ACCOUNTING PROCESS________________________ reversing entries – are usually made at the beginning of

the next accounting period to simplify the recording of

Accounting – is the process of identifying, measuring,
certain transactions
and communicating economic information to permit
informed judgments and decisions by users of the business or source documents – there are the original
information source materials evidencing a transaction
Accounting information system – is the system of double-entry system – under this system, each
collecting and processing transaction data and transaction is recorded in 2 parts – debit and credit
disseminating financial information to interested parties
duality – this concept views each transaction as having a
Accounting information system - is a subsystem of two-fold effect on values
management information system
equilibrium – this concept requires each transaction to
Management information system – is a set of data be recorded in terms of equal debits and credits
gathering, analyzing, and reporting functions designed
transaction approach – under this approach, profit or
to provide management with the information it needs
loss is computed as the difference between income and
to carry out its functions
expenses
Accounting policies – are the specific principles, bases,
single-entry system – under this system, each
conventions, rules and practices applied by an entity in
transaction is recorded through simple narrative
preparing and presenting financial statements
accrual basis – under this, income and expenses are
Accounting cycle – represents the steps or procedures
recognized when earned or incurred, regardless of
used in recording transactions and preparing financial
when cash is received
statement
cash basis – under this, income and expenses are
Identifying and analyzing – step wherein the accountant
recognized when received or paid, regardless of when
gathers information from source documents and
earned or incurred
determine the effect of the transaction on the accounts
journalizing – is the process of recording transactions in
Journalizing – step wherein the identifies accountable
the journal by means of journal entries
events are recorded in the journals
journal – is a formal record where transactions are
Posting – step wherein information from the journal are
initially recorded chronologically through journal entries
transferred to the ledger
general journal – a book of original entry used to record
Unadjusted trial balance – the balances of the general
transactions other than those that are recorded in the
ledger accounts
special journals
Adjusting entries – the accounts are updated as of the
special journal – a book of original entry used to record
reporting date on an accrual basis by recording accruals,
transactions of a similar nature
expiration of deferrals, estimations, and others
sales journal – used to record sales on account
Adjusted trial balance – step wherein the equality of
debits and credits are rechecked after adjustments are purchases journal – used to record purchases of
made inventory on account

financial statements – means by which the information cash receipts journal – used to record all transactions
processed is communicated to users involving receipts of cash

closing the books – this involves journalizing and cash disbursement journal – used to record all
posting closing entries and ruling the ledger transactions involving payments of cash

temporary/nominal accounts – accounts closed
post-closing trial balance – the equality of debits and
credits are again rechecked after the closing process
Simple journal entry – one which contains a single debit
and a single credit element
Compound journal entry – one which contains 2 or
more debits or credits
Adjusting entry – entries made prior to the preparation
of financial statements to update certain accounts so
that they reflect correct balances as at the designated
time
Closing entries – entries made at the end of the
accounting period after all the adjustments have been
made to zero-out
Reversing entries – entries usually made on the first day
of the accounting period to reverse certain adjusting
entries in the immediately preceding period
Correcting entries – entries made to correct accounting
errors
Reclassification entries – entries made to transfer an
amount from one account to another that better
describes the nature of the transaction being recorded
Posting – is the process of transferring data from the
journal to the appropriate accounts in the ledger
Ledger – the book of secondary entries or book of final
entries
General ledger – contains all the accounts appearing in
the trial balance
Subsidiary ledger – provides a breakdown of the
balances of controlling accounts
Controlling account – is one which consists of a group of
accounts with similar nature
Account – is the basic storage of information in
accounting
Chart of accounts – is a list of all the accounts used by
the entity
Real accounts – accounts that are not closed at the end
of the accounting period
Nominal accounts – accounts that are closed at the end
of the accounting period
Mixed accounts – accounts that have both real and
nominal account components; accounts subject to
adjustments such as prepayments, deferrals etc
Contra accounts – accounts that are deducted from a
related account
Adjunct accounts – accounts that are added to a related
account
Trial balance – is a list of general ledger accounts and
their balances
Unadjusted trial balance – trial balance prepared before
adjusting entries
Adjusted trial balance – trial balance prepared after
adjusting entries
Post-closing trial balance – trial balance prepared after
the closing process; it contains only real accounts
Transplacement error – error committed when the
number of digits in an amount is incorrectly increased
or decreased
Transposition error – error committed when digits in an
amount are interchanged
Deduction – how overstatement in an account is
corrected
Addition – how understatement in an account is
corrected
Adjusting entries – are entries made prior to the
preparation of financial statements to update certain
accounts so that they reflect correct balances as of the
designated time
Liability method – under this method, advanced
collections of income are initially credited to a liability
account
Income method – under this method, advanced
collections of income are initially credited to an income
account
Asset method – under this method, prepayments of
expenses are initially debited to an asset account
Expense method – under this method, prepayments of
expenses are initially debited to an expense account
Worksheet – is an analytical device used to facilitate the
gathering of data for adjustments and the preparation
of financial statements and closing entries
Closing the books – is the process of preparing closing
entries for nominal accounts and ruling and balancing
real accounts
Major components of MIS
1. Accounting information system
2. Personnel information system
3. Logistics information system
Components of accounting information system
1. Personnel directly involved in accounting work
2. Accounting policies and standards
 3. Procedures/activities involving the originating, 2. Statement of profit or loss and other
processing and reporting of financial and comprehensive income
related information 3. Statement of changes in equity
4. Equipment and devices used in the system 4. Statement of cash flows
5. Records and reports necessary to gather, 5. Notes
process, store and transmit financial and other 6. Additional statement of financial position
information
2 accounting records of a business entity
1. Business or source documents
2. Books of accounts
a. Journal
b. Ledger
2 types of journal
1. General journal
2. Special journal
a. Sales journal
b. Purchases journal
c. Cash receipts journal
d. Cash disbursement journal
7 journal entries
1. Simple journal
2. Compound journal
3. Adjusting
4. Closing
5. Reversing
6. Correcting
7. Reclassification
2 kinds of ledger
1. General
2. Subsidiary
Types of accounts
1. Real
2. Nominal
3. Mixed
4. Contra
5. Adjunct
3 types of trial balance
1. Unadjusted trial balance
2. Adjusted trial balance
3. Post-closing trial balance
Financial statements
1. Statement of financial position