e tutor presentation - unit two

UWIOC – ACCT 1002 E-Tutor Presentation (Unit Two)

Presented by:

Misty Dawn Floyd

04/12/23 Free template from www.brainybetty.com 2

Weekly Funny


Learning ObjectivesBy the end of this presentation, students

should be able to:

• Define fixed, current and long-term assets and liabilities

• Define ‘Real/Permanent Accounts’ and ‘Temporary/Nominal Accounts”

• List and explain the steps in the financial accounting cycle

• Define the term ‘Debit and Credit’• Explain the ‘Debit/Credit Rule’


Fixed/Long Term Assets and Current Assets• A Current Asset is an asset which is

going to be consumed within one yar or financial period, whichever is longer e.g. Accounts Recievable

• A Fixed or Long Term Asset is an asset which will be used over more than one financial period e.g Buildings and Land


Real/Permanent Accounts Vs. Nominal/Temporary Accounts• In accounting, the elements are further

broken down into Real or Permanent Accounts and Temporary/Nomial Accounts

• The Real/Permanent Accounts are the ‘skeleton’ of the business and always carry a balance

• The Temporary/Nominal Accounts record changes in the Real/Permanent Accounts and always close at the end of the financial period


Accounting Equation - Long Form

• Assets + Expenses = Capital + Liabilities+ Revenue

• Asset, Capital and Liability Accounts are Permanent or Real Accounts and are found on the balance sheet

• Expense and Revenue Accounts are temporary or nominal accounts and are found on the Income Statement


Accounting Cycle• The financial accounting cycle

outlines the process by which different transactions are recorded, classified and organized into financial statements.


The Accounting Cycle

Step One – Source Documents• Usually, a business will undertake a number of

different transactions. The company will purchase and sell inventory and other goods and services. For the company to adequately record transactions there must be sufficient proof that the transaction occurred. For this reason, the accounting cycle begins with taking information from a Source Document, such as a receipt, check stub or invoice which depicts the important details of a transaction such as the date, amount transacted and sometimes, the purpose of the transaction.


The Accounting CycleStep Two – Record to the Journal • After the bookkeeper has received a source document, he or

she will record the transaction in a book of original entry, called a Journal. A Journal is a diary which depicts the transactions as they occur. The Journal is used strictly for recording purposes; and the balances of accounts are not affected when transactions are journalized. The journal specifically assists the bookkeeper to record and analyze the transactions.

Step Three – Post to the Ledger• After the information has been recorded in the journal, the

accountant will copy the information recorded in the journal and post the transaction amounts to the ledger accounts. The process of posting is defined as the transfer of balances from the journal to the ledger. During this step, the balances of accounts change.


The Accounting CycleStep Four – Pre-Closing Trial Balance• At this stage, the balances of accounts in the ledger are extracted and listed

by their normal balance (debit/credit). Then, all debits are added together and all credits are added together to ensure the equality of debits and credits.

Step Five – Adjusting Entries• The bookkeeper then performs adjusting entries, which are

transactions that occur at the end of the period. These adjusting entries are normally to expense, asset and liability accounts and are performed to adequately reflect revenues and liabilities.

Step Six – Closing of Accounts and Post Closing Trial Balance• After adjustments, all accounts in the ledger are closed, and their balances

extracted. Another trial balance is drawn up.

Step Seven –Preparation of Financial Statements• The balances in the post closing trial balance are used to draw up

the Income Statement and balance sheet.


The Debit/Credit Rule• The Debit/Credit Rule• Financial data is organized into individual records classified by

type (Assets, Capital, Liabilities, Expenses & Revenue) called Accounts. An account has two sides into which information may be entered.

• Debit (Left) – The left hand side of the Account/Accounting Equation

• Credit (Right) – The right hand side of the Account/Accounting Equation

• The Debit/Credit Rule basically states that:• Assets & Expenses are increased with a DEBIT entry, or an entry

on the left hand side of these accounts. Conversely, these accounts are DECREASED with a Credit entry, or an entry to the right hand side of the account.

• Capital, Liabilities & Revenues are increased with a CREDIT ENTRY, or an entry on the right hand side of these accounts. Conversely, these accounts are DECREASED with a Debit entry, or an entry to the left hand side of the account


Don’t we all love this subject????…

e tutor presentation - unit two

Business

balances of accounts

ledger accounts

closing of accounts

realpermanent accounts

revenue accounts

liability accounts

real accounts

accounts recievable