Accounting Cycle (From Transactions to Final Accounts)

Five Stages

1. Transactions
2. Journal Entries
3. Ledger
4. Trial Balance
5. Final Accounts

1. Transactions in ABC Ltd.

• Started Business with Rs. 100

• Cash Purchases – Rs. 50 (50 units)
• Cash Sales - Rs. 60 (40 units)
• Wages – Rs. 5
• Salaries – Rs. 5
• Furniture purchased – Rs. 20
• Depreciation on Furniture – Rs. 5
• Loan from Krishna – Rs. 20
• Interest on Loan – Rs. 2

Adjustments: Closing Stock – Rs. 10

2. Journal Entries

Date Particulars LF Dr Cr
Cash A/c Dr 100
To Capital 100
Purchases A/c Dr 50
To Cash 50
Cash A/c Dr 60 60
To Sales
Wages A/c Dr 5
To cash 5
Salaries A/c Dr 5
To Cash 5
Furniture A/c Dr 20
To cash 20
Depreciation A/c Dr 5
To Furniture 5
Cash A/c Dr 20
To Krishna 20
 Interest A/c Dr 2
To Cash 2

3. Ledger

Capital A/c

Dr Cr
Date Particulars JF Amount Date Particulars JF Amount
To Balance c/d 100 By Cash 100
Total 100 Total 100
By Balance b/d 100

Cash A/c

Dr Cr
Date Particulars JF Amount Date Particulars JF Amount
To Capital 100 By Purchases 50
To Sales 60 By Wages 5
To Krishna 20 By Salaries 5
By Furniture 20
By Interest 2
By Balance c/d 98
Total 180 Total 180
To Balance b/d 98

Purchases A/c

Dr Cr
Date Particulars JF Amount Date Particulars JF Amount
To Cash 50
Total 50

Sales A/c

Dr Cr
Date Particulars JF Amount Date Particulars JF Amount
By Cash 60
Total 60

Wages A/c
 Dr Cr
Date Particulars JF Amount Date Particulars JF Amount
To cash 5
Total 5

Salaries A/c

Dr Cr
Date Particulars JF Amount Date Particulars JF Amount
To cash 5
Total 5

Furniture A/c

Dr Cr
Date Particulars JF Amount Date Particulars JF Amount
To Cash 20 By Depreciation 5
By Balance c/d 15
Total 20 Total 20
To Balance b/d 15

Depreciation A/c

Dr Cr
Date Particulars JF Amount Date Particulars JF Amount
To Furniture 5
Total 5

Krishna A/c

Dr Cr
Date Particulars JF Amount Date Particulars JF Amount
To Balance c/d 20 By Cash 20
Total 20 Total 20
By Balance b/d 20

Interst A/c

Dr Cr
Date Particulars JF Amount Date Particulars JF Amount
To Cash 2
Total 2
4. Trial Balance

Trial Balance

SN Particulars LF Dr Cr
1 Capital 100
2 Cash 98
3 Purchases 50
4 Sales 60
5 Wages 5
6 Salaries 5
7 Furniture 15
8 Krishna 20
9 Depreciation 5
10 Interest 2
Total 180 180

5. Final Accounts

Trading A/c of ABC ltd for the year ending______

Dr Cr
SN Particulars Amount SN Particulars Amount
To Purchases 50 By Sales 60
To Wages 5 By Closing Stock 10
To Gross Profit 15
(c/d to P & L A/c)
Total 70 Total 70

Profit & Loss A/c of ABC Ltd for the year ending____

Dr Cr
SN Particulars Amount SN Particulars Amount
To Salaries 5 By Net Profit 15
(b/d from Trading A/c)
To Depreciation 5
To Interest 2
To Net Profit 3
(C/d to Capital)
Total 15 Total 15
 Balance Sheet of ABC ltd as on 31st March _____

Liabilities Assets
SN Particulars Amount SN Particulars Amount
Capital 100 Furniture 15
+ Net Profit 3 103 Cash 98
Sundry Creditors 20 Closing Stock 10

Total 123 123