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Chapter 2

Accounting cycle (I): Journalizingposting and preparing Trial Balance

,

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Accounting Cycle

a sequence of accounting procedures whichare repeated continuously during eachaccounting period.

Accounting period /fiscal period: any span oftime covering a complete accounting cycle

E.g. a month ,a quarter or half a year, a year

Fiscal year/accounting year: twelveconsecutive months

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The Accounting Cycle

Journalize

transactions.Post entries to

the ledger

accounts.

Prepare trial

balance.

Complete awork sheet.

Prepare

financialstatements.

Prepare post-closing

trial balance.

Journalize and

post closingentries.

Journalize and

post adjustingentries.

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GENERAL JOURNAL Page 123

Date Description

Post.

Ref. Debit Credit

Step 3: Record

transactions in a

journal.

Steps in Journalizing

Step 1: Examinesource documents.

Equipment

(3) 26,000

Liabilities EquityAssets = +

Step 2: Analyze

transactions.

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The Journal()

In an actual accounting system, transactions

are initially recorded in the journal.( handout)

GENERAL JOURNAL

Date Account Titles and Explanation Debit Credit

1998

Jan 1 Cash 1,000,000

Li, Capital 1,000,000

Owner invested cash in the business.

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Exercise

Problem 1 on page 53.

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Posting Journal Entries to the

Ledger AccountsPosting ()

involves copying

information fromthe journal to the

ledger accounts.

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The Ledger()

The entire group of

accounts is kepttogether in an

accounting record

called a general

ledger()

Cash

Accounts

Payable

Jill Jones,Capital

Accounts are

individual records

showing increases

and decreases.

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Chart of Accounts

A official list of all the accounts and their

account numbers

1. The first digit indicates the major account

classification

2. The second digit indicates financial

statement classification

3. The third digit indicates detailed account

classification

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Posting

Sorting out and copying the information from

the journal to the ledger account.

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Posting Journal Entries to the

Ledger Accounts

GENERAL JOURNAL

Date Account Titles and Explanation Debit Credit

1998Jan 1 Cash 1,000,000

li, Capital 1,000,000

Owner invested cash in the business.General Ledger

CashDate Debit Credit Balance

1998

Jan 1 1,000,000 1,000,000

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Posting Journal Entries to the

Ledger Accounts

GENERAL JOURNAL

Date Account Titles and Explanation Debit Credit

1998Jan 1 Cash 1,000,000

LI, Capital 1,000,000

Owner invested cash in the business.General Ledger

li, CapitalDate Debit Credit Balance

1998

Jan 1 1,000,000 1,000,000

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Cross reference

3) Insert the page number of the journal in

the posting reference column of the ledger

account

4) Insert the ledger account number in the

posting reference column of the journal

Example on page 45

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Ledger Accounts After Posting

This ledger format is referred to as arunning balance (as opposed to simple

T accounts).

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ACCOUNT NAME: ACCOUNT No.

Date Description PR Debit Credit Balance

Step 4: Record the

journal information in a

ledger.

GENERAL JOURNAL Page 123

Date Description

Post.

Ref. Debit Credit

Step 3: Record

transactions in a

journal.

Step 5: Prepare a

trial balance.

Steps in Processing

Transactions

Step 1: Examinesource documents.

Equipment

(3) 26,000

Liabilities EquityAssets = +

Step 2: Analyze

transactions.

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Exercise

Problem 1 on page 53.

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End of Chapter 2