Slides complete steps 1 3 in the accounting cycle

Complete Steps 1-3 in Accounting Cycle

Principles of Cost Analysis and Management

© Dale R. Geiger 2011

1


What is the Accounting Cycle?
The Accounting Cycle is the systematic process by
which accounting information is recorded, compiled,
and reported to users.

© Dale R. Geiger 2011

2


Terminal Learning Objective

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•

Task: Complete Steps 1-3 In Accounting Cycle (Journalize, Post, Trial Balance)

•

Standard with at least 80% accuracy:

 Condition: You are a cost advisor technician with access to all

regulations/course handouts, and awareness of Operational Environment
(OE)/Contemporary Operational Environment (COE) variables and actors.

•
•
•

List steps in the Accounting Cycle
Describe terminology (journal, ledger, debit, credit)
Record transactions in tabular format under the accrual basis

© Dale R. Geiger 2011

3


The Accounting Cycle
Record Transactions
Post-Closing Trial
Post to Ledger

Balance

Close Accounts
Prepare Trial
Balance

Prepare
Statements

Adjust Accounts
Adjusted
Trial Balance
© Dale R. Geiger 2011

4


The Accounting Cycle
Record Transactions
Post-Closing Trial
Post to Ledger

Balance

Close Accounts
Prepare Trial
Balance

Prepare
Statements

Adjust Accounts
Adjusted
Trial Balance
© Dale R. Geiger 2011

5

The Accounting Cycle
Record Transactions
Post-Closing Trial
Post to Ledger

Balance

Close Accounts
Prepare Trial
Balance

Prepare
Statements

Adjust Accounts
Adjusted
Trial Balance
© Dale R. Geiger 2011

6


The Accounting Cycle
Record Transactions
Post-Closing Trial
Post to Ledger

Balance

Close Accounts

Prepare Trial
Balance

Prepare
Statements

Adjust Accounts
Adjusted
Trial Balance
© Dale R. Geiger 2011

7


The Accounting Cycle
Record Transactions
Post-Closing Trial
Post to Ledger

Balance

Close Accounts
Prepare Trial
Balance

Prepare
Statements

Adjust Accounts
Adjusted

Trial Balance
© Dale R. Geiger 2011

8


The Accounting Cycle
Record Transactions
Post-Closing Trial
Post to Ledger

Balance

Close Accounts
Prepare Trial
Balance

Prepare
Statements

Adjust Accounts
Adjusted
Trial Balance
© Dale R. Geiger 2011

9


The Accounting Cycle
Record Transactions

Post-Closing Trial
Post to Ledger

Balance

Close Accounts
Prepare Trial
Balance

Prepare
Statements

Adjust Accounts
Adjusted
Trial Balance
© Dale R. Geiger 2011

10


The Accounting Cycle
Record Transactions
Post-Closing Trial
Post to Ledger

Balance

Close Accounts
Prepare Trial
Balance

Prepare
Statements

Adjust Accounts
Adjusted
Trial Balance
© Dale R. Geiger 2011

11


Check on Learning

•
•

What is the first step in the Accounting Cycle?
What is the purpose of the Trial Balance?

© Dale R. Geiger 2011

12


The Journal

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Accounting events are recorded in the JOURNAL

•

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The Journal is a chronological record of all transactions

Each transaction requires a journal entry
Each journal entry consists of at least one Debit and one Credit: “Double Entry”
Accounting

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•
•

Debit amounts must equal Credit amounts
Debit: an entry on the left-hand side of the account
Credit: an entry on the right-hand side of the account

© Dale R. Geiger 2011

13


Regarding Debits and Credits

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Debits and credits are neutral

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Debit ≠ decrease
Credit ≠ increase
It depends on the type of account

Some accounts types record increases with a debit, some record increases with a
credit.

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The side of the account which records an increase is the account’s NORMAL
BALANCE.

© Dale R. Geiger 2011

14


“Normal” Account Balances
Assets = Liab + FinPosition ± Net Change
Net Change = Revenue – Expense, so:
Assets = Liab + FinPosition + Rev – Expense
+ Expense =

+ Expense

(Add Expense to both sides)
Assets + Expense = Liab + FinPosition + Rev

Everything on the LEFT side of the equation increases with an entry to the LEFT
side of the account
© Dale R. Geiger 2011

15


“Normal” Account Balances
Assets = Liab + FinPosition ± Net Change
Net Change = Revenue – Expense, so:
Assets = Liab + FinPosition + Rev – Expense
+ Expense =

+ Expense

(Add Expense to both sides)
Assets + Expense = Liab + FinPosition + Rev

Everything on the LEFT side of the equation increases with an entry to the LEFT
side of the account
© Dale R. Geiger 2011

16

“Normal” Account Balances
Assets = Liab + FinPosition ± Net Change
Net Change = Revenue – Expense, so:
Assets = Liab + FinPosition + Rev – Expense
+ Expense =

+ Expense

(Add Expense to both sides)
Assets + Expense = Liab + FinPosition + Rev

Everything on the LEFT side of the equation increases with an entry to the LEFT
side of the account
© Dale R. Geiger 2011

17


“Normal” Account Balances
Assets = Liab + FinPosition + Rev – Expense
+ Expense =

+ Expense

(Add Expense to both sides)
Assets + Expense = Liab + FinPosition + Rev

Everything on the LEFT side of the equation increases with an entry to the LEFT
side of the account

© Dale R. Geiger 2011

18


“Normal” Account Balances
Assets = Liab + FinPosition + Rev – Expense
+ Expense =

+ Expense

(Add Expense to both sides)
Assets + Expense = Liab + FinPosition + Rev

Everything on the RIGHT side of the equation increases with an entry to the
RIGHT side of the account

© Dale R. Geiger 2011

19


“Normal” Account Balances
Assets + Expense = Liab + FinPosition+ Rev
+

–

+

–

–

+

debit

–

+

–

+

credit

© Dale R. Geiger 2011

20


Check on Learning

•
•

What does “credit” mean?
An increase to an expense is reflected with an entry on which side of the

account?

© Dale R. Geiger 2011

21


Anatomy of a Journal Entry
Date of Transaction

© Dale R. Geiger 2011

22


Anatomy of a Journal Entry
Account
Debited

© Dale R. Geiger 2011

23


Anatomy of a Journal Entry
Amount Debited

© Dale R. Geiger 2011

24

Anatomy of a Journal Entry

Account Credited

© Dale R. Geiger 2011

25