The Accounting Cycle CONTRA AND ADJUNCT ACCOUNTS

- Contra accounts - presented in the financial

STEPS IN THE ACCOUNTING CYCLE statements as deduction to their related accounts
1. Identifying And Analyzing
- Adjunct accounts - presented in the financial
2. Journalizing
statements as addition to their related accounts
3. Posting
4. Preparing Unadjusted Trial Balance • The sum of balances of an accounts and its related
5. Preparing Adjusting Entries contra or adjunct account is called the carrying amount
6. Preparing Adjusted Trial Balance of that accounts
7. Preparing The Financial Statements
8. Closing The Books
9. Preparing The Post-Closing Trial Balance BOOKS OF ACCOUNTS
10. Recording Of Reversing Entries
1. Journal- "book of original entries" where business
1. Identifying and 2. Journalizing transactions are first recorded
analyzing 2. Ledger - "book of secondary entries" used to
- Transactions are Parts of a journal entry classify the effects of business transaction on the
normally identified from accounts
source documents.
 Sales invoices  Date TYPES OF JOURNAL
 Official receipts  Account titles
 Purchase order  Short description of 1. Special Journal
 Delivery receipts the transaction
 Bank deposit slips i. Simple journal entry • Sales Journal • Purchases Journal
 Bank statements - single debit and
• Cash Receipts Journal • Cash Disbursement Journal
 Checks single credit
 Statement of ii. Compound journal 2.General Journal
accounts entry- two or more
debit or credit COMMON ACCOUNT TITLES (FOR
JOURNALIZING)
DOUBLE ENTRY SYSTEM ASSETS LIABILITIES EQUITY
- Each Transaction Is Recorded In Two Parts - Debit  Cash  Accounts  Owner's
And Credit payable capital
- This Is In Order For The Accounting Equation To Be  Accounts  Notes  Owner's
Balanced At All Times receivable payable drawings
CONCEPTS OF DUALITY AND EQUILIBRIUM  Allowance for  Loans  Common
~ Concept Of Duality - Two Fold Effect On Values, bad debts payable stock
Each Transaction Is Recorded Using At Least Two  Notes  Interest  Preferred
Accounts receivable payable stock
 • Inventory  Salaries  Retained
~ Concept Of Equilibrium - Each Transaction Is payable earnings
Recorded In Terms Of Equal Debits And Credits  Prepayments  Utilities
(Prepaid payable
RULES OF DEBITS AND CREDITS
supplies,
Prepaid
insurance,
Prepaid rent)
 Accumulated  Unearned
depreciation income
 Land  Accrued
expense
 Building  Accounts
payable
 INCOME EXPENSES
 Service  Cost of  Bad debts
fee sales/ Cost expense
of goods
sold
 Sales  Salaries  Advertising
expense expense
 Interest  Rent  Insurance
income expense expense
 Gains  Freight  Taxes and
licenses
 Service  Utilities  Miscellaneous
fee expense expense
 Supplies  Interest
expense expense
 Depreciation  Losses
expense
3. POSTING
KINDS OF LEDGERS
1. General Ledger 2. Subsidiary Ledger
ILLUSTRATION:
ASSET ACCOUNT:
At The Beginning Of The Period, You Have A Cash
Balance Of P5,000.00. During The Period, You Had
Total Cash Collection Amounting To P10,000.00 And
Made Total Payments Of P8,000.00

4. PREPARING UNADJUSTED TRIAL BALANCE

A trial balance is a list of general ledger accounts and
their balances. It is prepared to check the equality of
total debits and credits
Types of Trial balance:
a. Unadjusted trial balance- prepared before AJE
b. Adjusted trial balance - prepared after AJE but
before FS
c. Post-closing trial balance - prepared after the closing
process