Stories begin in notebooks during loose brainstorming sessions. The point is just to get ideas on paper, so sketchy drawings and scratchy handwriting are okay. Since there is no pressure of developing a final version, ideas can flow with spontaneity.
Once there seems to be a story worth developing, then it's time to bring out the bristol board and pencils to set about fleshing out the illustrations. This round of drawings can either reflect very much the original notebook sketches or can veer off in other directions.
After all the pages are penciled, then I ink over the drawings using india ink and a small brush. This is a fun phase because the book really begins to take shape as the illustrations become more concrete.
Once everything is inked, then I scan the illustrations into the computer and color them in Photoshop. The advantage is you can get vibrant, consistent colors. The disadvantage is that it doesn't look organic like watercolor. Stay in art class, kids. Don't drop it so you can have a study hall.