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Accounting Cycle: Analysis and Recording of Transactions

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Learn how to analyze transactions, journalize, close, and post entries, prepare trial balances, and financial statements. Understand the accounting equation and the general ledger.

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Accounting Cycle: Analysis and Recording of Transactions

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  1. Module 3 Analysis and Recording of Transactions

  2. Learning Objectives

  3. The Accounting Cycle Analyze transactions Prepare post-closing trial balance 9 1 Journalize 2 2 Close 8 Post 3 Prepare statements 7 Prepare unadjusted trial balance 4 Adjust Prepare adjusted trial balance 6 5

  4. = + Assets Liabilities Equity The Accounting Equation • A detailed record of increases and decreases in a specific asset, liability, or equity item. Introductory Accounting SAP 2007 / SAP University Alliances

  5. The General Ledger

  6. The T-Account Introductory Accounting SAP 2007 / SAP University Alliances

  7. Calculating the Account Balance Example: 1 2 3 • Steps: • Add the amounts on the debit side. • Add the amounts on the credit side. • Calculate the difference between the debits and credits. Introductory Accounting SAP 2007 / SAP University Alliances

  8. Double-Entry Accounting Debits = Credits Always!

  9. Debit Credit Debit Credit Debit Credit +- - + - + Double-Entry Accounting = + Assets Liabilities Equity Assets Liabilities Owner’s Equity Introductory Accounting SAP 2007 / SAP University Alliances

  10. Capital Withdrawals Revenues Expenses Debit Credit Debit Credit Debit Credit Debit Credit - + +- - + +- Double-Entry Accounting Equity Accounts Introductory Accounting SAP 2007 / SAP University Alliances

  11. Assets Liabilities Equity Normal Balances • An account’s normal balance is the debit or credit side where increases are recorded. = + Introductory Accounting SAP 2007 / SAP University Alliances

  12. Chart of Accounts

  13. Analyzing Transactions

  14. Analyzing Transactions • Example 1: • The owner invests $10,000 in the business. 1 2 3

  15. Analyzing Transactions • Example 1: • The owner invests $10,000 in the business. 1 2 3

  16. Analyzing Transactions • Example #1: • The owner invests $10,000 in the business. 1 2 3

  17. Analyzing Transactions • Example #1: • The owner invests $10,000 in the business. 1 2 3

  18. Analyzing Transactions • Example 1: • The owner invests $10,000 in the business. Debit cash for $10,000 Credit owner, capital for $10,000 Introductory Accounting SAP 2007 / SAP University Alliances

  19. Analyzing Transactions • Example 2: • The company purchases supplies by paying $2,500 cash. 1 2 3

  20. Analyzing Transactions • Example 2: • The company purchases supplies by paying $2,500 cash. 1 2 3

  21. Analyzing Transactions • Example 2: • The company purchases supplies by paying $2,500 cash. 1 2 3

  22. Analyzing Transactions • Example 2: • The company purchases supplies by paying $2,500 cash. 1 2 3

  23. Analyzing Transactions • Example 2: • The company purchases supplies by paying $2,500 cash. Debit supplies for $2,500 Credit cash for $2,500 Introductory Accounting SAP 2007 / SAP University Alliances

  24. Analyzing Transactions • Example 3: • The company purchases supplies for $1,100 on credit. 1 2 3

  25. Analyzing Transactions • Example 3: • The company purchases supplies for $1,100 on credit. 1 2 3

  26. Analyzing Transactions • Example 3: • The company purchases supplies for $1,100 on credit. 1 2 3

  27. Analyzing Transactions • Example 3: • The company purchases supplies for $1,100 on credit. 1 2 3

  28. Analyzing Transactions • Example 3: • The company purchases supplies for $1,100 on credit. Debit supplies for $1,100 Credit accounts payable for $1,100 Introductory Accounting SAP 2007 / SAP University Alliances

  29. The General Journal

  30. Posting Journal Entries

  31. The Posting Process General journal information is transferred to the general ledger 3 1 2 5 5 4 • Steps: • Identify the account. • Enter date • Enter amount • Calculate new account balance • Enter posting references

  32. Trial Balance

  33. Trial Balance

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