At the end of making the general ledger, you will
find a balance for each account
1. transactions:
daily transactions that are QUANTIFIABLE and
NON QUANTIFIABLE happen within the company
or with other parties.
2. Journal Entries:
QUANTIFIABLE transactions are recorded to the
books using the journal entry.
Note:
A : increase in debit; decrease in credit
L: increase in credit; decrease in debit
E: increase in credit; decrease in debit
3. Posting (general ledger):
Keeps track of each individual accounts that are
involved in the transactions that have been
journalized.
When the customer pays for the service you’ve
4. Trial balance/ Worksheet:
the balance you’ve calculated from the general ledger
will be used to form a trial balance.
separate the accounts to its own category ( ALE) and
the debit/ credit balance it has as shown in the
example above.
5. Adjusting Journal entries
Everyday transactions don't always fit neatly into
time periods. Sometimes you earn money but haven't
gotten the cash yet, or you've used up supplies but
haven't paid the bill. Adjusting journal entries make
the necessary tweaks to reflect what was actually
earned or used during the period. Adjusting entries
are usually done every end of month.
Example(s):
1. You run a dog walking business. On February
2nd, you walk a client's dog and they agree to
pay you $30. However, you won't receive the
cash until they pay you on February 28th .
At the end of February, you need to record the
$30 you earned, even though you haven't received
the cash yet.
Debit: Accounts Receivable ($30) - This shows
you are expecting to receive the money from your
client.
Credit: Dog Walking Revenue ($30) - This records
the income you earned for walking the dog.
provided you’re adjusting your previous journals.
Debit: Cash ($30) - This shows you have received the
money from your client.
Credit: A/R ($30) - This shows you have received the
money from your client, they have no more
obligations to you.
Another example:
Imagine buying a car: You don't expect it to last
forever. It wears down over time, and eventually,
it won't be worth as much. Depreciation is like
accounting for that decrease in value.
Let's say initially you purchased the car on January 1st
, costing $100,000 (additional info: the car has a
useful life of 5 years and no residual value,
depreciated using the straight-line method)
Debit: Equipment- Car ($100,000) - This shows
you now own the car valuing $100,000
Credit: Cash ($100,000) – this shows that you’ve
paid this much for the equipment.
Assume that now is March 31st of the same year
you’ve purchased the car, how much do you think the
value of the car would be?
We know that the original value of the car is
$100,000, since we are using straight line method it
essentially means that every month the equipment
depreciates by the same amount.
So to find out the value that has been depreciated,
Yearly $100,000/5 (years) = 20,000
Monthly 20,000/ 12 = 1.666,666666666667
So since you’ve purchased the car on January 1st and
it is now the end of march, you’ve used the car for 3
months in total.
Therefore, every end of month this journal entry is
made:
 Debit: Accumulated Depreciation- Car
($1.666,67) - This shows how much value has
been used.

Credit: Depreciation Expense ($1.666,67) – This

shows how much value has been used.

Depreciation is recorded separately from the asset

itself (not directly reducing the value of the
equipment).

6. Adjusted Trial balance/ Worksheet:

taking the adjustment entries to account, the balance
you’ve calculated from the first general ledger and
now including the additional adjustment value will be
used to form another trial balance. ( to ensure
everything is correct / balanced).

7. Financial statements:
From the balances that you’ve tested in the adjusted
trial balance. You’re going to continue to forming
financial statement(s):
(notes have been provided previously)