This notation indicates that the transaction has the effect of decreasing cash
frominvesting activities on the statement of cash flows (IT), increasing and decreasing
assets by the same amount on the balance sheet (AcT), and that the transaction had no
effect on the income statement (—). Because assets must always equal liabilities plus
stockholders’ equity, the effects of transactions on the balance sheet must always be
equal. For example, in the preceding transaction, the increase in assets equals the
decrease in assets.
The November 10 transaction is accompanied by the following margin
notation:SCF BS IS
—AcLc —This notation indicates that the transaction has no effect on the statement of cash
flows (—), that assets and liabilities were increased on the balance sheet (AcLc), and
there was no effect on the income statement (—).
The November 18 transaction is accompanied by the following margin
notation:SCF BS IS
Oc Ac SEc RcThis notation indicates that the transaction increased cash from operating activi-
ties on the statement of cash flows (Oc), increased assets and stockholders’ equity on
the balance sheet (AcSEc), and increased revenues on the income statement (Rc).
The journal entries in this chapter and the remainder of this text are accompanied
by similar notation to indicate their effect on the financial statements. We do not show
this notation for closing entries, since closing entries are only used to prepare the
accounting records for the next period and do not reflect underlying transactions.
Closing entries are described and illustrated later in this chapter.Posting to the Ledger
As we discussed in the preceding section, a transaction is first recorded in the journal.
The journal thus provides a chronological history of transactions. Periodically, the jour-
nal entries must be transferred to the accounts so that financial statements can be pre-
pared. The group of accounts for a business is called its general ledger. The list of
accounts in the general ledger is called the chart of accounts. The accounts are nor-
mally listed in the order in which they appear in the financial statements, beginning
with the balance sheet and concluding with the income statement. The chart of ac-
counts for Online Solutions is shown in Exhibit 4.
The process of transferring the debits and credits from the journal entries to the
accounts in the ledger is called posting. To illustrate the posting process, Online
Solutions’ November 1 transaction, along with its posting to the cash and capital stock
accounts, is shown in Exhibit 5.160 Chapter 4 Accounting Information Systems