FUNDAMENTALS OF ACCOUNTING the Cash Receipts Journal, Cash

Disbursements Journal, Sales Journal,

MODULE 4: ACCOUNTING CYCLE
(JOURNALIZING TO ADJUSTMENTS)
STEP 2: JOURNALIZING
Previous problem:
Joong paid his office rental for the month
amounting to 4,166.67 in cash.
and Purchases Journal. The decision to
utilize these specific journals depends on
the frequency of transactions concerning
cash receipts, cash payments, credit
sales, and credit purchases.
STEP 3: POSTING TO THE LEDGER
Continuing Problem:

The two accounts that are affected by the After the journal has been entered the
transaction are Expense and Asset. next is to post it in the ledger

Expense – Rent Expense

Cash – Asset Cash
The Journal Entry: Debit Credit
4,166.67
Dr. Rent Expense 4,166.67
Cr. Cash 4,166.67
To record payment of Rent Expense for
the month

Date Description Debit Credit

30-Jul-23 Rent Expense 4,166.67
30-Jul-23 Cash 4,166.67
To record Rent Expense.

Accountants record the chronological

order of business transactions and/or
events in a document known as the
GENERAL JOURNAL. This journal
typically consists of the following
columns: date, description (of the
transaction), debit (amount), and credit
(amount).
In the "Description" column of the journal,
the account to be debited is recorded
near the date line, whereas the account
to be credited is indented within the same
"Description" column.
In practical accounting, there exist
additional specialized journals, including
Numerous types of Ledgers exist. Each
Ledger serves as a comprehensive
record of transactions for individual
accounts, providing a detailed account of
day-to-day transactions along with the
current balance as of the latest date.
While determining the ending balance of
an account through the General Journal
is straightforward when there are only a
few transactions, it becomes laborious
and challenging for accounts with

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Atty. Juan Pepito E. Dela Cruz, MICB, CPA, REA
numerous transactions, like Cash. Thus, Adjusting Entries. Making corrections
the Ledger comes into play, where the directly on the already completed Trial
accounts and their respective amounts Balance could lead to erasures and
from the Journal are transferred for confusion, as the new figures might not
easier tracking. This process of be easily comprehensible.
transferring amounts to the Ledger is
known as POSTING. In the example, Juan forgot to record his
personal loan to dunk. Thus, we make an
Typically, the ledger accounts are adjusting entry column on the Trial
organized in the subsequent sequence: Balance after we recorded the same at
the Journal.
1. Assets
2. Liabilities
3. Capital
Juan Dela Cruz, REA, REB
Adjusted Trial Balance

4. Revenues
For the year ended December 31, 2022
Beginning Debit Credit Unadjusted AJE Adjusted
Cash 1,195,000.00 1,190,000.00 2,385,000.00 50,000.00 2,435,000.00
5. Expenses Accounts Receivable 1,000,000.00 500,000.00 1,500,000.00 1,500,000.00
Property, Plant, & Equipment 120,000.00 120,000.00 120,000.00
Accumulated Depreciation (20,000.00) (20,000.00) (40,000.00) (40,000.00)
Trade & Other Payables (50,000.00) (50,000.00) (50,000.00) (100,000.00)
Owner's Equity (2,245,000.00) (2,245,000.00) (2,245,000.00)
Service Revenue (2,500,000.00) (2,500,000.00) (2,500,000.00)
STEP 4: PREPARING THE TRIAL Cost of Service
Depreciation Expense
250,000.00
20,000.00
250,000.00
20,000.00
250,000.00
20,000.00
BALANCE Office Supplies
Rent Expense
35,000.00
50,000.00
35,000.00
50,000.00
35,000.00
50,000.00
Taxes and Licenses 125,000.00 125,000.00 125,000.00
Communication, Light, and Water 150,000.00 150,000.00 150,000.00

Once all the postings from the General Salaries & Wages
TOTAL -
200,000.00
2,520,000.00 (2,520,000.00)
200,000.00
- -
200,000.00
-

Journals to the Ledgers have been

finalized, it becomes necessary to verify
if the ending balances of all the debit After the adjustments, we are now ready
accounts align with those of the credit to prepare the financial statements.
accounts.
Juan Dela Cruz, REA, REB
Trial Balance Textbook Reference:
For the year ended December 31, 2022
Beginning Debit Credit Unadjusted
Cash
Accounts Receivable
1,195,000.00 1,190,000.00
1,000,000.00 500,000.00
2,385,000.00
1,500,000.00
Accounting for Non-Accountants Text and Cases by
Property, Plant, & Equipment 120,000.00 120,000.00 Daniel R. Cruz, 1993 Edition (De La Salles University
Accumulated Depreciation (20,000.00) (20,000.00) (40,000.00)
Trade & Other Payables (50,000.00) (50,000.00) Press).
Owner's Equity (2,245,000.00) (2,245,000.00)
Service Revenue (2,500,000.00) (2,500,000.00)
Cost of Service 250,000.00 250,000.00
Depreciation Expense 20,000.00 20,000.00
Office Supplies 35,000.00 35,000.00
Rent Expense 50,000.00 50,000.00
Taxes and Licenses 125,000.00 125,000.00
Communication, Light, and Water 150,000.00 150,000.00
Salaries & Wages 200,000.00 200,000.00
TOTAL - 2,520,000.00 (2,520,000.00) -

STEP 5: THE ADJUSTING ENTRIES

Once the Trial Balance is ready, certain

accounts may require modifications or
adjustments to ensure a more precise
and realistic balance. These
adjustments, which modify the Trial
Balance amounts, are referred to as
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Atty. Juan Pepito E. Dela Cruz, MICB, CPA, REA