Accounting: 5-2 Understanding the General Ledger

What is the third step of the accounting cycle?

• Adjusting Entries

• Unadjusted Trial Balance

• Posting to the General Ledger

• Identify and Analyze Transactions

Why do we need a General Ledger?

• To quickly analyze transactions for specific accounts

• To prepare financial statements

• To organize transactions in chronological order

• To record every transaction

What is a General Ledger?

• A collection of all account transactions and balances

• A ledger containing all journal entries

• A ledger containing only the accounts needed to prepare financial statements

• An account that is included in company financial statements

What is the difference between a Ledger and a Journal?

• Journals record every transaction, they don’t “care” about what accounts are involved

• The ledger is the “book of original entry”

• The journal is the “book of second entry”

• Ledgers only include account-specific transactions

What do ledger accounts contain?

• The date of the transaction and the amount debited or credited

• A unique account title and account number

• A collection of transactions for each account

• The chart of accounts

What is the account number for Cash based on RockHill Media’s chart of accounts?

• 120

• 110

• 140

• 130

What does the ledger account for Cash show?

• The amount debited or credited with each transaction

• The balance of the Cash account after each transaction

• The date of the transaction

• All journal entries involving cash