CHAPTER 6

(Business Transactions and their Analysis)

Accounting Cycle
--steps or procedures used to record transactions and prepare FS.
-identifying, recording, communicating

STEPS IN ACCOUNTING CYCLE

1. Identifying and Analyzing
2. Journalizing
3. Posting
4. Unadjusted Trial Balance
5. Adjusting Entries
6. Adjusted Trial Balance (and/or worksheet)
7. Financial Statements
8. Closing Entries
9. Post-closing Trial Balance
10. Reversing Entries

Source Documents
--written evidences containing information about transactions.
1. Sales invoices (sale of goods)
2. Official Receipts (sale of services)
3. Purchase Orders (issued by buyer to seller)
4. Delivery Receipts (signed by receiver acknowledging receipt of goods)
5. Bank Deposit Slips (deposit to a bank account)
6. Bank Statements (issued by a bank MONTHLY)
7. Checks
8. Statement of Account, and the like.

TYPES OF EVENTS
1. External Transactions (w/ external party)
2. Internal Transactions

Journalizing
--recording transactions in the journal by means of journal entries

PARTS OF A JOURNAL ENTRY

1. Date
2. Account Titles and Amounts to be debited and credited
3. Short Description of the Transaction

FORMATS OF JOURNAL ENTRIES

1. Simple Journal Entries
2. Compound Journal Entries

Accountable Events
--affect the accounts
--the ones only recorded in acc. Records