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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