A The SEQUENCE of accounting procedures used to RECORD,

CLASSIFY and SUMMARIZE accounting information in financial reports after REGULAR INTERVALS

CCOUNTING C YCLE

Accountability

Maintaining documentary evidence

Detailed information about transection

Evaluating efficiency of different departments

Role of Accounting Records

CCOUNTING

CYCLE

A

GENERAL

JOURNAL

LEDGER

TRAIL BALANC

E

INCOME STATEME

NT

RETAINED

EARNING

BALANCE

SHEET

Owner’s equity

Accounting Cycle An OverviewBALANCE

SHEET ITEMS

INCOME STATEMENT ITEMS

RETAINED EARNING ITEMS

LIBILITIES ASSETS OWNER’S EQUITY ITEMS

All assets Revenue Opening balance retained earning

Accounts payable

Cash Capital stock

All liabilities

Expense Dividends Notes payable

Accounts receivable

Retained earning

Owner’s equity

Net profit Salaries payable

Building

Net loss Interest payable

Land

Tax payable

Supplies

Vehicles

Costume

AHUNA Inc.AS ON MARCH 31, 2007GENERAL JOURNAL

Date Account Titles Dr. $ Cr. $

Mar.3Cash 1200

Accounts Receivable 1200

11Cooking Supplies 700

Cash 700

15Accounts Payable 200

Cash 200

20Cash 4000

Capital Stock 4000

24Accounts Receivable 6200

Client Revenue 6200

27Salaries Expense 900

Cash 900

30Travel Expense 400

Cash 400

31Printing Expense 300

Accounts Payable 300

CASH

Dr. $ Cr. $

O/B 5700 700

1200 200

4000 900

400

C/D 8700

10900 10900

ACCOUNTS RECEIVABLE

Dr. $ Cr. $

O/B 1800 1200

6200 C/D 6800

8000 8000

COOKING SUPPLY

Dr. $ Cr. $

O/B 800

700 C/D 1500

1500 1500

ACCOUNTS PAYABLE

Dr. $ Cr. $

200 O/B 300

300

C/D 400

600 600

DIVIDENDS PAYABLE

Dr. $ Cr. $

O/B 500

C/D 500

500 500

RETAINED EARNING

Dr. $ Cr. $

O/B 1400

C/D 1400

1400 1400

DIVIDENDS

Dr. $ Cr. $

O/B 500

C/D 500

500 500

CAPITAL STOCK

Dr. $ Cr. $

O/B 6000

4000

C/D 10,000

10,000 10,000

SALARY EXPENSE

Dr. $ Cr. $

O/B 3100

900

C/D 4000

4000 4000

CLIENT REVENUE

Dr. $ Cr. $

O/B 5800

6200

C/D 12000

12000 12000

TRAVEL EXPENSE

Dr. $ Cr. $

O/B 1500

400

C/D 1900

1900 1900

PRINTING EXPENSE

Dr. $ Cr. $

O/B 600

300

C/D 900

900 900

AHUNA Inc.TRAIL BALANCE

AS ON MARCH 31,2007

ACCOUNT TITLES Dr. $ Cr. $

CASH 8700

ACCOUNTS RECEIVABLE 6800

COOKING SUPPLIES 1500

DIVIDENDS 500

SALARY EXPENSE 4000

TRAVEL EXPENSE 1900

PAINTING EXPENSE 900

ACCOUNTS PAYABLE 400

DIVIDENDS PAYABLE 500

RETAINED EARNING 1400

CAPITAL STOCK 10,000

CLIENT REVENUE 12000

TOTAL 24300 24300

Uses and Limitation of Trail Balance

It provide proof that ledger is in balance

Equal debit and credit for all transactions

Any addition in trail balance can be adjusted correctly

Income Statement

RealizationPRINCIPLE

MatchingPRINCIPLE

Relating to revenue

Revenue should be recognized at the time goods are sold or service is provided

e.g. rent revenue, advertisement revenue

Relating to expense

Cause a decrease in OWNR’S EQUITY

It requires a company to match expenses with related revenues in order to report a company's profitability during a specified time interval. e.g. salary expense

AHUNA Inc.INCOME STATEMENTAS ON MARCH 31, 2007

REVENUE

EXPENSE

NET INCOME/PROFIT (R-E) $5200

SALARY EXPENSE

$4000

TRAVEL EXPENSE

$1900

PAINTING EXPENSE

$900

TOTAL EXPENSE

$6800

CLIENT REVENUE--------------------

$12000

AHUNA Inc.OWNER’S EQUITY

AS ON MARCH 31, 2007

O/B RATAINED EARNING--------- $1400 +NET INCOME-------------------------- $5200 +NET LOSS------------------------------- -0- -DIVIDENDS----------------------------- $5000 -C/B RETAINED EARNING--------- $6100

AHUNA Inc.BALANCE SHEET

AS ON MARCH 31, 2007

ASSETS LIABILITIESCash $8700 Accounts Payable $400

Accounts Receivable 6800 Dividends Payable $500

Cooking Supplies 1500Total Liabilities $900

Owner’s EquityCapital Stock $10,000

Retained Earning $6100

Total Owner’s Equity $16100

Total Assets $17000Total Liabilities & Owner’s Equity $17000