Scribd
Upload
4K views3 pages

Journal and Ledgers

The document discusses the accounting cycle and process for Uy Law Office for the month of December 2015. It involves 7 key steps: 1) Analyzing transactions, 2) Journalizing entries, 3) Posting to general ledger accounts, 4) Preparing an unadjusted trial balance, 5) Journalizing and posting adjusting entries, 6) Preparing financial statements and closing nominal accounts, and 7) Preparing a post-closing trial balance. The accounting cycle captures all financial activities and ensures the accounting equation stays in balance.

Uploaded by

Rhea Ramirez
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
4K views3 pages

Journal and Ledgers

The document discusses the accounting cycle and process for Uy Law Office for the month of December 2015. It involves 7 key steps: 1) Analyzing transactions, 2) Journalizing entries, 3) Posting to general ledger accounts, 4) Preparing an unadjusted trial balance, 5) Journalizing and posting adjusting entries, 6) Preparing financial statements and closing nominal accounts, and 7) Preparing a post-closing trial balance. The accounting cycle captures all financial activities and ensures the accounting equation stays in balance.

Uploaded by

Rhea Ramirez
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3

The Accounting Equation and Books of Accounts

UY Law office

On December 1, 2015, Atty. Jan Uy established his legal practice under the name “Uy Law Office”. He
employs you as the bookkeeper for the said entity. During the month, Uy Law Office had the following
transactions:

Dec 1 Atty Jan Uy Invests P 500,000 cash


Dec 1 Uy Law Office obtains loan from Mars Bank amounting to P 100,000. The loan bears 6% annual
interest payable every December 1, 2016. The principal is payable in two equal annual
installments.
Dec 1 Uy Law office pays P10, 000 for the necessary permits and licenses for its operation.
Dec 1 Uy Law Office pays P 120,000 for the annual rent of the office space. The lease contract will expire
on December 1, 2016 and is renewable annually.
Dec 2 Uy Law office renders a legal advice to Mercury Company. Uy Law office bills Mercury Company
for P 135,000
Dec 2 Uy Law Office purchase supplies worth P 5,000 on cash basis.
Dec 8 Uy Law office renders legal advice to Venus Company for P 37,500 on cash basis.
Dec 8 UY Law office purchases a laptop for P36, 000 cash. The laptop has an estimated useful life of 3
years, with no residual value. The Company treats purchases during the first half of the month as
a purchase at the start of the month.
Dec 15 Mercury Company pays Uy Law office
Dec 17 Atty. Uy withdraws P 25,000 from the law office for his personal use.
Dec 20 Cygnus Catering bills Uy Law office for P 25,000 for services rendered for the company’s holiday
luncheon for its clients and staff.
Dec 22 Uy Law office receives P 35,000 cash in advance from Jupiter Company for legal services to be
rendered in 2016.
Dec 23 Uy Law office renders legal services to Vega Company for P 55,000, on account.
Dec 27 Uy Law office renders taxation advice to a client. Uy Law office bills the client for P 20,000
Dec 31 Uy Law office pays P 15,000 for the salary of its accounting and office staff.
Dec 31 Uy Law office also pays utilities of P8,000
Dec 31 Office supplies of P 3,000 has been used up by the law office

Requirements:

1. Analyze the transaction

2. Prepare the necessary journal entries

3 Post the entries to the ledger using T-accounts

4. Prepare the unadjusted Trial Balance

5. Prepare and post the adjusting entries

6. Prepare the Financial Statements; Close the nominal accounts and Drawing Accounts

7. Preparation of Post-Closing Trial Balance


Review of the Accounting Cycle

1. Analysis of Transactions – In this stage of the accounting process, source documents would assist the
bookkeeper or accountant in determining what accounts are affected and by how much. The accountant
initially determines what accounts are affected, keeping in mind that the accounting equation should
remain in balance. After which, the accountant assigns the corresponding monetary value to the
affected accounts.

2. Journalizing of transactions – An accountant’s analysis of a transaction is captured through a journal


entry. A general journal is a daily collection of business transactions entered into by an entity. This is
arranged in chronological order. This is conventionally called as “the books of original entry”, since
transactions are first entered into the general journal.

Note: The reference number heading pertains to the account number of the specific account. An account
number is a unique numeric identifier of a specific account based on a company’s chart of accounts.

A chart of accounts is a listing of all the accounts available for the use of an entity.

GENERAL JOURNAL
DATE PARTICULARS REFERENCE DEBIT CREDIT

3. Posting to the General Ledger – A general ledger presents transactions in relation to the accounts
they affect. This is contrast to the general journal where transactions are presented chronologically.
Each account is given a specific general ledger account. The General ledger captures all debits and
credits for a specific account.

GENERAL LEDGER
Account Name: CASH Account Number: 1001
DATE PARTICULARS REFERENCE DEBIT DATE PARTICULARS REFERENCE DEBIT

A more informal way of capturing the effects of transactions on each account is through the use of T-
account. It is a mechanism used to capture all debits and credits from journal entries, without using a
formal general ledger.

CASH - 1001
DEBIT CREDIT

4. Generation of the unadjusted trial balance – a trial balance is a listing of the general ledger accounts.
These accounts are generally arranged from assets, liabilities, capital balance, drawing balance,
revenues to expenses. A Trial balance must always have equal total for debit and credit sides. A trial
balance with equal totals for debit and credit does not signify that no error is made in recording the
transactions. The equality of debit and credit only shows that the accounting equation is in balance.

5. Journalizing and Posting of Adjusting Entries

Two general types of adjustments:

1. Deferral – is the postponement of the recognition of “an expense already paid but not yet
incurred” or of “revenue already collected but not yet earned”.

Deferrals would be needed in two cases:

a) Allocating assets to expense to reflect expenses incurred during the accounting period (
e.g. prepaid insurance, supplies, and depreciations)
b) Allocating revenues received in advance to reflect revenues earned during the
accounting period ( e.g subscriptions, unearned revenue

2. Accrual – is the recognition of “an expense already incurred but unpaid” or “revenue earned but
uncollected.

Accruals would be required in two cases”

a) Accruing expenses to reflect expenses incurred during the accounting period that are
unpaid and unrecorded (e.g. accrued salaries, accrued interest)

6. Preparation of Financial Statements, Closing of Nominal and Drawing Accounts – Nominal accounts
are temporary accounts which are not carried over to the next year or next accounting period. Nominal
accounts are composed of revenues and expenses which are closed to the owner’s capital account. To
close an account is to make the account balance zero.

7. Preparation of the Post closing Trial Balance – it contains the balances of the real accounts at the start
of the succeeding year.

It is to be noted that the accounting cycle will repeat again for the following year. The same procedures
and steps will be generally followed.

You might also like