ACCOUNTING CYCLE

GROUP 6

ACCOUNTING CYCLE

Our team

MARK RONALD MIMING
D20181082762

NUR SYAMIMI ASHRI
D20181082740

SITI NOR SYUHADA AWANG
D20181082737

WARDINA ABU BAKAR
D20181082748

Table of Contents

01 Introduction of
Accounting Cycle

02 Accounting

cycle:

2.1 Source Document
2.2 Books of Prime Entry
2.3 Ledgers
2.4 Trial Balance
2.5 Adjustment
2.6 Trial Balance Adjustment
2.7 Closing
2.8 Financial Statement

03 Summary

01

Introduction
of Accounting

Cycle

HI ! WELCOME TO CLASS GET TO
ACCOUNTING
Let’s look at this situation

What is Accounting Cycle ?

The accounting cycle is a system of recording, processing,
summarizing and communicating all financial transactions
in a consistent way. It starts when a transaction occurs,
and ends with its representation on financial statements.
Once the cycle concludes, steps are taken to begin the next
accounting cycle. This signals the start of the next fiscal
period

Oh.. I got it. What about the purpose of
Accounting Cycle? It is very important to
understand ?

Yes ! Of course. It was very important for us to
understand accounting cycle because it help to ensures
that all accounts are updated and maintained so all
payments owed to the company are addressed. This was
important since the accounts receivable representatives
will get the company’s owed funding to keep the finances
balanced.

If you need more information, you are
welcoming to read this e-book until the
end !

ACCOUNTING CYCLE

Analysis of Business Record
Transactions journal
entries

Prepare Post to Ledger
Financial Accounts
Statement
Prepare
Closing entries trial

balance

Adjusted trial Make adjusting entries
balance

02

Discussion

2.1 Source Document
2.2 Books of Prime Entry

2.3 Ledgers
2.4 Trial Balance
2.5 Adjustment
2.6 Trial Balance Adjustment

2.7 Closing
2.8 Financial Statement

AnalysiSsToEfP B1:usiness
Transaction

Many business transactions occur every day
in an entity, and those transactions are
recorded and controlled by different source of
documents

Some of the documents are recorded and
reported for operational reporting and some
of that use for recording financial reporting

This is 11 source of 5. Goods Dispatched
accounting documents Note
that we should know :
6. Invoice
1. Quotation 7. Account Statement
2. Purchase Order 8. Credit Note
3. Sales Order 9. Debit Note
4. Goods Received 10. Remittance Advice
11. Official Receipt
Note

TYPES OF SOURCE DOCUMENTS

1. QUOTATION

Definition:
It is a source of accounting
documents sent to a customer by a
company stating the fixed price
charged to produce or deliver goods

or service.

Purpose :
➔ To be used when businesses do

not have a standard listing of
prices for products

TYPES OF SOURCE DOCUMENTS

2. Purchase Order

Definition:
It is a source of accounting
documents that details goods or
services which company wishes to
purchase from another company.

Purpose :
➔ Easy to track the order since

purchase order are having two
copies which is one to company
and the other is kept internally.

SCAN FOR MORE

TYPES OF SOURCE DOCUMENTS

3. Sales Order

Definition:
Is a type of accounting documents
that details an order placed by a

customer for goods or services

Purpose :
➔ To track the orders that have

been placed by customers.

SCAN FOR MORE

TYPES OF SOURCE DOCUMENTS

4. Good Received Notes

Definition:
Is a type of accounting documents
that details lists the goods that a

business has received from a
supplier.

➔ prepared by the business’s own
warehouse or goods receiving
area

SCAN FOR MORE

TYPES OF SOURCE DOCUMENTS

5. Goods Dispatched Notes

Definition:
A company document lists the goods
that the company has sent out to a

customer.

Purpose :

➔ The company will keep a record of
goods dispatched notes in case of
any queries by customers about the
goods sent. The customer will
compare the goods dispatched a
note to what they receive to ensure
all the items listed have been
delivered and are within the right
specification

SCAN FOR MORE

TYPES OF SOURCE DOCUMENTS

6. Invoice

Definition:
The invoice is one of the Sources of
Accounting Documents that probably

see every working day. This
document contains the units you
received, unite price, subtotal, and

grand total per invoices.

Purpose :
➔ To helps both the seller and the

buyer to keep track of their
payments and amounts owed.

SCAN FOR MORE

TYPES OF SOURCE DOCUMENTS

7. Account Statement

Definition:
the account statement is a type of
accounting documents sent out by a
supplier to a customer listing the

transactions on the customer’s
account, including all invoices and
credit notes issued and all payments

received from the customer.

Purpose :
➔ To allows the customer to
reconcile the amount they believe

they owe the supplier to the
amount they believe they are

owed

TYPES OF SOURCE DOCUMENTS

8. Credit Notes

Definition:
Credit Noted is an accounting
document sent by a supplier to a
customer in respect of goods
returned or over-payments made by

the customer

Purpose :
➔ To make the cancellation or the

result of customers’ requests.

TYPES OF SOURCE DOCUMENTS

9. Debit Notes

Definition:
Debit Noted is a document sent by a
customer to a supplier in respect of
goods returned or an overpayment

made.

Purpose :
➔ To make the cancellation or to

reduce the amount in the
invoices.

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TYPES OF SOURCE DOCUMENTS

10. Remittance Advice

Definition:
Remittance Advice is accounting
documents sent to a supplier with a
payment, detailing which invoices
are being paid and which credit

notes offset.

Purpose :
➔ To allows the supplier to update

the customer’s records to show
which invoices have been paid
and which are still outstanding

SCAN FOR MORE

TYPES OF SOURCE DOCUMENTS

11. Official Receipt

Definition:
Official Receipt is a document
confirming confirmation that a
payment has been received. This is
usually in respect of cash sales

Purpose :
➔ To be used for a cash transaction

SCAN FOR MORE

BOOKS OFSTPERPIM2:E ENTRY

Followed by the
identification of the
source document, it
will be recorded in
the books of prime

entry.

The cash book
and the journal
are the books of

prime entry.

Retails Cash Books

A cash book is a financial journal
where all cash receipts and
transactions, including bank

deposits and withdrawals, are
recorded. The cash book entries

are then transferred to the
general ledger.

There are also single
and double column of

cash book

Scan me

General Journal

A document that keeps track of
business transactions in list form

Record the accounts to be
credited and debited,

First place to record data
entries for specific transactions

that are not listed in other
accounting journals

Format of General Journal

Scan me

Special Journal

Special journals are used to record
specified transactions such as cash

receipts and sales. The use of
special journals decreases the time
needed to record transactions and

record them to the ledgers
considerably.

Scan me

Format of Special Journal

POST TO LESDTGEPER3:ACCOUNTS

OWW, I SEE.. This is

The general journal is a great tool to where the ledger
capture transaction and event details, but it comes into play!

certainly does nothing to tell a company

about the balance in each specific account.

One could go through the journal and net the
debits and credits. But this is tedious and
highly susceptible to error. It would become
virtually impossible if the journal were
hundreds of pages.

Ledger is an accurate and systematic summary of business transaction.

Ledger consists two types of account which are real (focus
on assets) and nominal (focus on revenues and expenses)
account. Besides, there are also two types of ledger and

format:

Includes real and
nominal accounts

The only difference between general and
subsidiary ledger is in its use. The general ledger are

use to record all of the accounts (such as revenue,
expenses, assets, liabilities, capital and drawings)
except for account receivables and payables, while,
subsidiary ledger are only use to record the account

receivables and payables.
In terms of its format, the items that need to be
included are just the same, only the shapes are
different. Below shows how both of the ledger’s formats

look like:

TWO SIDED “T” ACCOUNT

THREE COLUMN LEDGER

STEP 4:
PREPARE TRIAL BALANCE

Is a list of all

the accounting

journal account The amount of

balances the debit

balances should

always equal the

total of the

credit balances

As a check to

confirm that a debit

recorded in one

ledger account is

aligned with a credit

in another for each

transaction Serves as a basis for

the preparation of the

company's financial

statements, the

balance sheet, and the

profit and loss account

Format of Trial Balance

Step to Prepare a Trial Balance

1) Need to 2) Produce the
complete or trial balance by
‘balance off’ listing each closing
the ledger balance from the
ledger accounts as
accounts either a debit or a
credit balance

Scan me

STEP 5:

ADJUSTMENTS

Adjustments entries are prepared as
an application of the accrual basis of

accounting
Adjusting entries will update the
accounts before they are summarized

in the financial statements
At the end of the accounting period,

some expenses may have been
incurred but not yet recorded in the

journals. Some income may have
been earned but not yet entered in

the books
Examples of adjustments are accrual,

prepayments, bad debts and
depreciation

HOW TO RECORD ADJUSTING
ENTRIES

★ Recording adjusting entries is quite
simple. Here are the 3 main steps to
record an adjusting journal entry :

1. Determine the current account balance
2. Determine what current balance should

be
3. Record adjusting entry

EXAMPLE TO RECORD ADJUSTING ENTRIES

MILENDARU SHOP YEAR-END IS ON 31 DECEMBER 2021. HIS TRIAL
BALANCE NEEDS TO BE ADJUSTED FOR THE FOLLOWING EVENTS :

1. Milen pays his RM 1000 January rent in December

2. Milen’s December electric bill was RM 200 and is due on January
15th

3. One of Milen’s employee works half a pay period, so Milen
accrues RM 500 of wages

STEP 6:
ADJUSTED TRIAL BALANCE

Adjusted trial balance may be
prepared after adjusting entries are

made and before the financial
statements

This is to test the equality between
debits and credits after adjusting
entries are made

The result of this adjusted trial
balance demonstrates the effects

of all financial events that
occurred during that particular

reporting period.

If you lost Trial
Balance, You can
find it on step 4 !!!

HOW TO MAKE ADJUSTED TRIAL
BALANCE

★ There are two main ways to prepare an
adjusted trial balance

1. Post accounts to the adjusted trial
balance using the same method in
creating unadjusted trial balance. The
account balances are taken from the T-
accounts or Ledger accounts.

2. Take the unadjusted trial balance and
simply add the adjustments to the
accounts that have been changed.

Further
explanation with

example here

JOURNALIZE ANDSTPOESPT7C:LOSING ENTRIES

Closing entries is a type of journal entries made at the end
of an accounting period to transfer data from
temporary/nominal accounts to permanent account.

The terms of “closing” are in line with its purpose,
as it is used to update the retained earnings account in the
ledger to equal the end-of-period-balance. In other words, it
is used to record the closure of all revenue and expense
accounts.

Keep in mind the recording of each item of revenue
and expense accounts does not automatically
produce an updating debit or credit to retained
earnings.

Hence, comes the need of those accounts to be zeroed out
or reset to begin the next accounting period. In contrast with
the real accounts, as their balances are carried forward from
period to period. For example, one does not “start over” each
period accumulating assets like cash, their balances carry
forward.

Closing involves a four steps process:

All of the revenue and expense accounts were
zeroed away via closing and do not appear in

the post-closing trial balance.
After the closing process, the post-closing trial
balance reveals the balance of accounts that consists of
balance sheet accounts only. The post-closing trial
balance is a tool to demonstrate that accounts are in
balance and it is not a formal financial statement.

STEP 8:
FINANCIAL STATEMENT PREPARATION

Preparing general-purpose financial
statements: such as income

statement, statement of retained
earnings, and statement of cash

flows.

The concept financial reporting and
the process of the accounting cycle
are focused on providing external
users with useful information in the
form of financial statements. These
statements are the end product of
the accounting system in any company.

Who is external users ? Tax Authority

Supplier Customers

Banker Investor Auditor Public

INCOME STATEMENT FORMAT

Company name
Income Statement for the year ended (date)

★ The income statement, also called the profit or loss
statement is a report that shows the income,
expenses, and resulting profits or losses of a
company during a specific time period.

★ The income statement format include ;

1. Heading that display the company name, Title of the
statement and the time period of the report.

2. Revenue : All income gained from operating activities
3. Expenses : All expenses occurred in operating

activities
4. Net Income : The amount of Revenue minus by Expense

BALANCE SHEET FORMAT

★ The Balance Sheet, also called the statement of financial
position, is the third general purpose financial
statement prepared during the accounting cycle. It
reports a company’s Assets. Liabilities, and Equity at a
single moment in time

★ This statement can be reported in 2 different formats:
account form and report form.

Company name
Balance Sheet for the year ended (date)

★ This is the account form of balance sheet statement.

★ The account form consists of 2 columns displaying
assets on the left column of the report and liabilities
and equity on the right column,

You can think of this like debits and
credits. The debit accounts are on the
left and credit accounts are on the right

BALANCE SHEET FORMAT

Company name
Balance Sheet for the year ended (date)

★ This is the report form of balance sheet statement.

★ The report form only has one column. This form is more

of a traditional report that is issued by organizations.

Assets are always present first followed by liabilities and

equity. Need more
info ? just
scan here !

03

Summary

At the end of this e-book
you will get

★ Gain initial knowledge accounting
especially in the accounting cycle

★ Have 8 steps in accounting cycle which
is:

1. Source document
2. Books of prime entry
3. Ledger
4. Trial Balance
5. Adjustment
6. Adjusted trial balance
7. Financial Statement
8. Financial reports
★ This e-book will help student especially

in secondary school to understand more
easier in an accounting cycle