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Recording Business Transactions

The document discusses basic accounting concepts including the accounting cycle, double-entry accounting, journals, general ledger, trial balance, and provides an example problem to record business transactions in a journal. Specifically, it provides 10 steps in the accounting cycle, explains that assets normally have debit balances while liabilities and owner's equity have credit balances, defines journals, general ledger, trial balance, and provides a sample problem to record 8 business transactions of a consulting company in its journal in the first month of operations.

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290 views

Recording Business Transactions

The document discusses basic accounting concepts including the accounting cycle, double-entry accounting, journals, general ledger, trial balance, and provides an example problem to record business transactions in a journal. Specifically, it provides 10 steps in the accounting cycle, explains that assets normally have debit balances while liabilities and owner's equity have credit balances, defines journals, general ledger, trial balance, and provides a sample problem to record 8 business transactions of a consulting company in its journal in the first month of operations.

Uploaded by

Ash imo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Recording Business Transactions

(Basic Accounting)
Accounting Cycle
• The accounting cycle is the process involving
sequential steps by which companies produce
their financial statements.
Accounting Cycle
1. Identify transactions or events to be recorded.
2. Journalize transactions and events.
3. Posting from journals to ledger.
4. Prepare unadjusted trial balance.
5. Journalize and post adjusting journal entries.
6. Prepare adjusted trial balance.
7. Prepare financial statements.
8. Journalize and post closing journal entries.
9. Prepare post-closing trial balance.
10.Journalize and post reversing journal entries.
Asset Accounts
• Asset accounts normally have debit balances.
• An increase in an asset is recorded on the left
(debit) side of the account. While a decrease
in an asset is recorded on the right (credit)
side of the account.
Liability & Owner’s Equity Accounts
• Liability & Owner’s Equity account normally
have credit balances.
• An increase in a liability or an owner’s equity
account is recorded on the right (credit) side
of the account.
• A decrease in a liability or an owner’s equity
account is recorded on the left (debit) side of
the account.
Double-Entry Accounting
• The manner of recording transactions such
that the amounts debited always equal the
amounts credited is known as the double-
entry accounting.
Journals
• A journal is a chronological record of all
company’s business transactions.
• A journal is commonly called a book of
original entry because it is here that the first
formal accounting record of a transaction is
made.
• Entering the transaction in a journal is called
journalizing.
General Ledger
• A complete set of all the accounts used by a business is
called the General Ledger.
• The ledger is the grouping of all accounts of a company
showing its respective outstanding balances.
• It is called the book of final entry.
• It presents the changes in specific account balances like
Cash, Accounts Receivable, Accounts Payable, etc.
• Posting involves the transferring of journal entries to
the ledger accounts to bring together the effect of the
transactions to the individual accounts of the company.
Trial Balance
• A trial balance is a list of all account with their
balances in the order in which they appear in
the ledger. Assets, Liabilities, Owner’s Equity,
Revenue and Expenses.
• The debit balances are listed in the left-hand
column and the credit balances in the right-
hand column.
• The totals of the two columns must be equal.
Problem Exercise
Required: Record the following transactions in the journal of Shin
Consulting Service. Use the following accounts:
• Cash
• Accounts receivable
• Office Supplies
• Building
• Accounts Payable
• Anne Shin, Capital
• Service Revenue
• Salary Expense
• Rent Expense
Shin Consulting Service engaged in the following
transactions during March 2018, its first month
of operations:
3/1 Anne Shin invested P590,000 of cash to start
the business.
3/2 She purchased office supplies of P2,000 on
account.
3/4 She paid P400,000 cash for a building to use as
future office.
3/6 She performed service for customers and
received cash P20,000.
3/9 She paid P1,000 on accounts payable.
3/17 She performed service for customers on
account, P16,000.
3/23 She received P12,000 cash from a customer
on account.
3/31 She paid the following expenses: salary,
P12,000 and rent, P5,000.

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