accounting cycle activities.
General Journal
All transactions of a business are recorded.
post-closing trial balance
Balances of permanent accounts after closing entries.
Adjusting entries (AJE)
Transactions effected during multiple account periods which are either allocated or accrued.