The accounting process begins with a transaction and ends with closing the books of accounts. An accountant has to first identify transactions from the various source documents and then record them in journals using the double-entry principle. The next step is to post the journal entries in individual account ledgers called t-accounts. The balances brought forward in the t-accounts are then recorded in the unadjusted trial balance. Closing the books of accounts includes summing up all accounts in financial statements.
Journal Entries
Journals are accounting records for posting transactions in their sequential order. Posting journal entries in this manner is the first step in the accounting cycle. The below journal indicates the various transactions in chronological order:
Delegate your assignment to our experts and they will do the rest.
| Date | Account Name | ||||||
| January |
Debit |
Credit |
|||||
|
1 |
Cash | 5,000 | |||||
| Capital Stock | 5,000 | ||||||
| To record issuance of share capital | |||||||
|
2 |
Equipment | 3,000 | |||||
| Accounts payable | 3,000 | ||||||
| To record purchase of equipment on credit | |||||||
|
3 |
Rent | 600 | |||||
| Cash | 600 | ||||||
| To record rent payment in cash | |||||||
|
4 |
Supplies | 3,000 | |||||
| Accounts payable | 3,000 | ||||||
| To record purchase of supplies on credit | |||||||
|
5 |
Accounts receivables | 3,500 | |||||
| Revenue | 3,500 | ||||||
| To record billing for repairs | |||||||
|
6 |
Accounts payable | 1,500 | |||||
| Cash | 1,500 | ||||||
| To record half payment for credit supplies | |||||||
|
7 |
Cash | 400 | |||||
| Accounts receivables | 400 | ||||||
| To record payment for billed repairs | |||||||
|
8 |
Cash | 1,200 | |||||
| Equipment | 1,200 | ||||||
| To record sale of equipment | |||||||
Ledger Entries
Ledgers have records of business transactions indicating the various elements of financial statements in their separate accounts. Ledgers help to sort and store financial statements’ transactions. Below are ledger accounts corresponding to the above journal entry transactions:
|
Cash |
Capital Stock |
||||||||
|
1 |
5,000 | 3 | 600 | Balance c/d | 5,000 | 1 | 5,000 | ||
|
7 |
400 | 6 | 1,500 | ||||||
|
8 |
1,200 | Balance c/d | 4,500 | ||||||
| 6,600 | 6,600 | ||||||||
| Balance b/f | 4,500 | Balance b/f | 5,000 | ||||||
|
Accounts Receivable |
Accounts Payable |
||||||||
|
5 |
3,500 | 7 | 400 | 6 | 1,500 | 2 |
3000 |
||
| Balance c/d | 3,100 | Balance c/d | 4,500 | 4 |
3000 |
||||
| 3,500 | 3,500 | 6,000 |
6000 |
||||||
| Balance b/f | 3,100 | Balance b/f |
4500 |
||||||
|
Equipment |
|||||||||
|
2 |
3,000 | 8 | 1,200 | ||||||
| Balance c/d | 1,800 | ||||||||
| 3,000 | 3,000 | ||||||||
| Balance b/f | 1,800 | ||||||||
|
Supplies |
|||||||||
|
4 |
3,000 | Balance c/d | 3,000 | ||||||
| Balance b/f | 3,000 | ||||||||
|
Revenue |
|||||||||
| Balance c\d | 3,500 | 5 | 3,500 | ||||||
| Balance b/f | 3,500 | ||||||||
|
Rent |
|||||||||
|
3 |
600 | Balance c/d | 600 | ||||||
| Balance b/f | 600 | ||||||||
Unadjusted Trial Balance
The unadjusted trial balance provides a listing of all the account balances of the general ledgers at the end of each accounting period. Posting general ledger transactions in the unadjusted trial balance occurs before any adjustment is done to the account balances to create financial statements. The unadjusted trial balance helps analyze account balances before adjusting them. The trial balance below indicates unadjusted balances of the above t-accounts;
| Account Name |
Debit |
Credit |
|||
| Cash | 4,500 | ||||
| Capital Stock | 5,000 | ||||
| Accounts Receivable | 3,100 | ||||
| Accounts Payable | 4,500 | ||||
| Equipment | 1,800 | ||||
| Supplies | 3,000 | ||||
| Revenue | 3,500 | ||||
| Rent | 600 | ||||
| Totals | 13,000 | 13,000 |
