Accounting Cycle

Outline:
Introduction
Objective
Methods
Accounting Cycle
Transactions
Journal Entries
Posting
Trial Balance
Adjusting Journal Entries
Worksheet
Financial Statement
Closing
Conclusion
Reference
 Objective
Correct errors in general journal
entries in Accounting Cycle.
Methods
Collecting data
The source of data in Accounting Cycle is from internet.
Solving Problem
The problem in Errors in general jurnal entries can be
corrected at the end of period Accounting cycle and
continue the next step of Accounting Cycle.
Accounting Cycle
Accounting Cycle is used to record the transactions of income
and balance sheet of the company.This includes everything from
opening the books at the start of the year to closing them at the
end. Accounting Cycle from Bookeeping Workbook For Dummies

Financial
Transactions Closing
Statement

Jurnal Entries Adjusting

Entries

Posting Trial Balance Worksheet

1. Transactions
Transactions is the first activity in accounting cycle.
Business transaction is an economic event that causes
a change in the financial position
Financial Position:
What the entity controls
How the entity controls them (claims)
Ex :
Wards Consulting purchases Office Equipment $500.
2. Journal Entries
Journal is the book of original entry. Transactions are
written in a journal in chronological order.
The format of the journal is important.
Journalizing is the process of entering information as
debits and credits to the correct accounts.
We must entries the date , account debit , account
credit,post reference,and an explanation of the
transaction when entries the journal.
 Here is an example showing the analysis of a transaction
and its general journal entry:
Wards Consulting Purcahse Office Equipment $500.

Journal Page 1
Date Description Post Ref. debit credit

July 8 Office Equipment 15 $500

Cash 11 $500
Purchase Office Supplies
 A casier recorded $500 in transaction on July,8 ,but on
July,25 she realizes that the real transaction is $5,000
In that case we need to make a journal entries at the end
of period and then we continue the accounting cycle.
Example:

Journal Page 2
Date Description Post Ref. debit credit
July 31 Office Equipment 15 $4,500
Cash 11 $4,500

Correct the errors on July,8

3. Posting
All transactions are recorded in the journal, then
amounts are copied to the ledger accounts.
Ledger Account
Listing of the transactions for an individual account
General Ledger
A book containing all the Ledger Accounts
Once the amounts are entered into the accounts, a
posting reference (PR) must be entered in the journal.
New balances are computed in the running ledger
accounts.
Here is the example of ledger account of Office
Equipment:

Office Equipment No. 15

Post Balance
Date Item
Reff.
Debit Credit Debit Credit
July
JU 1 $500 $500
8
July
JU 2 $4,500 $5,000
31
4. Trial Balance
Trial balance lists all account that have the same balance
between account debit and account credit.
Trial balance will show some mistake if debit and credit
are not balance
Example of trial balance:

July 31, 2009

5. Worksheet
An accounting worksheet is large table of data which
may be prepared by accountants as an optional
intermediate step in an accounting cycle.
 Example of worksheet :
Ward's Consulting
Worksheet
For the Month Ended July 31,2009

Unadjusting Trial Balance Adjustment Trial Balance Income Statement Balance Sheet
Account Title
Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash 7000 7000 7000
Account Receivable 3000 3000 3000
Office Supplies 4200 1200 3000 3000
Office Equipment 5000 5000 5000
Bank Loan 5000 5000 5000
Accounts Payable 1000 1000 1000
Common Stock 10000 10000 10000
Consulting Revenue 7000 7000 7000
Rent Expense 600 600 600
Salaries Expense 2500 1600 1600
Supplies Used 0 1200 1200 2400
Utilities Expense 1200 400 400
23500 23000 1200 1200 21800 23000 5000 7000 18000 16000
Net Income 2000 2000
7000 7000 18000 18000
6. Adjusting Jurnal Entries
At this step, we find something wrong and post the
correction where needed
Adjustment are also made for prepaid , Acrued revenue
or expense ,and depreciation
First we entries into jurnal,Example:
Suplies balance on July 1,2009 is $950 ,supplies on hand
on july 31,2009 is $300

Journal Page 1
Date Description Post Ref. debit credit

july 31 Supplies used 56 $650

Office Supplies 12 $650
($950-$300)
7. Financial Statements
After worksheet is in balance , we prepare income
statement ,statement of owner equity , and balance
sheet.
The income statement is prepared using the revenue
and expense accounts from the trial balance.
The Statement Of Owners Equity is prepared using
Owners Equity and Net Income Accounts.
the balance sheet can be prepared using the asset and
liability accounts by including the net income with the
other equity accounts.
 Ward's Consulting
Income Statement
For the Month Ended July 31,2009
Consulting Revenue 7000
Expense:
Rent expense 600
Salaries Expense 1600
Supplies Used 2400
Utilities Expense 400
total 5000
Net Income 2000

Ward's Consulting
Statement Of Owner's Equity
For the Month Ended July 31,2009
Common Stock July 1,2009 10000
Additional Investment 0
net income 2000
Total 2000
Less Withdrawals 0
increase in Owner's Equity 2000
Common Stock July 31,2009 12000
 Ward's Consulting
Balance Sheet

July 31,2009
Assets: Liabilities
Cash 7000 Bank Loan 5000
Account Receivable 3000 Account Payable 1000
Office Supplies 3000 total liabilities 6000
Office Equipment 5000 Owner's Equity
Total Assets 18000 Common Stock July31,2009 12000

18000
total liabilities and Owner's Equity
8. Closing the Book
Closing Entries is the last step in Accounting
Cycle.Closing entries are journal entries made at the end
of an accounting period which transfer the balances of
temporary accounts to permanent accounts.temporary
accounts include:
Revenue
Expense
Drawing or Withdrawals
Income Summary
Example of closing Entries:

Journal Page 1
Date Description Post Ref. debit credit

july 31 Consuting Revenue 5006 $650

Income Summary 1003 $650
After the closing entries we post it to Post-Cosing Trial
Balance,

Ward's Consulting
Post-Closing Trial Balance

July 31,2009
Debit Credit
Cash 7000
Account Receivable 3000
Office Supplies 3000
Office Equipment 5000
Bank Loan 5000
Account Payable 1000
Common Stock July31,2009 12000
18000 18000
Conclusion
Accounting cycle is used to gauge your profit or your
loss in a company.
Accounting cycle is done periodically (a month,three
months,or a year).
When we realize the error,we can correct it at the end
of period before financial Statement.
Reference
Epstein, Lita.2007. Bookkeeping Workbook For Dummies. Wiley
Publishing:Indiana.
http://accountingexplained.com/ accessed on December 14,2014
http://content.moneyinstructor.com/1499/trialbalance.html
accessed on January 7,2015
https://learning.uonbi.ac.ke accessed on December 14,2014
vrpacioli.loyola.edu/ accessed on December 14,2014
Warren, Carl.S, Reeve, James.M, & Duchac, Jonathan.E. 2009.
Principle of Accounting, edition 23. South- Western Cengage
Learning : USA.
www.houstonisd.org/ accessed on December 14,2014
Thank You for Yuor
Attention