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LESSON 4-1 PREPARING A CHART OF ACCOUNTS RELATIONSHIP OF A T ACCOUNT TO AN ACCOUNT FORM 2 Balance columns LESSON 4-1 page 91 CHART OF ACCOUNTS 3 LESSON 4-1 page 92 CHART OF ACCOUNTS - TERMS 4 Ledger – a group of accounts. General Ledger – a ledger that contains all accounts needed to prepare financial statements. Account Title – the name given to an account. Account Number – the number assigned to an account. Chart of Accounts – a list of account titles and numbers showing the location of each account in a ledger. LESSON 4-1 CHART OF ACCOUNTS 5 Accounts in a general ledger are arranged in the same order as they appear on financial statements. TechKnow Consulting’s chart of accounts shows five general ledger divisions: 1. 2. 3. 4. 5. Assets Liabilities Owner’s Equity Revenue Expenses See page 92 LESSON 4-1 ACCOUNT NUMBERS 6 LESSON 4-1 page 92 ASSIGNING ACCOUNT NUMBERS 7 TechKnow Consulting initially assigns account numbers by 10s so that new account can be added easily. Nine numbers are unused between each account on TechKnow Consulting’s chart of accounts. New numbers can be assigned between existing account numbers without renumbering all existing accounts. File maintenance – the procedure for arranging accounts in a general ledger, assigning account numbers, and keeping records current. LESSON 4-1 ADDING NEW ACCOUNTS 8 Unused account numbers are assigned to new accounts. 510 515 520 LESSON 4-1 Advertising Expense Gasoline Expense Insurance Expense (Existing account) (New account) (Existing account) REMOVING ACCOUNTS 9 When an account is no longer needed, it is removed from the general ledger and chart of account. Account number is then available to assign to another account if the need should arise. LESSON 4-1 ADDING A NEW ACCOUNT AT THE END OF A LEDGER DIVISION 10 The next number in a sequence of 10s is used. 550 Supplies Expense (Existing account) 560 570 Utilities Expense Water Expense (Existing account) (New account) LESSON 4-1 OPENING AN ACCOUNT IN A GENERAL LEDGER page 94 11 1 1. Write the account title. 2. Write the account number. LESSON 4-1 2 OPENING AN ACCOUNT IN A GENERAL LEDGER 12 Opening an account – writing an account title and number on the heading of an account. A general ledger account is opened for each account listed on a chart of accounts. Accounts are opened and arranged in a general ledger in the same order as on the chart of accounts. LESSON 4-1