| We
are about to start a wholesale business to sell furniture.
One of the first things you want to do when you start
a business is to set up your chart of accounts. Next,
we will take a look at the transactions for the first
month, post these transactions, pull a trial balance and
create a balance sheet and income statement. We'll keep
things simple. To really learn accounting you will learn
how to handle the complicated transactions and do the
same kind of things you do here where it is simple.
# |
Name
of Account |
100 |
Cash |
102 |
Inventory |
103 |
Accounts Receivable |
200 |
Accounts Payable |
300 |
Jonas Furnisher,
Owner |
400 |
Sales |
500 |
Cost of Goods Sold |
501 |
Selling Expenses |
502 |
Other
Expenses |
600 |
Closing Account |
Notice that beside each
account name on the left is an account number. Assets
start with 100, Liabilities start with 200, Owner's Equity
starts with 300, Revenue starts with 400, Expenses start
with 500, and the closing account starts with 600. We
will discuss each of these accounts more as transactions
are entered, but this is how you know which account is
what. Once again look at the box below, this time with
account numbers. By
using a simple tool like the box below you know what to
debit and what to credit each time a particular account
is affected.
A
=
100,102, 103 |
I
=
600
E = 500, 501,502 |
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