COURSE
ESSENTIAL
STANDARD
OBJECTIVE
ESSENTIAL
QUESTIONS
6311 Accounting I
2.00
C3
Unit A
24%
The Accounting Cycle
Apply accounting procedures for a
sole proprietorship.
2.01
C3
11%
Apply procedures to prepare and
post journal entries for a sole
proprietorship.
 What is the correct procedure for recording a journal entry?
 What is the correct procedure for posting a journal entry?
Unit 2.0 Study Guide
I.
Procedure for Journalizing Transactions
A. Analyze the transaction. Identify the accounts affected, classify the accounts affected,
and determine how each account increases or decreases.
B. Determine which account is debited and which account is credited and the dollar
amount of this transaction.
C. Draw a T-account and record the debit(s) and credit(s).
D. Journalize the transaction.
1. Record the date in the Date column.
2. Record the name of the account to be debited in the Account Title column.
3. Record the debit amount in the Debit column on the same line as the account title.
4. On the next line, record the name of the account to be credited in the Account Title
column.
5. Record the credit amount in the Credit column on the same line as the account
title.
6. Record the source document in the Document Number column.
II.
Procedure for Posting From a Journal to the General Ledger
A. Write the date of the journal entry in the Date column of the account.
B. Write the journal page number in the post reference column of the account.
C. Write the debit amount or the credit amount (whichever applies to this account) under
the appropriate column (Debit or Credit) of the account.
D. Write the new account balance in the appropriate amount column (Balance Debit or
Balance Credit).
E. Return to the journal. In the Post Reference column of the journal record the account
number of the account to which the entry was posted.
III.
Procedures for Posting From a Multicolumn Journal to the General Ledger
A. Posting the total of the Sales Credit column
1. Write the date in the Date column of the ledger account Sales.
2. Write the journal page number in the Post. Ref. column of the account.
3. Write the column total from the journal in the Credit column of the account.
4. Write the new balance in the Balance Credit column of the account.
5. Return to the journal and write the Sales account number (410) in parentheses
below the Sales Credit column total.
B. Posting the total of the Cash Debit column
1. Write the date in the Date column of the ledger account Cash.
2. Write the journal page number in the Post. Ref. column of the account.
3. Write the column total from the journal in the Debit column of the account.
4. Write the new account balance in the Balance Debit column of the account.
5. Return to the journal and write the Cash account number (110) in parentheses
below the Cash Debit column total.
C. Posting the total of the Cash Credit column
1. Write the date in the Date column of the ledger account Cash.
2. Write the journal page number in the Post. Ref. column of the account.
3. Write the column total from the journal in the Credit column of the account.
4. Write the new account balance in the Balance Debit column of the account.
5. Return to the journal and write the Cash account number (110) in parentheses
below the Cash Credit column total.
KEY TERMS
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I.
Ledger
General ledger
Account number
File maintenance
Opening an account
Posting
Correcting entry
Proving cash
Obj. 2.02
Procedures for Preparing a Worksheet
A. Enter the heading of the worksheet.
1. Write the company name on the first line.
2. Write the name of the document being prepared on the second line.
3. Write the date of the document, For the Month Ended July 31, 20--, on the third
line.
B. Prepare the Trial Balance section of the worksheet.
1. Write the general ledger account titles in the Account Title column.
2. Write the general ledger debit balances in the Debit column and the general ledger
credit balances in the Credit column.
3. Rule a single line across the two Trial Balance columns below the last amounts.
(A single line drawn under a column means that the amounts above the line are
ready to be totaled.)
4. Add each column. If the two column totals are the same, then debits equal credits
in the general ledger accounts. If not, check and correct errors.
5. Write the total of each column below the single line.
6. Rule double lines across both Trial Balance columns. (Double lines mean that the
totals just above the ruling have been verified as correct and no other entries need
to be made.)
C. Prepare the adjustments in the Adjustments section of the worksheet.
(Only those
using SW Books)
6311 Accounting I
Summer 2010, Version 2
Page 56
1. Write the debit amount in the Adjustments Debit column and the credit amount in
the Adjustments Credit column. The adjustment amount equals the ending balance
in the account minus the amount on hand at the end of the fiscal period.
2. Rule a single line across the two Adjustments columns on the same line as the
single line for the Trial Balance columns.
3. Add both Adjustments columns. If the two amounts are the same, then debits
equal credits. If not, check and correct errors.
4. Rule double lines across both Adjustments columns to show that the totals have
been verified as correct.
D. Extend the balance sheet account balances to the Balance Sheet section on the
worksheet. (Note: Those using the SW books will have to update their accounts with
the adjustments.)
E. Extend the income statement account balances to the Income Statement section on the
worksheet. (Note: Those using the SW books will have to update their accounts with
the adjustments.)
F. Calculate and record net income or net loss on the worksheet.
G. Total and rule the worksheet.
1. Rule a single line across the four Income Statement and Balance Sheet columns.
2. Add each of the Income Statement and Balance Sheet columns and write the totals
below the single line.
3.
Calculate net income or net loss by subtracting the Income Statement Debit
column from the Income Statement Credit column. Note: If Sales (total revenues)
are greater than Expenses, the company has net income. If Sales (total revenues)
are less than Expenses, the company has a net loss. Write the words Net Income
or Net loss in the Account Title column on the same line as the amount calculated.
If the company has net income, record the amount under the Income Statement
Debit column. If the company has a net loss, record the amount under the Income
Statement Credit column.
4. Rule a single line across the four Income Statement and Balance Sheet columns
just below the net income or net loss amount.
5. If a net income was calculated, then the amount of net income is written under the
subtotal in the Balance Sheet Credit column. If a net loss was calculated, then the
amount of net loss is written under the subtotal in the Balance Sheet Debit column.
6. Rule a single line under the net income or net loss amount across all four Income
Statement and Balance Sheet columns.
7. Add the subtotal and net income (or net loss) for each column to get proving totals
for the Income Statement and Balance Sheet columns. Write the totals below the
single line. Check for equality in each pair of columns.
8. Rule double lines across the Income Statement and Balance Sheet columns.
II.
Procedures for Preparing an Income Statement
A. Enter the heading of the income statement.
1. Center the name of the company on the first line.
2. Center the name of the report on the second line.
3. Center the date of the report, For the Month Ended, July 31, 20--, on the third line.
B. Prepare the Revenue, Expenses, and Net Income sections.
1. Write the name of the first section, Revenue, at the left of the wide column on the
first line.
2. Write the title of the revenue account, Sales, on the next line, indented from the
margin.
3. Record the balance of the Sales account on the same line in the second amount
column.
4. Write the name of the second section, Expenses, at the left of the wide column on
the next line.
5. Write the title of each expense account in the wide column, indented from the
margin.
6. Write the balance of each expense account in the first amount column on the same
line as the account title.
7. Rule a single line across the first amount column under the last expense account
balance to indicate addition.
8. Write the words Total Expenses on the next blank line indented from the margin in
the wide column.
9. Record the amount of total expenses on the same line in the second amount
column.
10. Calculate and verify the amount of net income or net loss.
a. Calculate net income or net loss by subtracting total expenses from total
revenue. (If expenses are greater than sales then there is a net loss.)
b. Compare the amount of net income (or loss) with the net income (or loss)
amount on the worksheet. If the amounts are not the same, an error has been
made and must be corrected.
11. Rule a single line across the second amount column just below the total expenses.
12. Write the words Net Income (or Net Loss) on the next line at the left margin of the
wide column.
13. On the same line, record the amount of net income (or net loss) in the second
amount column.
14. Rule double lines across both amount columns below the amount of net income to
show that the amount has been verified as correct.
C. Calculate the component percentages – the percentage relations between one financial
statement item and the total that includes that item.
1. Total Expense Component Percentage = Total Expenses ÷ Total Sales
2. Net Income Component Percentage = Net Income ÷ Total Sales
III.
Procedures for Preparing a Balance Sheet
A. Enter the heading of the balance sheet.
1. Center the name of the company on the first line.
2. Center the name of the report on the second line.
3. Center the date of the report, July 31, 20--, on the third line.
B. Prepare the Assets and Liabilities sections of the balance sheet.
1. Write the title of the first section, Assets, in the middle of the left wide column.
2. Write the title of all asset accounts under the heading.
3. Record the balance of each asset account in the left amount column on the same
line as the account title.
4. Write the title of the next section, Liabilities, in the middle of the right wide
column.
5. Write the titles of all liability accounts under the heading.
6. Record the balance of each liability account in the right amount column on the
same line as the account title.
7. Rule a single line across the right amount column under the last amount to indicate
addition.
8. Write the words Total Liabilities in the right wide column on the next blank line.
9. Record the total of all liabilities in the right amount column.
C. Prepare the Owner’s Equity section of the balance sheet.
1. Write the title of the section, Owner’s Equity, in the middle of the right wide
column on the next line below Total Liabilities.
2. Write the title of the owner’s capital account on the next line.
3. Record the current amount of owner’s equity in the right amount column.
a. Current Capital = Capital account balance plus Net Income minus Drawing
account balance
b. Current Capital = Capital account balance minus Net Loss minus Drawing
account balance
4. Rule a single line under the last amount in the longer left amount column.
5. Rule a single line in the right amount column on the same line.
6. Write the words Total Assets on the next line in the left wide column.
7. Record the amount of total assets in the left amount column.
8. Write the words Total Liabilities and Owner’s Equity in the right wide column on
the same line as Total Assets.
9. Record the amount of total liabilities and owner’s equity in the right amount
column.
10. Compare the totals of the two amount columns. The total should be in balance –
assets should equal liabilities plus owner's equity.
11. Rule double lines across both the left and right amount columns just below the
column totals to show that the totals have been verified as correct.
KEY TERMS
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Fiscal period
Worksheet
Trial balance
Adjustments
Balance sheet
Income statement
Net income
Net loss
Matching Principle
Ruling
Obj. 2.03
I.
Procedure for Preparing End of Period Adjusting Entries
A. Write the heading, Adjusting Entries, in the middle of the Account Title column of the
journal. (There are no source documents; therefore, the heading is written only once
for all adjusting entries.)
B. Write the date in the Date column.
C. Write the title of the account debited in the Account Title column.
D. Record the debit amount in the General Debit column on the same line as the title.
E. Write the title of the account credited in the Account Title column.
F. Record the credit amount in the General Credit column on the same line as the title.
II.
Procedure for Preparing End of Period Closing Entries
A. Journalize an entry to close income statement accounts that have a credit balance.
B. Journalize an entry to close income statement accounts that have a debit balance.
C. Journalize an entry to transfer net income or net loss to the owner’s capital account
and close the income summary account.
D. Journalize an entry to close the owner’s drawing account.
III.
Procedure for Preparing a Post-Closing Trial Balance
A. Write the heading “Post-Closing Trial Balance” in the Account Title Section.
B. Write the account titles of all general ledger accounts that have balances in the
Account Title column.
C. Write the account balance in the appropriate amount column – Debit or Credit.
D. Rule a single line below the last amount in each column.
E. Write the word Totals on the line below the last account title.
F. Write the column totals on the line below the rule. The two totals should be the same;
debits = credits.
G. Rule with double lines below the totals indicating the totals are verified as correct.
KEY TERMS
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Adjusting entries
Permanent accounts
Temporary accounts
Income summary accounts
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Closing entries
Post-closing trial balance
Accounting cycle