10 Step Accounting process

 Identifying
 Journalizing
o Chronologically arrange
 Positing
o Transferring information from journal to ledger (T-Account Analysis) and ledger will
give as the balance
 LEDGER
 Arrange by chart accounts (Listing of accounts). Chart of Account is
group by assets, liabilities, equity, income, and expenses.
 General Ledger
o Controlling accounts, contains main balances
 Subsidiary Ledger
 Private Ledger
o Confidential ledgers
 ACCOUNTS
 Device and represents names of ALOE+IE
 9 types of account
o Real Account (FS accounts)
o Nominal (Income and Expenses account)
o Mixed Accounts (Combination of the above; Prepaid Assets)
o Clearing Accounts (temporary accounts, that contain costs that
are to be transferred to another account)
o Controlling Account (main account can be found in general
ledger
o Auxiliary Account (found in subsidiary ledger)
o Suspense Account (related to clearing but you are not sure to
what type of account it is)
o Reciprocal Account (account that should be balance)
o Summary Account (Income summary and expense summary
account; summarize certain group of accounts for closing
process)
 Preparation of Trial Balance (to know if total debits and credits are balance)
o As to form
 Trial balance of balances- all accounts that have balances
 Trial balance of total- all accounts even though it has no balances
o As to time preparation
 Periodic or Unadjusted Trial Balance (Real, Nominal, and Mixed Accounts)
 Adjusted Trial balance (Real and Nominal Accounts)
 Post-Closing Trial Balance (Real Account only because nominal account is
closed to capital account)
o ERRORS IN REVEALED IN TRIAL BALANCE
 Error of trans placement/sliding error/decimal point
 Example 10000 is recorded as 1000
 Always divisible by 9
  Error of Transposition
 Example debit should be 10400 but you debited 14000
 Always divisible by 9
 Error in posting one side of an entry
 Omission in posting one side of an entry
o ERRORS NOT REVEALED BY TRIAL BALANCE
 Wrong computation
 Wrong Classification or use of account
 Double posting
 Omission on both sides
 Omission on journalizing transaction
 Preparation of adjusting entries
o CONCEPTS INVOLVED
 Accrual- recognizing income when earned and expense when incurred
 Matching of Cost of Revenue
 Accounting period
o To take up unrecorded income and expense of the period
 Accrued Expense
 DR Expense Account; CR Payable Account
 Accrued Income
 DR Receivable Account; CR Income Account
o To split mixed account into their real and nominal elements
 Prepaid expenses
 Prepaid Rent and Cash (UNADJUSTED)
 Rent Expense and Prepaid Rent (ADJUSTED)
 Unearned income- cash is received but not yet performed
 Cash and Unearned Income (UNADJUSTED)
 Unearned Income and Service Income (ADJUSTED)
 Bad Debts (related to valuation)
 Bad Debts Expense and ADA (Contra to receivables)
 Inventory
 Ending, Purchases and Beginning, Sales
 Depreciation (to distribute the use of machinery evenly)
 Preparing Adjusted Trial Balance or worksheet
o Worksheet is analytical device used in accounting to facilitate the gathering of data, not a
requirement
 Preparing Financial Statements
o SFP, SCI, SCE, SCF, Notes to FS
 Closing
o Close nominal to income and expense summary account
o Close income and expense summary account to drawing or retained earnings
o Close Drawing to Capital Account
 Preparing Post-Closing Trial balance
o Contains real account only
 Reversing Entries
 o For convenience of recording accruals and consistency of deferrals
o Accrued Expense and Income
o Prepaid Expense if expense method is used
o Unearned Income if income method was used

INFORMATION SYSTEM

 Accounting Information System- financial in aspect

QUIZZER
1. Accounting System
2. Bookkeeping
3. Accounting Records (Source document and Journal and ledgers)
4. Descriptive of bookkeeping (Mechanical aspect and Science)
5. Condition that qualifies a situation as an accountable event (affects ALE)
6. Two-fold effect (Double entry)
7. Only cash and personal are recognized (Single entry)
8. Bookkeeping system (Single entry and cash basis accounting receipt of cash is basis for recording
transaction)
9. Single entry bookkeeping System (Net Asset approach,
10. Book of account use in single entry bookkeeping (cash and subsidiary account
11.
12.
13. Concepts underlying double entry (Duality and equilibrium)
14. Accountable event according to GAAP (estimation of recoverable value of an intangible asset
becomes lower than its carrying value) S