The Accounting Cycle The accounting period of a business is separated into activities that help the business keep its accounting records in order. ese activities are called the Accounting Cycle. 1 Collect and verify source documents 2 Analyze each transaction 3 Journalize each transaction 4 Post to the ledger 5 Prepare a trial balance 6 Prepare a worksheet 7 Prepare financial statements 8 Journalize and post closing entries 9 Prepare a post-closing trial balance 1 Collect and verify source documents 2 Analyze each transaction 3 Journalize each transaction
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The Accounting Cycle The accounting period of a business is separated into activities that help the business keep its accounting records in order. These.
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The Accounting Cycle
The accounting period of a business is separated into activities that help the business keep its accounting records in order.
These activities are called the Accounting Cycle.
1Collect
and verifysource
documents
2Analyze
eachtransaction
3Journalize
eachtransaction
4Post to the
ledger
5Prepare a
trialbalance
6Prepare aworksheet
7Preparefinancial
statements
8Journalizeand postclosingentries
9Prepare a
post-closingtrial
balance
1Collect
and verifysource
documents
2Analyze
eachtransaction
3Journalize
eachtransaction
Source DocumentsA Source Document provides evidence that a transaction has taken place.
There are 4 basic types of Source Documents that we will be using.
InvoiceIndicates that money is owed.
from your company to your company
AccountsReceivable
AccountsPayable
Receipt Indicates that money has been paid.
from your company to your company
DebitCash
CreditCash
Check Stub Indicates that a check has been issued.
CreditCash
Memorandum (memo)
Written message describing a transaction
Various
Source Document Examples
(1) Name of company providing service
(1)
(2) Name of company receiving service
(2)
(3) Date of invoice
(3)
(4) Invoice number
(4)
(5) Item sold/bought
(5)
(5) Price of item
(6)
(1) Name of company providing service
(1)
(2) Name of company receiving service
(2)
(3) Date of receipt
(3)
(4) Receipt number
(4)
(5) Service provided
(5)
(5) Amount received
(6)
(1) Memo number
(1)
(2) Date of memo
(2)
(3) Description of transaction
(3)(1) Amount of check
(1)
(2) Check number
(2)
(3) Date check was written
(3)
(4) Name of company being paid
(4)(5)
(5) Purpose of check
Invoice
Receipt
Memo
CheckStub
Homework
Textbook Page: 125 Workbook Page: 66
Problem 6-1
Recording Transactions in a General Journal
Page: ______
POST REF
1
2
3
4
DESCRI PTI ON
GENERAL J OURNAL
DATE DEBI T CREDI T
Let’s take a look at a sample General Journal and the steps to journalizing a transaction.
Year
1) Date of Transaction
Month Day
2) Name of Account Debited
Debited Account Name
3) Amount of the Debit
3 0 0
4) Name of Account Credited
Credited Account Name
5) Amount of the Credit
3 0 0
6) Source Document Reference
Source Document
Investments by the OwnerBusiness Transaction 1
On October 1 Maria Sanchez took $25,000 from her personal savings and deposited that amount to open a business account in the name of Roadrunner Delivery Service, Memo 1.
Page: ______
POST REF
1
2
3
4
5
6
7
DESCRI PTI ON
GENERAL J OURNAL
DATE DEBI T CREDI T
1
2014Oct 1 Cash in Bank 25 0 0 0
M. Sanchez, Capital 25 0 0 0Memo 1
Business Transaction 2
On October 2 Maria Sanchez, took two telephones valued at $200 each (total $400) from her home and transferred them to the business as Office Equipment, Memo 2.
2 Office Equipment 4 0 0M. Sanchez, Capital 4 0 0
Memo 2
Purchase TransactionsBusiness Transaction 3
On October 4 Roadrunner issued check 101 for $3,000 to buy a computer system.
Page: ______
POST REF
8
9
10
11
12
13
DESCRI PTI ON
GENERAL J OURNAL
DATE DEBI T CREDI T
1
4 Computer Equipment 3 0 0 0Cash in Bank 3 0 0 0
Check 101
Business Transaction 4
On October 9 Roadrunner bought a used truck on account from North Shore Auto for $12,000, Invoice 200.