Basic Accounting 101

BASIC ACCOUNTING CYCLE SUMMARY

Accounting is… - a service activity. - its function is to provide quantitative information, - primarily financial in nature - about economic entity - that is intended to be useful in making economic decision.

Accounting is also defined as… - an “ART” of:

a. Journalizing – Books of Original Entry Journals ▪ General Journals ▪ Cash Receipt Journals ▪ Sales Journals ▪ Cash Disbursements Journal ▪ Purchase Journal

b. Posting – Books of Final Entry General Ledger

▪ Subsidiary Ledgers

c. Preparation of the Unadjusted Trial Balance – Contains both Real / Permanent and Nominal / Temporary Accounts d. Preparation of the Adjusting Journal Entries e. Preparation of the Adjusted Trial Balance– Contains both Real / Permanent and Nominal / Temporary Accounts f. Preparation of the Financial Statements

▪ Statement of Financial Position or Balance Sheet - (Real / Permanent Accounts) ▪ Statement of Changes in Capital / Stockholders Equity / Retained Earnings ▪ Cash Flow Statement ▪ Statement of Income or Income Statement - (Nominal / Temporary Accounts) ▪ Notes to Financial Statements

g.