2. Steps in the Accounting Cycle
• Analyzing business transactions through
source documents (business documents)
• Business Transactions? Personal
Transactions?
• Effect on the basic accounting equation?
3. Steps in the Accounting Cycle
› Journalizing, or the recording of
transactions in a Journal or Book of
Original Entry
7. Steps in the Accounting Cycle
Balancing of the accounts and
preparation of the trial balance
Trial Balance - a list of account balances
taken from the ledger
8. Steps in the Accounting Cycle
Preparation of the 10-column worksheet
Journalizing and posting adjusting entries
Preparation of the financial statements
based on adjusted balances
Recording and posting of closing entries
9. Steps in the Accounting Cycle
Balancing and preparing a Post-Closing
Trial Balance from the list of open account
balances taken from the ledger
Preparation of the reversing entries for
certain adjusted accounts to enable the
business to maintain the same method of
recording certain transactions from one
period to another. This is optional.
10. Bookkeeping
Bookkeeping is the systematic and
chronological recording of transactions in
books of accounts following a series of
steps and procedures commonly referred
to as the accounting cycle.
12. Journal
Date is used to show the day of the month
on which each transaction takes place.
Particulars column or sometimes called
the Account Titles and Explanation
column, is used to show every account
title affected by each transaction and to
give some explanation or justification of
the debits and credits being made to the
accounts.
13. Journal
P/R (Posting Reference) column is
important because it indicates the
numbers of the accounts in the ledger to
which the debits and credits recorded in
the journal have been transferred. In
manual systems, these account numbers
are inserted at the proper time in the P/R
column of the journal.
14. Journal
Debit and credit columns indicate the
amounts to be debited or credited to the
account titles written in the particulars
column
15. The recording process
Transactions are first analyzed, identifying
the transaction from business source
documents, e.g., official receipts, cash
vouchers, etc.
Business documents are formal written
records that provide information to
everyone with an understanding of
accounting to measure the amount of the
transaction and to analyze it in the same
way.
16. The recording process
The day on which the transaction took
place is written in the Date column.
The account titles affected by the
transactions are put into the particulars
column. At the same time each account
title is written in the journal, the peso
amount is inserted in the appropriate
Debit or Credit column. For each journal
entry, the total debits must equal the total
credits.
17. The recording process
A brief explanation is written immediately
below the last account title credited. The
explanations follow no rigid rules. The
accountant uses his own wording in every
explanation.
It is advisable to leave a blank line
following the explanation to help
distinguish one journal entry from the next.
