Chapter 3 Flashcards
What are the 7 accounting cycle?
- Data gathering
- Journalize
- Recording in books of accounts
- Posting
- Preparation of adjusting entries
Preparation of adjusted trial balance - Preparation of financial statements
- Preparation of closing entries
Preparation of post-closing balance
Preparation of reversal entries
Journalize in either?
a. journal voucher
b. cash receipt voucher
c. cash payment voucher
Observed accounting principle in data gathering from acctg cycle
entity
objectivity
cost
materiality
matching
accounting period
revenue recognition
conservatism
Book of original entry
- General journal
- Cash receipt journal
- Cash payment journal
- Other special books
Control in 3rd step of Acctg cycle
a. recording must be systematic and chronological
b. must be done by a person not handling cash
c. books must be registered with BIR
d. books must have monthly totals
From the journal, the monthly totals will be transferred monthly to the ledger, which is the book of final entry.
Posting
First phase of summarization. Transfer the figures in the general ledger to the working paper’s first two columns.
Trial balance
This is very important because this transaction will identify the transactions as business transactions.
Data gathering
If we are to apply in real terms only business transactions are allowed to be entered into the books of the accounts and such transactions should be authorized by the manager of the company.
Entity concept
States that transactions must be supported by pieces of evidence.
Objectivity principle
The BIR’s standards are:
The receipt must be in the name of the company.
The receipt must be an invoice (cash invoice or credit invoice) or an official receipt.
The receipt must be claimed within the taxable period only.
Because we can check on the authorization for the incurrence of the said transactions, with their supporting evidence, they are verifiable.
Verifiability principle
These transactions incurred with the proper supporting pieces of evidence, as authorized by the manager will now be forwarded to the accounting department for journal entry preparation.
Reliability principle
Represents receipt of cash in hand
Cash receipt voucher
shows the responsibility of the person who prepared the voucher;
Prepared by
shows the accuracy of the transaction and the journal entry prepared;
Checked by
shows that the journal entry is now approved for entry in the company’s books of account
Approved by
Components of the cash receipt voucher, cash payment voucher, journal voucer
- The heading, which consists the:
* Name of the company, and
* Name of the office form. - The cash payment voucher no.is essential for future referencing. Should there be a problem with the entry, the no. can be used as a reference;
- The body of the form particulars, debit, and credit;
- Prepared by shows the responsibility of the person who prepared the voucher;
- Checked by shows the accuracy of the transaction and the journal entry prepared;
- Approved by shows that the journal entry is now approved for entry company’s books of account;
- The name of the bank check number and the amount are essential for recording purpose and for bank reconciliation purpose later;
- The received by portion is essential so we will know who received the payment in case there is a problem. We can refer to the name that collected the check payment and
- The check itself. The check should be crossed to indicate that the check payment could only be deposited to the account of the payee. The check cannot be encashed.
portion is essential so we will know who received the payment in case there is a problem. We can refer to the name that collected the check payment and
Received by
should be crossed to indicate that the check payment could only be deposited to the account of the payee.
Check
Cannot be encashed.
Check
a written authorization prepared for every financial transaction, or for every transaction that meets defined requirements.
Journal voucher
Contains all the cash received by the business entity and journalized in cash receipt voucher.
Cash receipt book
serves as a control measure of accounting officers so that no transactions will be recorded by the accounting staff
cash receipt voucher
The process of transferring the information contained in the journals to the ledger (book of final entry).
Posting
It is very important supposing the auditor validates where the figures come from he may refer to it for verification.
P/R or Posting Reference column
The list of account titles in the ledger with their corresponding balance does not demonstrate whether the accounts are correct or not, but whether all accounts transferred correctly to the ledger.
Trial balance
Trial balance is of two types. These are:
- Trial balance of total
- Trial balance of balances
listing the account title found in the ledger and getting the total of each debit and credit to be written in the debit and credit column of the trial balance.
Trial balance of total
What should be observed when using a trial balance of total:
a. The report should start with the proper heading so the user can know what the report is all about. The heading contains the following information:
Main Heading
Name of the company
Name of the statement (trial balance)
Date
Column Heading
Account title
Debit column
Credit column
b. The currency sign (peso sign) is only written on the following:
* First figure of the column
* Total
c. The account title is arranged in accordance with its appearance in the ledger.
d. Since we are preparing a trial balance of total, account with no figures in the ledger should be marked zero.
e. Once balanced, you have to double rule. Double ruling signifies the completeness of your report.
Under this type, get the difference between the debit and the credit, and place the difference under the column (debit or credit) having the greater value.
Trial balance of balances
