The Accounting Cycle The accounting period of a business is separated into activities that help the business keep its accounting records in order. These activities are called the Accounting Cycle. 2 Analyze each transaction 2 Analyze each transaction 3 Journalize each transaction 3 Journalize each transaction 1 Collect and verify source documents 1 Collect and verify source documents 4 Post to the ledger 9 Prepare a post-closing trial balance 5 Prepare a trial balance 8 Journalize and post closing entries 6 Prepare a worksheet 7 Prepare financial statements

Source Documents A Source Document provides evidence that a transaction has taken place. There are 4 basic types of Source Documents that we will be using. Invoice Indicates that money is owed. Check Stub Indicates that a check has been issued. from your company to your company Accounts Receivable Accounts Payable Credit Cash Receipt Indicates that money has been paid. Memorandum (memo) Written message describing a transaction from your company to your company Debit Cash Credit Cash Various

Source Document Examples (4) Invoice (1) (3) (1) (4) (3) (2) Receipt (2) (6) (5) (6) (5) (1) Name of company providing service (2) Name of company receiving service (1) Name of company providing service (3) Date of receipt (2) Name of company receiving service (4) Receipt number (3) Date of invoice (1) (2) (5) Service provided (3) (4) Invoice number (4) Memo (5) Amount received (5) (5) Item sold/bought (5) Price of item (1) (2) (1) Amount of check (3) (2) Check number Check Stub (3) Date check was written (1) Memo number (4) Name of company being paid (2) Date of memo (5) Purpose of check (3) Description of transaction

Homework Textbook Page: 125 Workbook Page: 66 Problem 6-1

Recording Transactions in a General Journal Let’s take a look at a sample General Journal and the steps to journalizing a transaction. 1) Date of Transaction 3) Amount of the Debit 2) Name of Account Debited Year Month Day Debited Account Name 3 0 0 Credited Account Name 3 0 0 Source Document 4) Name of Account Credited 5) Amount of the Credit 6) Source Document Reference

Investments by the Owner Business Transaction 1 On October 1 Maria Sanchez took $25,000 from her personal savings and deposited that amount to open a business account in the name of Roadrunner Delivery Service, Memo 1. Business Transaction 2 On October 2 Maria Sanchez, took two telephones valued at $200 each (total $400) from her home and transferred them to the business as Office Equipment, Memo 2. 1 2014 Oct 1 Cash in Bank 25 0 0 0 M. Sanchez, Capital 25 0 0 0 Memo 1 2 Office Equipment 4 0 0 M. Sanchez, Capital 4 0 0 Memo 2

Purchase Transactions Business Transaction 3 On October 4 Roadrunner issued check 101 for $3,000 to buy a computer system. Business Transaction 4 On October 9 Roadrunner bought a used truck on account from North Shore Auto for $12,000, Invoice 200. 1 4 Computer Equipment 3 0 0 0 Cash in Bank 3 0 0 0 Check 101 9 Delivery Equipment 12 0 0 0 Accts Payable – North Shore Auto 12 0 0 0 Invoice 200

Miscellaneous Transactions Business Transaction 5 On October 11 Roadrunner sold one telephone to Green Company for $200 on account, Memo 3 Business Transaction 6 On October 12 Roadrunner mailed check 102 for $350 as the first installment payment on the truck purchased from North Shore Auto on October 9. Business Transaction 7 On October 14 Roadrunner received and deposited a check for $200 from Green Company. The check was full payment for the telephone sold, Receipt 1 1 11 Accts Rec – Green Company 2 0 0 Office Equipment 2 0 0 Memo 3 12 Accts Payable – North Shore Auto 3 5 0 Cash in Bank 3 5 0 Check 102 14 Cash in Bank 2 0 0 Accts Rec – Green Company 2 0 0 Receipt 1

Revenue & Expense Transactions Business Transaction 8 On October 15 Roadrunner provided delivery services for the Sims Corporation. A check for $1,200 was received in full payment, Receipt 2. Business Transaction 9 On October 16 Roadrunner mailed check 103 for $700 to pay the rent for the month . 1 15 Cash in Bank 1 2 0 0 Delivery Revenue 1 2 0 0 Receipt 2 16 Rent Expense 7 0 0 Cash in Bank 7 0 0 Check 103

More Revenue & Expense Transactions Business Transaction 10 On October 18 Beacon Advertising prepared an advertisement for Roadrunner. Roadrunner will pay Beacon’s $75 fee later, Invoice 129. Business Transaction 11 On October 20 Roadrunner provided delivery services to City News. Roadrunner billed City News $1,450, Sales Invoice 1. 1 18 Advertising Expense 7 5 Accts Pay – Beacon Advertising 7 5 Invoice 129 20 Accts Receivable – City News 1 4 5 0 Delivery Revenue 1 4 5 0 Sales Invoice 1 I only have 2 lines left, but I need 3 lines to record a transaction.

Even More Revenue & Expense Transactions Business Transaction 12 On October 28 Roadrunner paid a $125 telephone bill with check 104 . Business Transaction 13 On October 29 Roadrunner wrote check 105 for $600 to have the office repainted . Business Transaction 14 On October 31 Maria Sanchez wrote check 106 to withdraw $500 cash for personal use . 2 2014 Oct 28 Utilities Expense 1 2 5 Cash in Bank 1 2 5 Check 104 29 Maintenance Expense 6 0 0 Cash in Bank 6 0 0 Check 105 31 M. Sanchez, Withdrawals 5 0 0 Cash in Bank 5 0 0 Check 106

Homework Textbook Page: 140 Do on lose-leaf paper Problem 6-2 & Problem 6-3

Problem 6-4 T – P. 145 W – P. 67 Wilderness Rentals Chart of Accounts 101 Cash in Bank 105 A/R – Helen Katz 110 A/R – Polk & Co. 120 Office Equipment 125 Camping Equipment 201 A/P – Adventure Equipment Inc. 203 A/P – Digital Tech Computers 205 A/P – Greg Mollaro 301 Ronald Hicks, Capital 305 Ronald Hicks, Withdrawals 310 Income Summary 401 Equipment Rental Income 501 Advertising Expense 505 Maintenance Expense 515 Rent Expense 520 Salaries Expense 525 Utilities Expense

Jan 1 Wrote Check 310 for the part-time secretary’s salary, $270. 3 Bought $2,000 of camping equipment on account from Adventure Equipment Inc., Invoice 320 5 Received $500 from a client for equipment rental, Receipt 150. 7 Wrote Check 311 to pay the electricity bill of $110. 11 Billed a client, Polk and Co., $1,700 for rental equipment, Sales Invoice 262 12 Ronald Hicks withdrew $800 for personal use, Check 312 14 Bought a $300 scanner for the office computer from Digital Tech Computers, on account, Invoice 270.

16 Wrote Check 313 for $1,000 as an installment payment toward the amount owed to Adventure Equipment Inc. 25 Received $1,700 from Polk and Co. in payment on their account, Receipt 151. 30 Paid Digital Tech Computers $300 for the amount owed, check 314. That was easy

Homework Textbook Page: 146 Workbook Page: 68 Problem 6-5