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FA - Chapter No. 3

Here are the steps to solve this practice question: 1. Record the business transactions in the general journal with date, account titles, explanations, debits and credits. 2. Develop T accounts in the ledger for each account, posting the debits and credits from the general journal. 3. Prepare a trial balance listing the debit and credit balances of each account to ensure the accounting equation balances. Let me know if you would like me to provide a sample solution showing the general journal, ledger accounts and trial balance. I'm happy to work through an example to demonstrate the accounting cycle steps.

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Masood Mehmood
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167 views18 pages

FA - Chapter No. 3

Here are the steps to solve this practice question: 1. Record the business transactions in the general journal with date, account titles, explanations, debits and credits. 2. Develop T accounts in the ledger for each account, posting the debits and credits from the general journal. 3. Prepare a trial balance listing the debit and credit balances of each account to ensure the accounting equation balances. Let me know if you would like me to provide a sample solution showing the general journal, ledger accounts and trial balance. I'm happy to work through an example to demonstrate the accounting cycle steps.

Uploaded by

Masood Mehmood
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Chapter

THE ACCOUNTING
3 CYCLE: CAPTURING
ECONOMIC EVENTS
Last Session
Types of Financial Statements
Types of Accounts
Double Entry Accounting System
Accounting Equation
Structure of Balance Sheet, Income Statement
and Cash Flows Statements
Recording Business Transactions

2
Today
The Process of recording, Processing and
recoding of accounting information
The Accounting Cycle
Stages of Accounting Cycle
Practice Questions
First, however, lets look at...

The
Accounting
Cycle
The Accounting Cycle

Make end-of-
Journalize year
Post entries to Prepare trial
transactions. adjustments.
the ledger balance.
accounts.

Prepare after-closing Journalize and Prepare Prepare adjusted


trial balance. post closing financial trial balance.
entries. statements.
Types of Ledger Accounts

Assets

Liabilities

Stockholders Equity

Revenues

Expenses
Using Debits and Credits

Debits and credits are used to increase or


decrease account balances.
Determining whether to use a debit or
credit to record an increase or decrease
depends on the type of account in
question.
The Balance Sheet equation is the basis
for the determination.
Balance Sheet Model

Assign a T-Account to each element of the


Balance Sheet Model

A = L + SE
Account Name Account Name Account Name
Debit Credit Debit Credit Debit Credit
The Ledger

Accounts are
Cash individual records
showing increases
Accounts and decreases.
Payable

The entire group of


Capital accounts is kept
Stock
together in an
accounting record
called a ledger.
Stage 1: General Journal Page
GENERAL JOURNAL
Page:

Date Description PR Debit Credit


The Journal

In an actual accounting system, transactions


are initially recorded in the journal.

GENERAL JOURNAL

Date Account Titles and Explanation Debit Credit


2005
May 1 Cash 8,000
Capital Stock 8,000
Owners invest cash in the business.
Stage 2: The Use of T-
Accounts

Increases are Title of Account


recorded on one
side of the T- Left Right
account, and or or
Debit Credit
decreases are Side Side
recorded on the
other side.
Posting Journal Entries to the Ledger
Accounts

GENERAL JOURNAL

Date Account Titles and Explanation Debit Credit


2005
May 1 Cash 8,000
Capital Stock 8,000
Owners invest cash in the business.
General Ledger
Cash
Date Debit Credit Balance
2005
May 1 8,000 8,000
Ledger (T Accounts)
Stage 3: Trial Balance Illustration
First Company
Trial Balance
12/31/X8

Debits Credits
Cash $ 500
Accounts Receivable 1,200
Equipment 3,800
Accounts Payable $ 700
Notes Payable 1,450
Capital Stock 3,000
Retained Earnings - 1/1/X8 -
Dividends 250
Revenues 11,000
Salary Expense 5,000
Utility Expense 3,000
Rent Expense 2,400
$ 16,150 $ 16,150
Practice Question
Practice Question
July 1. Owner invested PHp 500,000 cash along with computer
equipment that had a market value of php. 120,000 two years ago but
was now worth Php. 100,000 only.
July 8. Completed awork for a client and immediately collected the php.
32,000 cash.
July 10. Completed work for a client and sent a bill for php. 27,000 to be
paid within 30 days.
July 12. Purchased additional equipment for php. 8,000 in cash.
July 15. Paid an assistant php. 6,200 cash as wages for 15 days.
July 28. Owner withdrew php. 500 cash for personal use.
July 30. Completed work for another client who paid only php. 40,000 for
50% of the system design.
July 31. Paid salary of assistant php. 700.
July 31. Received PLDT bill, php. 1,800 and Meralco bill php. 3,800.
Required:
1. Record Business Transactions in General Journal
2. Develop the Ledger Accounts (T Accounts)
3. Trail Balance

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