Accounting Cycle
Accounting Cycle
Accounting Cycle
CHART OF ACCOUNTS
It is a list of Assets, Liabilities, Revenue, Expense and Capital Accounts
applicable to the business enterprise. It normally includes brief description
of the nature of transaction, identification number or account number.
Presented below is the chart of accounts for the illustration.
EQUITY
310 W. Kayayan, Capital
320 W. Kayayan, Withdrawals
330 Income Summary
JOURNALIZING
THE JOURNAL
Format
Date: The year and month are not written for every written entry unless
the year or month changes or a new page is needed.
Account Titles and Explanation: The first line of an entry shows the account
debited and the second line is the account credited. The account
credited is indented to the right. For each entry, a brief
explanation is required enough to understand the nature of the
transaction.
Posting Reference: This column is filled up only when the entry is
transferred to the next book of accounts, the ledger. Posting
reference column is where the account number of each account is
written.
Debit: The debit amount for each account is entered in this column.
Credit: The credit amount for each account is entered in this column.
ILLUSTRATION
Once again, let us review the transactions of the newly organized accounting
firm of Mr. Kayayan.
6 Accounts
Payable Cash 160 5 0 0 0 0
Full payment of account. 210 5 0 0 0 0
8 Office Equipment
Accounts Payable 110 2 5 0 0 0
Computer units purchased 410 2 5 0 0 0
10 Cash
Service Revenue 220 3 0 0 0 0
Service revenue 410 3 0 0 0 0
rendered.
15 Utilities
Expense
Cash
Paid meralco bill.
2014
15 Salaries Expense 530 1 5 0 0 0
May
Cash 110 1 5 0 0 0
Paid Salary of office staffs
20 Cash 110 1 0 0 0 0
Accounts Receivable 120 1 0 0 0 0
Collection of account
22 Cash 110 4 5 0 0 0
Interest Expense 550 5 0 0 0
Notes Payable 220 5 0 0 0 0
Proceeds of loan.
Take note that the post reference of the general journal is not filled up yet
in the process of recording. This will filled in the posting process.
POSTING
THE LEDGER
The accounts in the general ledger are classified into two general groups:
Permanent/Real accounts –balance sheet accounts
Temporary/Nominal accounts –income statement accounts
Posting means transferring the amounts from the journal to
the appropriate accounts in the ledger. The steps are
illustrated as follows:
1. Transfer the date of the transaction from the journal to the
ledger.
2. Transfer the page number from the journal to the journal
reference.
3. Post the debit figure from the journal as a debit
figure in the ledger and the credit figure from the
ledger 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.
Illustration: