Accounting Cycle/Bookkeeping Cycle

 refers to the sequential steps or procedures

performed to accomplish the accounting
process.
Steps in the Cycle:
1. Identifying and analyzing the events to be
recorded.
2. Recording transactions in the journal.
3. Posting journal entries to the ledger
3. Posting journal entries to the ledger
4. Preparing Trial Balance
5. Preparing the worksheet and adjusting entries
6. Preparing the financial statements
7. Journalizing and posting of adjusting entries.
8. Journalizing and posting of closing entries
9. Preparing the post-closing trial balance
10. Journalizing and posting of reversing journal
entries.
RECORDING TRANSACTIONS IN THE JOURNAL
The JOURNAL- is chronological record of events or
business transactions showing all the effects of
each transactions in terms of debit and credit.

A journal should contain the following:

1. Date
2. Account Titles and Explanation
3. P.R. (Posting Reference)
4. Debit
5. Credit
Self Check:
Problem 3. Dina Natutulog opened DN Laundry Services. The following accounts are
available in the accounting records. Cash; Accounts Receivable; Laundry Supplies;
Prepaid Insurance; Laundry Equipment; Service Vehicle; Notes Payable, Accounts
Payable; Natutulog, Capital; Natutulo Drawing, Laundry Revenues; Salaries Expense;
and Utilities Expense. During the month, the following transactions happened.
2021
May 1 Dina Natutulog invested Laundry equipment valued at P 15,000, Laundry
Supplies, P 5,000 and P 100,000 cash in her business.
3 Acquired service vehicle costing P 60,000 on cash.
4 Purchased laundry supplies on account for P 5,o00.
5 Completed a laundry job and billed the customer P 5,800.
10 Received a P 4,800 check from the customer billed on June 5.
11 Paid P 4,000 for an insurance policy for a one-year coverage.
12 Paid electricity bill, P 5,000.
18 Paid for the laundry supplies purchased last June 4.
24 The owner withdraw cash amounting to P 5,000 for personal use.
30 Paid the laundry assistant P 4,000 for fifty (50) hours’ work.
Required:
1. Journalize the above transactions with brief explanation.
The transactions of J. Cruz Systems Consultant, are shown below.
Journalize the transactions using the following accounts: Cash;
Accounts Receivable; Office Furniture; Office Equipment; Accounts
Payable; Unearned Consulting Revenue, Cruz, Capital, Cruz,
Withdrawals; Consulting Revenue; Salaries Expense; Rent Expense;
Utilities Expense.
 
2021
June 1 Invested P 130,000 in cash, P 20,000 Office
Furniture to start the business.
3 Paid P 7,500 for one month’s rent.
6 Bought office furniture for P 26,000 in cash.
8 Performed services for P 10,500 in cash.
10 Performed services for P 12,000 on credit.
12 Bought a desktop computer for P55,000; paid
50% down, balance in 30 days.
•
June15 Received P 7,000 from services performed
last Jan. 10.
16 Bought additional office chairs for P 8,000 on credit.
18 Issued a check for P 32,000 to pay for salaries.
20 Received cash for P5,000 from services rendered
last Jan. 10.
22 Collected P 3,000 on accounts receivable.
24 Issued a check for P 4,000 in partial payment of the
amount owed for office chairs.
27 Paid for the monthly telephone bill.
28 Received P 10,000 as an advance payment for services
to be rendered next month.
30 Cruz withdrew P 10,000 in cash for personal expenses.
31 Paid P2,000 for the electric bill.
Required:
1. Prepare Chart of Account
2. Journalize transactions
 Information 2.1.1
THE LEDGER:
 
A grouping of the entity’s accounts is referred to as a ledger. A General Ledger is a book or
file used by a business where accounts are kept on separate pages or cards. In a
computerized accounting system, accounts are kept on magnetic tapes or disks but the
accounts as a group are still referred as the ledger, or the ledger accounts.

The accounts in the general ledger are classified into two general groups:
1. Balance sheet or permanent accounts (assets, liabilities and owner’s equity).
2. Income statement or temporary accounts (income and expenses). Temporary accounts
are used to gather information for a particular accounting period. At the end of the
period, the balances of these accounts are transferred to a permanent owner’s equity
account.
Two general types of ledger:
1. T-Account Ledger 2. Balance Account Ledger
 
The Balance column account form shown below has places for the:
3. Account name 5. Amount of credit entry
4. Account number
5. Date of entry (debit & credit) 6. Running balance after each entry.
6. Amount of debit entry 7. Posting reference for each entry
 Information 2.1.2
 
Posting
 means transferring the amounts from the journal to the
appropriate accounts in the ledger. Debits in the journal are
posted as debits in the ledger, and credits in the journal as
credits in the ledger. The steps are illustrated as follows:
 
1. Transfer the date of the transactions from the journal to the
ledger.
2. Transfer the page number from the journal to the journal
reference (J.R.) column of the ledger.
3. Post the debit figure from the journal as a debit figure in the
ledger and the credit figure from the journal as a credit figure
in the ledger.
4. Enter the account number in the posting reference column of
the journal once the figure has been posted to the ledger.
 Information Sheet 3.1
Preparing the Trial Balance
 
Learning objective: After reading this information, you should be able to prepare a listing of accounts,
and transfer and summarize trial balance.
 
The trial balance is a list of all accounts with their respective debit or credit balances. It is prepared
to verify the equality of debits and credits in the ledger at the end of each accounting period or at any
time the posting is updated.
 
The procedures in the preparation of a trial balance follow:
1. List the account titles in numerical order.
2. Obtain the account balance of each account from the ledger and enter the debit balances in the
debit column and the credit balances in the credit column.
3. Add the debit and credit columns.
4. Compare the totals.
The trial balance is a control device that helps minimize accounting errors. When the totals are equal,
the trial balance is in balance. This equality provides an interim proof of the accuracy of the records
but it does not signify the absence of errors. For example, if the bookkeeper failed to record payment
of rent, the trial balance columns are equal but in reality, the accounts are incorrect since rent expense
is understated and cash is overstated.