Scribd
Upload
5 views2 pages

The Accounting Cycle

The document outlines the accounting cycle, detailing steps such as analyzing transactions, journalization, posting to the ledger, and preparing financial statements. It explains the process of journalizing transactions, types of journal entries, and the distinction between trade and cash discounts. Additionally, it covers methods of accounting for income and expenses, emphasizing the expense and asset methods.

Uploaded by

ABELON, MIKHAIL CLINT B.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
5 views2 pages

The Accounting Cycle

The document outlines the accounting cycle, detailing steps such as analyzing transactions, journalization, posting to the ledger, and preparing financial statements. It explains the process of journalizing transactions, types of journal entries, and the distinction between trade and cash discounts. Additionally, it covers methods of accounting for income and expenses, emphasizing the expense and asset methods.

Uploaded by

ABELON, MIKHAIL CLINT B.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

THE ACCOUNTING CYCLE

ANALYZING TRANSACTIONS- check the nature of the transactions


JOURNALIZATION- the process of recording the business transaction in the journal
POSTING to the ledger- the process of transferring the information from the journal to the ledger.
PREPARING THE TRIAL BALANCE- the process of taking the balances of open accounts from the ledger,
ADJUSTING THE BOOKS- entries prepared at the end of the accounting period to update the records.
PREPARING THE FINANCIAL STATEMENTS- refers to the preparation of accounting reports, the Income
Statement, Balance Sheet, Statement of Owner’s Equity and Statement of Cash Flows.
CLOSING THE BOOKS- refers to the preparation of closing entries at the end of the accounting period
to bring the income and expense accounts to zero balance.
PREPARING A POST-CLOSING TRIAL BALANCE- refers to the preparation of a Trial Balance after closing
the income and expense accounts. The post closing trial balance shows only the assets, liabilities and
owner’s equity.
REVERSING ENTRIES- are prepared at the beginning of the next accounting period to reverse certain
adjustments that were made at the end of the accounting period.

JOURNALIZATION
THE RECORDING OF BUSINESS TRANSACTIONS IN TERMS OF DEBIT AND CREDIT IN A JOURNAL. THE
SIMPLEST FORM OF JOURNAL IS CALLED THE GENERAL JOURNAL.
A JOURNAL IS A CHRONOLOGICAL RECORD OF THE ENTITY’S TRANSACTIONS.IT IS THE BOOK OF
ORIGINAL ENTRY.

HOW TO JOURNALIZE A TRANSACTION


ENTER THE DATE AND THE YEAR IN THE DATE COLUMN
THE DEBIT ENTRY IS PLACED IN THE “ EXPLANATION” COLUMN.
THE CREDIT ENTRY IS PLACED ON THE NEXT LINE AFTER THE DEBIT ENTRY, INDENTED ABOUT ONE
HALF INCH.
A BRIEF EXPLANATION IS WRITTEN ON THE THIRD LINE WHICH IS ALSO INDENTED.
LEAVE THE NEXT LINE BEFORE ENTERING THE SECOND JOURNAL ENTRY.
A COMPLETE JOURNAL ENTRY IS COMPOSED OF A DEBIT AND A CREDIT PLUS A BRIEF EXPLANATION.
THE AMOUNTS ARE ENTERED IN THE IN THE DEBIT AND CREDIT COLUMN IN THEIR PROPER MONEY
COLUMN.
THE F IN THE “F” COLUMN STANDS FOR FOLIO OR REFERENCE.

TYPES OF JOURNAL ENTRY


SIMPLE JOURNAL ENTRY- when there is one debit and one credit
COMPOUND JOURNAL ENTRY - when the journal entry has two or more debit or two or more credit. It
may take any of the following form:
One debit and two or more credits
Two or more debits and one credit
Two or more debits and two or more credits

DISCOUNTS
TWO KINDS OF DISCOUNTS:
1.TRADE DISCOUNT - ARE DEDUCTIONS FROM THE LIST PRICE TO ENCOURAGE BUYERS TO BUY MORE.
THIS IS IMMEDIATELY DEDUCTED FROM THE LIST PRICE. THIS IS NOT RECORDED IN THE BOOKS.
2. CASH DISCOUNTS - ARE DEDUCTIONS FROM THE INVOICE COST TO ENCOURAGE CUSTOMERS TO
PAY EARLY.THIS IS RECORDED IN THE BOOKS AS EITHER SALES DISCOUNT OR PURCHASE DISCOUNT.
HOWEVER PURCHASE DISCOUNT ON FIXED ASSETS ARE DIRECTLY DEDUCTED TO THE COST OF THE
ASSET.
DISCOUNT TERMS
TRADE DISCOUNT- 10 AND 5 (MEANING 10 % AND 5%. THE FIRST DSCOUNT OF 10% IS DEDUCTED
FROM THE LIST PRICE AND THE SECOND DISCOUNT OF 5% IS DEDUCTED FROM THE BALANCE AFTER
DEDUCTING THE FIRST DISCOUNT.

B. TRADE DISCOUNT- 10% (TO BE DEDUCTED FROM THE LIST PRICE)


C. CASH DISCOUNTS- 2/10, N/30
D. CASH DISCOUNT - ⅖;1/10, N/30
E. 2, eom

METHODS OF ACCOUNTING FOR INCOME & EXPENSES

ASSET METHOD AND EXPENSE METHOD FOR EXPENSES


INCOME METHOD AND LIABILITY METHOD FOR INCOME

EXPENSE METHOD- IS USED WHEN AN EXPENSE ACCOUNT IS DEBITED AT THE TIME OF PAYMENT
ASSET METHOD- IS USED WHEN THE ASSET ACCOUNT IS DEBITED AT THE TIME OF PAYMENT
WHEN THE PROBLEM IS SILENT, THE EXPENSE METHOD IS ALWAYS USED.

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy