THE UNIVERSITY OF MANILA

ACCOUNTING REFRESHER 1

Accounting Cycle
The life of the business is divided into accounting periods of equal length. A standard sequence
of accounting procedures is repeated for each period. These uniform procedures done to accomplish the
accounting process are referred to as accounting cycle.
1. Identifying and Analyzing Business Transactions
2. Recording in the Journals
3. Posting to the Ledger
4. Unadjusted Trial Balance
5. Adjusting Entries
6. Adjusted Trial Balance
7. Financial Statements
8. Closing Entries
9. Post-Closing Trial Balance
10. Reversing Entries ( Optional step at the beginning of the new accounting period)

Identifying and Analyzing of Transaction

 Examine each business transaction to determine the nature of the transaction
 Determine which accounts will be affected. This calls for the identification of the general ledger
accounts that will be altered as a result of the transaction.
 Determine the effect of the transaction on the accounts affected. (Increase or Decrease)
 Apply the rules of debit and credit show the corresponding increase or decrease.

Recording or Journalizing
Is the chronological record of events or business transactions showing all the effects of the
transaction in term of debit and credit (double entry system). Initially recorded in the journal (original
entry)

Type of Journal Entry:

 Simple journal entry – one debit and one credit
 Compound Journal Entry – two or more debit or two or more credit

Exercises:

Following transaction for the month of Sy Shoe Repair Shop

1-Jan Henry Sy started it Shoe Repair Business with a capital of P1,500,000

2-Jan An amount of P36, 000 was paid as advance rent for three months.
2-Jan Hired to office staff with the monthly salary of P20,000
 3-Jan Paid P60, 000 cash on the purchase of equipment costing P80, 000.
  The remaining amount was recognized as a one year note payable with interest rate of 9%.
4-Jan Purchased office supplies costing P17, 600 on account.
13-Jan Provided services to its customers and received P28, 500 in cash.
13-Jan Paid the accounts payable on the office supplies purchased on January 4.
14-Jan Paid wages to its employees for first two weeks of January, aggregating P19, 100.
18-Jan Provided P54, 100 worth of services to its customers. They paid P32, 900 and promised to
pay the remaining amount.
23-Jan Received P15, 300 from customers for the services provided on January 18.
25-Jan Received P4, 000 as an advance payment from customers.
26-Jan Purchased office supplies costing P5, 200 on account.
27-Jan Owner withdraw 5,000 for personal use
28-Jan Paid wages to its employees for the third and fourth week of January: P19, 100.
31-Jan Received electricity bill of P2, 470.
31-Jan Received telephone bill of P1, 494.
31-Jan Miscellaneous expenses paid during the month totaled P3,470