Accounting Cycle: Journal, Ledger & Trial Balance
Accounting Cycle: Journal, Ledger & Trial Balance
Accounting Cycle: Journal, Ledger & Trial Balance
ACCOUNTING CYCLE
JOURNAL, LEDGER & TRIAL BALANCE
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CHAPTER 3: ACCOUNTING CYCLE
1 Accounting Cycle
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ACCOUNTING CYCLE
ACCOUNTING CYCLE
Source
documents
Prepare financial
Journalising The accounting cycle is the
statements
sequence of procedures
used to keep track of
business transactions and to
report the financial effect of
those things.
Balancing &
closing-off
accounts
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ACCOUNTING CYCLE
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BOOK OF PRIME
ENTRY
BOOK OF PRIME/PRIMARY ENTRY
Name Record
CREDIT Sales return journal/ Return Return made by customers/debtors due to damage,
CREDIT
inwards journal incorrect, etc.
CREDIT CREDIT Purchases journal Purchased made on credit from suppliers / creditors
• This is used to record the sale on credit of those goods bought specifically for resale.
• It is written up from copies of the sales invoices (and debit notes) retained by the seller.
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PURCHASES JOURNAL – FOR CREDIT PURCHASES
• This is used to record the purchase on credit of those goods intended for resale.
• It is written up from the invoices (and debit notes) received from suppliers.
Jan 3 Purchase of stocks from Ramlah RaRa for RM202 (Inv: 427).
6 Goods purchased on credit from Syeilala for RM707 (Inv: 429).
9 Bought stocks from Amoi Chu Sdn. Bhd. for RM111 payable after 2
months (Inv: 430).
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SALES RETURN JOURNAL – FOR RETURN INWARDS
• This is used to record goods sold on credit that have been returned by customers. It is
written up from copies of the credit notes retained by the seller.
■ Used to record goods sold on credit that have been returned by customers.
■ Example 2.3
Feb 3 Goods returned by Angelilo RM90 due to the wrong specification.
6 Goods returned by Michael Eng RM50.
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PURCHASES RETURN JOURNAL – FOR RETURN OUTWARDS
• This is used to record goods purchased on credit that have been returned to
suppliers.
• It is written up from the credit notes received from suppliers
Feb 1 Goods returned to Syeilala Rusli RM10 due to the wrong specification
8 Goods returned to Amoi Chu Sdn. Bhd. RM70.
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CASH RECEIPTS JOURNAL
Feb 16 Aman Shah wants to pay the RM300 that he owes to the company. He is paying
promptly, the firm offers him a 10% discount.
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CASH PAYMENTS JOURNAL
Jan 15 The company wants to pay to Syeilala, which it owes RM707. The company entitled to
a 5% discount, if it pays within a stipulated time period.
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GENERAL JOURNAL
General Journal
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LEDGER
POSTING TO LEDGER
Ledgers:
A summary, by account, of all transactions affecting that account.
Ledgers
Impersonal
Personal Ledgers 17 Ledgers
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LEDGER
Ledgers
Personal Ledgers
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LEDGERS
Ledgers
Impersonal Ledgers
(General Ledgers)
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ACCOUNTING TRANSACTION
Entering transaction into accounts Jan 1 Owner invested RM10,000 cash into the business
Example:
2 Purchase furniture & fittings paid RM2,500 cash
CASH ACCOUNT
Jan 1 Capital 10,000 Jan 2 Furniture 2,500
Dt. Cash
Cr. Capital
CAPITAL ACCOUNT
Jan 1 Cash 10,000
Dt. Furniture
Cr. Cash
FURNITURE & FITTINGS ACCOUNT
Jan 2 Cash 2,500
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ACCOUNTS – BALANCING OFF @ CLOSING ACCOUNT
◉ Balancing off accounts ‘is the process of closing the accounts to determine the
balance at the end of any particular period.
◉ When an account has debit total more than the credit total, the account is said to
have debit balance or vice versa.
◉ Usually, the balance normally corresponds to the nature of the accounts: debit
for assets and expenses while credit for liabilities, owner’s equity, and revenue.
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ACCOUNTS – BALANCE OFF EXERCISE
CASH ACCOUNT
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ACCOUNTS – BALANCE OFF EXERCISE
CASH ACCOUNT
10,000 10,000
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ACCOUNTS – BALANCE OFF EXERCISE
CASH ACCOUNT
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TRIAL BALANCE
◉ When an account has debit total more than the credit total, the account is said to have debit balance
or vice versa.
◉ Usually, the balance normally corresponds to the nature of the accounts: debit for assets and
expenses while credit for liabilities, owner’s equity, and revenue.
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TRIAL BALANCE - ILLUSTRATION
A trial balance is a list of the balances in the ledger at the end of an accounting period,
divided between those accounts with debit balances and those with credit balances.
ABC Sdn Bhd
Trial Balance at 31 December 2018
Debit Credit
Land 20,000
Equipment 12,000
Vehicle 30,000
Cash 3,000
Receivables / debtors 8,300
Supplies 2,700
Payables / creditors 4,500
Bank loan 22,000
Capital 49,500
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76,000 76,000
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Company’s Name Profit or Loss Balance Sheet
Trial Balance as at 31 December 2015
Debit (RM) Credit (RM) EXPENSES REVENUE ASSET LIABILITY &
EQUITY
Cash and bank 35,000 35,000
Trade receivable 16,500 16,500
Insurance on building 3,000 3,000
Inventory as at 1 January 2015 3,500 3500
Building 150,000 150,000
Accumulated depreciation – building 60,000 60,000
Office furniture 75,000 75,000
Accumulated depreciation – office 15,000 15,000
furniture
Trade payables 9,500 9,500
Drawings 25,000 25,000
Capital 130,200 130,200
Purchases 109,000 109,000
Bad debts 2,500 2,500
Sales 246,200 246,200
Return inwards 1,200 12,00
Return outwards 1,300 1,300
Salaries and wages 22,000 22,000
Utilities 12,000 12,000
Advertising and marketing costs 7,500 7,500
PROFIT OR (LOSS) 86,800 86,800
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462,200 462,200 247,500 247,500 301,500 214,700
FINANCIAL STATEMENTS
123,000
Current assets
Debtors 16,000
(-) Provision for doubtful debts (800)
15,200
Bank 33,500
Inventory 2,500
Prepayments 2,000
53,200
176,200
Financed by:
Owner’s Equity
Capital 100,200
(+) Profit or (-) Loss 61,500
(-) Drawings (26,500)
135,200
Non current liabilities
Loan / Mortgages 30,000
Current liabilities 30
Creditors 9,500
Accruals 1,500
11,000
176,200
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