The Accounting Cycle

What we know so far…So far we know how to: Identify and differentiate balance sheet

and income statement accounts Manipulating transactions Create a general ledger using T accounts Create financial Statements But there are a few other steps in the accounting cycle that we must cover

The CycleBusiness Transactions Journalizing Beginning of Period

Journal posting Financial Statements Ledger Statement Trial Balance Prep.

The Journal A CHRONOLOGICAL Record of all parts of

a transaction in one document. Features the date, debit, credit and

most importantly, an explanation of each transaction

The main journal of a business is referred to as the General Journal

Journalizing This is the process of entering

transactions into a journal. Similar to entering transactions into a

general ledger.

Better than T-accounts! Using a general journal has all the

benefits of T-account ledgers but is FAR more organized.

Cash SalesOct 1 900 Oct1 900

Using a JournalGENERAL JOURNAL

Date Particulars PR Debit Credit20--Oct

 1

 Cash

    9 

0 0 00            

      Sales             9 

0 

0 

00  

     Sold services to R. Heinz for cash                        

Steps to Journalizing Record the date – First entry must show

the Year, Month and day. For all other entries only the day of the month needs to be recorded

Record the debit Record the credit Record the explanation

Your Homework Pg. 114 questions 1-8 Pg. 115 questions 1-3 – Use your

workbook

And remember….

Where to go after the Journal Posting to the general Ledger is different

than when we post to the journal. As we know, the general journal is

where transactions are first recorded. After this, the transactions must be

broken out into their separate accounts in the ledger.

Balance-Column form The Journal entries are broken out into

what is called the Balance Column Form of Ledger.

Basically, it looks similar to the general journal, but with a column added onto it.

The third column is to keep a running total of a specific account.

Looks a little like this

Account Cash No. 100

 Date Particulars P.R. Debit Credit DR.

CR. Balance

                         DR.                                                

Posting to the LedgerThere are Six steps to remember:

Locate the account in the Journal. Cash, Accounts receivable etc.

Record the Date. Month and year need not be included, if they are already at the top.

Enter the amount

Posting steps continued Calculate the new balance in the

“Balance” Column

Last steps Complete the Ledger posting Reference

Column. This is literally the Journal page number. So if the transaction is recorded on the 10th page of the journal, you’d fill in J10 into this column.

Complete the journal posting Reference column.