FINANCIAL ACCOUNTING AND REPORTING 1 (REVIEWER)

Steps in the Accounting Cycle Purchase Order

- document issued by a buyer to a seller
1. Identifying and analyzing indicating the types, quantities and agreed price
2. Journalizing
3. Posting Delivery Receipt
4. Unadjusted trial balance - document signed by the receiver if shipment
5. Adjusting entries acknowledging the receipt of the goods
6. Adjusted trial balance (and/or Worksheet)
7. Financial statements Bank Deposit Slip
8. Closing entries - evidences a deposit to bank account
9. Post-closing trial balance

10. Reversing entries Bank Statement

Identifying and Analyzing Transactions and
Events
Only accountable events are recorded.
Accountable events are those that affect the
assets, liabilities, equity, income or expenses
of the business.
Accountable events are normally identified
from source documents, such as sales invoice,
official receipts, delivery receipts, and the
like.
Types of Events
- report issued by a bank (monthly)
Check
- instrument that orders a bank to pay the
person named a definite amount from the drawer's
bank account
Statement of Account
- serves as a notice of billing
Simple and Compound Journal Entries

Simple Journal Entry

1. External events - are transactions that involve - contains a single debit and a single
the business and another external party. credit element.

2. Internal events - are events that do not involve Compound Journal Entry
an external party. - contains two or more debits or
credits.
Journalizing

- Journalizing refers to recording an identified

accountable event in the journal by means of a
journal entry.

-BSA 1.2
 FINANCIAL ACCOUNTING AND REPORTING 1 (REVIEWER)

POSTING
Simple Journal Entry Accounts Titles listed
-transferring data from journal to appropriate > Assets
accounts in ledger > Liabilities
- classify the effects of transaction > Equity
> Income
Data processed in journal is raw, need to >Expenses
classify the information to ledger to provide a
refined information ADJUSTING ENTRIES
Accounts in ledger resemble a t-account
- made prior to the preparation of financial
Compound Journal Entry statement to update certain accounts
- contains two or more debits or
credits. Purpose

- take up unrecorded income and expenses
PREPARING THE UNADJUSTED TRIAL - split mixed accounts into their real and
BALANCE nominal elements

Trial Balance Accruals of Income and Expenses

- list of general ledgers accounts and their
balances
- to check the equality of total debits and
credits
- preparation of financial statement
- accruals means to recognize an
> income that is already earned but not
yet collected
> expense that is already incurred but not
yet paid

Types of Trial Balance

> Unadjusted - preparation before financial
statement
> Adjusted - adjusting entries before financial
statement
> Post-Closing - after the closing process
Heading of Trial Balance
> Name of the Business - who?
> Title of the Report - what?
Transplacement Error ( Slide Error)
- number or digits in an amount is incorrectly
increased or decreased
- 1,000 > 100 / 10,000
Transposition Error
- digits in an amount are interchanged
- 15, 652 > 15, 625 / 15,265

> Date of the Report - when? INTEREST INCOME

Formula
i=P r t
Depreciation - allocation of cost over the useful
life of a depreciable asset i = interest r = rate
P = principal t = time

-BSA 1.2
 FINANCIAL ACCOUNTING AND REPORTING 1 (REVIEWER)

EXPENSE RECOGNITION PRINCIPLES

Matching
- directly associated with the earning or
revenue are recognized as expenses in the same
period
Systematic & Rational Allocation
- not directly associated with the earning
revenue are recognized as expenses over the
period
liability
Immediate Recognition
- do not provide future economic benefits
- recognized immediately as expenses
REAL NOMINAL AND MIXED ACCOUNTS
Real Accounts (Permanent)
-not closed at the end of accounting period
- extended to the next accounting period
- include all balance sheet accounts, except
owner drawings account
METHODS OD INITIAL RECORDING OF
INCOME AND EXPENSES
INCOME
Liability Method
- advanced collections of income are initially
credited to a liability account
- at the end of the period, earned portion is
recognized as income, unearned portion remains
Income Method
- advanced collections of income are initially
credited to an income amount
- at the end of the period, unearned portion
is recognized as liability, earned portion remains
as income

Nominal Accounts (Temporary)

- closed at the end of accounting period
- include all income statement accounts,
drawings account, clearing accounts and suspense
accounts
> Clearing Account - store amounts that
will eventually transferred to another account
> Suspense Account - store discrepancies in
the accounts pending their analysis and permanent
classification

Mixed Accounts
- have both real and nominal account
- subject to adjustment

-BSA 1.2