Chapter 3
Beginning the
Accounting Cycle
© 2010 Prentice Hall Business
Publishing, College Accounting: A
Practical Approach, 11e by Slater
Learning Objective 1
Journalizing: analyzing and recording
business transactions into a journal- Steps
1 & 2 of the Accounting Cycle
LO-1
© 2010 Prentice Hall Business
Publishing, College Accounting: A
Practical Approach, 11e by Slater
Accounting Cycle
Normal accounting procedures that are
performed over a period of time
 Takes place over an accounting period

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Publishing, College Accounting: A
Practical Approach, 11e by Slater
Accounting Period
Period of time covered by the income
statement
 Monthly
 Quarterly
Semi-annual Reports
 Annually
◦ Calendar year
◦ Fiscal year
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Publishing, College Accounting: A
Practical Approach, 11e by Slater
Accounting Period

Calendar year - covers January 1st December 31st

Fiscal year - Covers any 12-month period

Natural Business Year - A business’s fiscal
year that ends at the same time as a slow
seasonal period begins
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© 2010 Prentice Hall Business
Publishing, College Accounting: A
Practical Approach, 11e by Slater
General Journal
Book of original entry
 Simplest form of a journal
 Records information from transactions in
chronological order as they occur
 Information is then transferred to the
ledger

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Publishing, College Accounting: A
Practical Approach, 11e by Slater
Journalizing A Transaction
General Journal
Page 1
Date
Account Titles and Description
PR
Dr.
Cr.
200x
Jan
1
Cash
10,000
J. Sims, Capital
10,000
Initial investment by owner
1. Debits must equal credits in each entry.
2. The debit is always recorded first.
3. The credit is indented & below the debit portion.
4. The explanation follows after the credit.
© 2010 Prentice Hall Business
Publishing, College Accounting: A
Practical Approach, 11e by Slater
5. Skip a line between entries.
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Problem 3B-3

We will use Problem 3B-3 to apply the
concepts presented in the chapter.
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© 2010 Prentice Hall Business
Publishing, College Accounting: A
Practical Approach, 11e by Slater
The Chart of Accounts
Chart of Accounts for A. French’s Placement Agency
Balance Sheet Accounts
Assets
Liabilities
111
211
112
Cash
Accounts Receivable
Accounts Payable
Owner’s Equity
131 Supplies
311
A. French, Capital
141 Equipment
312 A. French, Withdrawals
Income Statement Accounts
Revenue
Expenses
411
Placement Fees
511
Earned
521 Telephone Expense
Wages Expense
531 Advertising Expense
© 2010 Prentice Hall Business
Publishing, College Accounting: A
Practical Approach, 11e by Slater
June 1: A. French invested $6,000 in the new
placement agency.
General Journal
Page 1
Date
Account Titles and Description
PR
Dr.
Cr.
200x
Jun 1
Cash
A. French, Capital
6,000
6,000
Initial investment of
cash by owner
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Publishing, College Accounting: A
Practical Approach, 11e by Slater
LO-1
June 2: Bought equipment for cash, $350.
General Journal
Page 1
Date
Account Titles and Description
PR
Dr.
Cr.
200x
Jun 2 Equipment
Cash
350
350
Purchased equipment
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Publishing, College Accounting: A
Practical Approach, 11e by Slater
LO-1
June 3: Earned placement fee commission of
$2,100, but payment from Avon Co. will not be
received until July.
General Journal
Page 1
Date
Account Titles and Description
PR
Dr.
Cr.
200x
Jun 3 Accounts Receivable
Placement Fees Earned
2100
2100
Billed Avon Co. for fees
earned
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© 2010 Prentice Hall Business
Publishing, College Accounting: A
Practical Approach, 11e by Slater
June 5: Paid wages expense, $400.
General Journal
Page 1
Date
Account Titles and Description
PR
Dr.
Cr.
200x
Jun 5
Wages Expense
Cash
400
400
Paid Wages
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© 2010 Prentice Hall Business
Publishing, College Accounting: A
Practical Approach, 11e by Slater
June 7: A. French paid his home utility bill from
the company checkbook, $69.
General Journal
Page 1
Date
Account Titles and Description
PR
Dr.
Cr.
200x
Jun 7 A. French, Withdrawals
Cash
69
69
Paid owner’s personal
bill
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© 2010 Prentice Hall Business
Publishing, College Accounting: A
Practical Approach, 11e by Slater
June 9: Placed Jay Diamond on a national TV
show, receiving $900 cash.
General Journal
Page 1
Date
Account Titles and Description
PR
Dr.
Cr.
200x
Jun 9
Cash
900
900
Placement Fees Earned
Placed J. Diamond
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Publishing, College Accounting: A
Practical Approach, 11e by Slater
June 15: Paid cash for supplies, $350.
General Journal
Page 1
Date
Account Titles and Description
PR
Dr.
Cr.
200x
Jun 15 Supplies
Cash
350
350
Purchased Supplies
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© 2010 Prentice Hall Business
Publishing, College Accounting: A
Practical Approach, 11e by Slater
June 28: Telephone bill received but not paid,
$185.
General Journal
Page 1
Date
Account Titles and Description
PR
Dr.
Cr.
200x
Jun 28 Telephone Expense
Accounts Payable
185
185
Telephone bill in, but not
paid
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© 2010 Prentice Hall Business
Publishing, College Accounting: A
Practical Approach, 11e by Slater
June 29: Advertising bill received but not paid,
$200.
General Journal
Page 1
Date
Account Titles and Description
PR
Dr.
Cr.
200x
Jun 29 Advertising Expense
Accounts Payable
200
200
Advertising bill in, but not
yet paid
LO-1
© 2010 Prentice Hall Business
Publishing, College Accounting: A
Practical Approach, 11e by Slater
Learning Objective 2
Posting: Transferring information from a
journal to a ledger
LO-2
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Publishing, College Accounting: A
Practical Approach, 11e by Slater
Ledger Account
Account Title
Account # xx
Balance
Date
Explanation
PR
Debit
Credit
Debit
Credit
4 Column Account- A
running balance account
that records debits and
credits and has a column
for an ending balance
(debit and credit).
LO-2
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Publishing, College Accounting: A
Practical Approach, 11e by Slater
LO-2
© 2010 Prentice Hall Business
Publishing, College Accounting: A
Practical Approach, 11e by Slater
Cross-Referencing
Adding to the post reference column of
the journal the account number of the
ledger account that was updated from the
journal.
 Users can refer to journal and ledger
transactions by referring to account
numbers or general journal pages.

© 2010 Prentice Hall Business
Publishing, College Accounting: A
Practical Approach, 11e by Slater
Ledger Account
Cash
Account # 111
Balance
Date
Explanation
Jun 1
PR
GJ1
Debit
Credit
6,000
Debit
6,000
2
GJ1
350
5,650
5
GJ1
400
5,250
7
GJ1
69
5,181
9
GJ1
15
GJ1
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Publishing, College Accounting: A
Practical Approach, 11e by Slater
900
6,081
350
5,731
Credit
Sample Chart of Accounts
Account Name
Account Number
Accounts Receivable
112
Supplies
131
Equipment
141
Accounts Payable
211
A. French Capital
311
A. French Withdrawals
312
Placement Fees Earned
411
Wage Expense
511
Advertising Expense
531
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Publishing, College Accounting: A
Practical Approach, 11e by Slater
LO-2
Learning Objective 3
Preparing a trial balance
LO-3
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Publishing, College Accounting: A
Practical Approach, 11e by Slater
Trial Balance
List of individual accounts with their
balances
 Taken from the ledger
 Certain errors can come to light if total
debits are not equal to total credits

◦ Computational errors
◦ Transposition or slide errors
◦ Posting errors
LO-3
© 2010 Prentice Hall Business
Publishing, College Accounting: A
Practical Approach, 11e by Slater
Trial Balance
A. French’s Placement Agency
Trial Balance
June 30, 200X
Debit
Cash
5,731
Accounts Receivable
2,100
Supplies
350
Equipment
350
Accounts Payable
385
A. French, Capital
6,000
A. French, Withdrawals
69
Placement Fees Earned
3,000
Wage Expense
400
Telephone Expense
185
Advertising Expense
200
Totals
© 2010 Prentice Hall Business
Publishing, College Accounting: A
Practical Approach, 11e by Slater
Credit
9,385
9,385
Making Corrections

Before Posting
◦ Draw a line through the incorrect entry
◦ Write correct information above the line
◦ Write your initials near the change

After Posting
◦ Draw a line through the error and write
correct figure above the line
◦ Change the running balance to reflect the
corrected posting
◦ Initial both changes
LO-3
© 2010 Prentice Hall Business
Publishing, College Accounting: A
Practical Approach, 11e by Slater
Making Corrections

Correcting an entry posted to the wrong
account
◦ The journal must include a correction
accompanied by an explanation.
◦ The correct information must also be posted to
the appropriate ledgers.
LO-3
© 2010 Prentice Hall Business
Publishing, College Accounting: A
Practical Approach, 11e by Slater
Making Corrections
1. Wages expense was debited. Error was made on June 5.
2. The error was discovered and corrected on June 8.
To correct error in which Wages Exp
was debited for charges to Phone Co.
LO-3
© 2010 Prentice Hall Business
Publishing, College Accounting: A
Practical Approach, 11e by Slater
Making Corrections
1. The wages expense ledger account is corrected.
Correcting Entry
2. The telephone expense ledger account is corrected.
LO-2
© 2010 Prentice Hall Business
Publishing, College Accounting: A
Practical Approach, 11e by Slater
First Steps in Accounting Cycle
Business
transactions
occur
Analyze and
record
transactions
in journal
Post
information
from journal
to ledger
Prepare a trial
balance
LO-3
© 2010 Prentice Hall Business
Publishing, College Accounting: A
Practical Approach, 11e by Slater
End of Chapter 3
© 2010 Prentice Hall Business
Publishing, College Accounting: A
Practical Approach, 11e by Slater