Accounting Process Flashcards
represents the steps or procedures used in recording transactions and preparing financial statements.
Accounting Cycle
Steps in Accounting Cycle
- Analyzing the business documents or transactions
- Journalizing
- Posting
- Preparing the unadjusted trial balance
- preparing the adjusting entries
- Preparing the financial statements
- Preparing the closing entries
- Preparing a post-closing trial balance
- Preparing the reversing entries
These pertain to the original source materials evidencing a transaction.
Business Source Documents
These pertains to the journals. Aside from the general journal, large entities maintain special journals such as sales journal, purchase journal, cash receipts journal and cash disbursement journal.
Books of original entry
These are the ledgers - general ledger and subsidiary ledger
Books of final entry
The process of recording transactions in the journal through journal entries.
Journalizing
under this system, each transaction is recorded in two parts - Debit and Credit. This system uses the concepts of duality and equilibrium
Double Entry System
Under this system, each transaction is recorded through simple narrative
Single Entry System
Approach in computing net income: Double Entry System
Transactional Approach
Approach in computing net income: Single Entry System
Capital Maintenance Approach
Accounts used for bookkeeping: Double Entry System
Complete Accounts (ALEIE)
Accounts used for bookkeeping: Single Entry System
Limited Accounts (Cash, AR,AP, Equity)
Books of Accounts used: Double Entry System
Journals, Special Journals, Ledger, Subsidiary Ledgers and other important books
A journal used to record transactions not recorded in the special journals
General Journal
Journals used to record transactions of similar nature to facilitate efficient recording of large number of similar transactions
Special Journals
Journal: Only Sales of merchandise on credit are recorded
Sales Journal
Journal: Receipts of cash from any source are recorded.
Cash Receipts Journal
Journal: As a rule, purchases of merchandise on credit are recorded
Purchase Journal
Journal: All payments of cash for any purpose are recorded
Cash Disbursement Journal
It is the process of transferring data from the journal to appropriate accounts in the ledger.
Posting
A systematic compilation of a group of accounts
Ledger
Contains all the accounts appearing in the trail balance
General Ledger
This is the device used in storing the details of certain general ledger accounts.
Subsidiary Ledger
The basic storage of information in accounting .
Account
Left Side of the T-Account Format
Debit
Right side of the T-Account Format
Credit
listing of all the entity’s general ledger accounts in a systematic form.
Chart of Accounts
Represents assets, liabilities and equity. Also known as Permanent accounts.
Real accounts
Represents revenues and expenses. Also known as temporary accounts.
Nominal Accounts
represent those with real and nominal element
Mixed Accounts
Accounts that are deducted from a related account such as accumulated depreciation and allowance for doubtful accounts.
Contra Accounts
Accounts that are added to a related account such as premium on bonds payable
Adjunct Accounts
List of general ledger accounts with their respective debit or credit balance.
Trial Balance
This is prepared before adjusting entries. It contains Real, Nominal and Mixed Accounts.
Unadjusted Trial Balance
This is prepared after adjusting entries. It contains Real and Nominal Accounts
Adjusted Trial Balance
This is prepared after the closing process. It contains Real accounts only
Post-Closing Trial Balance
Made at the end of every accounting period in order to split mixed accounts up to date. Allocate revenue and expenses between current and future periods.
Adjusting Entries
The original payment is debited to an expense account. Entry: the unused portion is recognized as asset while the expired portion remains as expense
Expense Method
The original payment is debited to an asset account. Entry: The incurred portion is recognized as expense while the unused portion remains as asset
Asset Method
An income account is credited for the receipt of the income expense. Entry: The unearned portion is recognized as liability while the earned portion remains as income
Income Method
A liability account is credit for the receipt of the income. Entry: The earned portion is recognized as income while the unearned portion remains as liability
Liability Method
Multicolumn sheet of paper that an accountant uses in compiling and summarizing the information necessary for the preparation of the financial statement
Worksheet
Made at the end of an accounting period after adjusting entries and financial statements have been prepared for the purpose of closing at nominal or temporary accounts.
Closing Entries
Made at the beginning of the new accounting period in order to transfer all accrued and prepaid items established by adjusting entries to the nominal accounts that are to be used in recording transactions during the new period.
Reversing Entries
