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TO
LANGUAGE OF
BUSINESS
FINANCIAL STATEMENTS
THE PREPARATION
OF F/S IS NOT THE
FIRST STEP IN THE
ACCOUNTING
PROCESS,
ACCOUNTING SPECTRUM
PROCESS
BJECTS
TASKS
IDENTIFY
COLLECT
MEASURE
ANALYZE
COMMUNICATE
OUTPUTS
FINANCIAL
INFORMATIO
N
BALANCE SHEET
INCOME STATEMENT
CASHFLOW
FUNDS FLOW
SUBJECTS
ECONOMIC
ENTITIES
CORPORATIONS
PARTNERSHIPS
PROPRIETORSHIP
ACTIVITIES
INVESTING
FINANCING
OPERATING
EXTERNAL
POTENTIAL INVESTORS
SUPPLIERS
CREDITORS
CUSTOMERS
COMPETITORS
GOVERNMENT
GENERAL PUBLIC
INTERNAL
STOCKHOLDERS
MANAGERS
EMPLOYEES
8. Closing
Books are prepared for
next cycle.
1. Transaction Occurs
2. Journalizing
7. Draft Financial
Statements
Transactions are
entered in a general
journal.
6. Closing Entries
3. Posting
5. Accounting Adjustments
4. Trial Balance
FINANCIAL STATEMENTS
ACCOUNTING CYCLE:
TRACKING THE
COMPANYS
LIFECYCLE
ACCOUNTING CYCLE
THE CHART OF ACCOUNTS: A
COLLECTION OF BUCKETS AS YOU GO
ALONG
THE GENERAL JOURNAL: THE HISTORY
BOOK
THE GENERAL LEDGER: TRACING THE
CHANGES (INCREASE OR DECREASE) IN
THE BUCKETS
TRIAL BALANCE: BALANCING THE
BUCKETS
ANALYSIS OF ACCOUNTING
TRANSACTIONS
ACCOUNT
Debit
Credit
ASSETS
Increases
Decreases
LIABILITIES
Decreases
Increases
EQUITIES
Decreases
Increases
REVENUES
Decreases
Increases
EXPENSES
Increases
Decreases
ACCOUNT
ASSETS
BALANCES
Debit
LIABILITIES
Credit
EQUITIES
Credit
JOURNALIZING
The process of recording the debits and
credits chronologically (day by day) in a book of
original entry called the journal is called journalizing. In
its simplest format, the journal is composed only of two
money columns placed side by side. It must be
registered with the Bureau of Internal Revenue before
the bookkeeper begins making entries into it.
A complete journal entry contains the following:
1. Date
2. The account title/s and the amount/s to be debited
3. The account title/s and the amount/s to be credited
4. Short explanation
GENERAL JOURNAL
A listing of all transactions in chronological order
= Book of original entry
A record of debits and credits entered in
columns,
the left column for recording debits
the right column for recording credits
Date
Debit
Credit
T-ACCOUNT
Account Title
Debit
Credit
Journal Entry
How transactions are entered into the accounting system.
Assets
101 Cash
102 Reserves
103 Short Term
Investments
SAMPLE CHART OF
ACCOUNTS
Liabilities
201 Short-term
Borrowing
202 Client Savings
203 Long-term Debt
(comm.)
SAMPLE CHART OF
ACCOUNTS
Equity
301 Paid in Equity
302 Donated Equityprior
303 Long-term Debt
(comm.)
Revenue
401 Interest on
Current & Past due
loans
402 Interest
Restructured
Loans
403 Interest on
Investments
SAMPLE CHART OF
ACCOUNTS
Expenses
501 Interest Paid on Short-term borrowing
502 Interest Paid on Client Savings
503 Interest Paid on Long-term Debt
LEDGER ACCOUNTS
Fixed Assets
Date
Explanation
Debit
Credit
Balance
230,504
July 1
3
Purchased computer
4,000
234,504
Purchased motorcycles
15,000
249,504
POSTING
TRIAL BALANCE
After all transactions for the period have been
posted to the ledger accounts, the balance for each
account is determined which is either a debit or a
credit.
The trial balance is the list of all accounts and their
balances and checks whether total debits equal
total credits.
ADJUSTING ENTRIES
Entries required at the end of each
accounting period to update the accounts as
necessary and to fully recognize, on an
accrual basis, revenues and expenses for the
period.
ADJUSTING ENTRIES
Prepayments
Deferred Income
Accrued Income
Accrued Expenses
Doubtful Accounts
Depreciation
CLOSING ENTRIES
are entries that reduce all revenue and
expense accounts to a zero balance at the end
of each accounting period, and transferring
the preclosed balances to the the retained
earnings account.