JOURNALIZING TRANSACTION,
Detailed Steps in the Accounting Cycle
Analyze
Business
Transactions.
Journalize
transactions
in the
journal.
Post entries
to the
accounts in
the ledger.
Prepare
unadjusted trial
balance.
Post-closing trial
balance
Journalize and
post closing
entries
Prepare
financial
statements.
Prepare adjusted
trial
balance.
Journalize
and post
adjusting
entries
Analysis and Recording
Business Transactions

Business transaction is an economic event that
causes a change in the financial position

Financial Position:

What the entity controls

How the entity controls them (claims)
Fundamental Accounting Equation
ASSETS = EQUITIES
ASSETS = LIABILITIES + OWNERS' EQUITY
How do accounts behave?
Assets
=
+
Liabilities
+
+
Shareholders’ Equity
+
So Assets increase on the left hand or debit side then they
decrease on the credit side
Assets
+
debit
credit
Behavior of Accounts cont…
Liabilities and Owners’ Equity accounts increase on the credit
side, decrease on the debit side
Liabilities or Owners’ Equity Accounts
debit
+
credit
Transaction Analysis and
The Duality Concept

Double entry system states that every transactions affects at least
two accounts.

Therefore
•
If an asset account increases (decreases), because of duality
concept there must be a corresponding:
1.
increase(decrease) in a specific liability account
2.
or a decrease(increase) in a another asset account
3.
or an increase(decrease) in owners' equity account.
What’s in a Journal Entry?
Date
2.
At least one debit entry
 Debit account, use exact account title, do not indent
titles
3.
At least one credit entry
 Credit account, use exact account title, indent titles
4.
An explanation of the transaction:
 Check number
 Invoice number
 Accounts receivable customer name
 Many other elements OR details as appropriate…
 Remember: the accountant must leave a good audit
trail so that users of accounting information can
understand what occurred with each transaction
1.
DR=CR
Steps in Journalizing
1.
2.
3.
Determine the effects of
transactions on three components
of the accounting equation,
Determine which specific accounts
are affected, and
Assure that total of the increases
should be equal to either increases
on the other side of the equation or
to decreases on the same side, or
a combination there of.
Rules of Debit and Credit
Assets =
+ Dr Cr
Liabilities
+
Dr
Cr
+
Owners’ Equity
+
Dr
Cr
Expense
Revenue
+
+
Dr Cr
Dr Cr
Withdrawals/Dividends
+
Dr
Cr
Assets
Give examples of an asset account:
Liability
Give examples of a liability account:
Owner’s Equity
Give examples of an owner’s equity account:
Illustrations:
In January of the current year, S. Moreno began a
business he called “Moreno Furniture Repair Shop’ and
completed the following transactions during the month:
1. On Jan 1, Moreno invested ₱300,000 to start the
business.
Event Assets
No
1
Total
Liabilities
Owners’
Equity
GENERAL JOURNAL
Page 1
Date Account Title and Description Acct.No. Debit
Credit
2. Paid ₱10,000 for the rent of the
shop building
Event Assets
No
1
Total
Liabilities
Owners’
Equity
GENERAL JOURNAL
Page 1
Date Account Title and Description Acct.No. Debit
Credit
3. Purchased ₱80,000 of shop machinery, giving
₱30,000 cash and a promissory note in
payment of the balance.
Event Assets
No
1
Total
Liabilities
Owners’
Equity
GENERAL JOURNAL
Page 1
Date Account Title and Description Acct.No. Debit
Credit
5. Purchased ₱9,500 of shop
supplies from C. Alba on credit.
Event Assets
No
1
Total
Liabilities
Owners’
Equity
GENERAL JOURNAL
Page 1
Date Account Title and Description Acct.No. Debit
Credit
9. Collected cash on delivery of a
cabinet to a customer, ₱20,000.
Event Assets
No
1
Total
Liabilities
Owners’
Equity
GENERAL JOURNAL
Page 1
Date Account Title and Description Acct.No. Debit
Credit
13. Completed and delivered sofa bed to
M. Maranan ₱13,000 on credit.
Event Assets
No
1
Total
Liabilities
Owners’
Equity
GENERAL JOURNAL
Page 1
Date Account Title and Description Acct.No. Debit
Credit
15. Paid wages of the shop
helpers, ₱15,000
Event Assets
No
1
Total
Liabilities
Owners’
Equity
GENERAL JOURNAL
Page 1
Date Account Title and Description Acct.No. Debit
Credit
15. Paid the delivery services rendered by
C. Rana Trucking, ₱8,000.
Event Assets
No
1
Total
Liabilities
Owners’
Equity
GENERAL JOURNAL
Page 1
Date Account Title and Description Acct.No. Debit
Credit
18. Paid the account due to
C. Alba, ₱9,500.
Event Assets
No
1
Total
Liabilities
Owners’
Equity
GENERAL JOURNAL
Page 1
Date Account Title and Description Acct.No. Debit
Credit
20. Took ₱1,000 worth of shop
supplies for use in his carport.
Event Assets
No
1
Total
Liabilities
Owners’
Equity
GENERAL JOURNAL
Page 1
Date Account Title and Description Acct.No. Debit
Credit
23. Received ₱5,000 from M. Maranan in
partial payment of his account.
Event Assets
No
1
Total
Liabilities
Owners’
Equity
GENERAL JOURNAL
Page 1
Date Account Title and Description Acct.No. Debit
Credit
25. Withdrew ₱5,000 for
personal expenses.
Event Assets
No
1
Total
Liabilities
Owners’
Equity
GENERAL JOURNAL
Page 1
Date Account Title and Description Acct.No. Debit
Credit
28. Collected ₱5,000 on the
delivery of small chairs.
Event Assets
No
1
Total
Liabilities
Owners’
Equity
GENERAL JOURNAL
Page 1
Date Account Title and Description Acct.No. Debit
Credit
30. Paid ₱8,000 for the delivery service on
the second half of the month.
Event Assets
No
1
Total
Liabilities
Owners’
Equity
GENERAL JOURNAL
Page 1
Date Account Title and Description Acct.No. Debit
Credit
30. Paid the wages of the
shop helpers, ₱15,000.
Event Assets
No
1
Total
Liabilities
Owners’
Equity
GENERAL JOURNAL
Page 1
Date Account Title and Description Acct.No. Debit
Credit
30. Paid the light and power bill,
₱3,500.
Event Assets
No
1
Total
Liabilities
Owners’
Equity
GENERAL JOURNAL
Page 1
Date Account Title and Description Acct.No. Debit
Credit
Accounting Cycle-Revisited
Analyze and
record the
transactions
Close the
accounts and
prepare trial
balance
Post the
transactions and
prepare trial
balance
Prepare the
financial
statements
Adjust the
accounts
and prepare
trial balance
THE END
THANK
YOU