Course Content
New Accounting Model (Exam-2009)
Books references: 1. Account Code (Volume III). 2. Chart of Accounts (Issued by CGA). 3. Manual Accounting Principles. 4. Accounting Policies and Procedures Manual.
Private: DAO Part-I Examination 2024 (Fresh Candidates) Past Papers
About Lesson

Let’s dive into each of these accounting processes with definitions and examples:

  1. Journalizing Transactions:

    • Definition: Journalizing transactions is the initial step in recording all financial transactions of a business. It involves creating journal entries that follow the double-entry bookkeeping method.
    • Process:
      • Identify the transaction details (date, description, accounts involved).
      • Apply debits and credits based on the rules of double-entry bookkeeping.
      • Record the journal entry in the chronological journal.
    • Example:
      • Transaction: Received $500 in service revenue for repair services.
      • Journal Entry:
        • Debit: Service Revenue Account (+$500)
        • Credit: Cash Account (+$500)
  2. Posting to Ledgers:

    • Definition: Posting transfers the journal entries to the respective accounts in the general ledger. Each account has its own ledger where transactions are recorded.
    • Process:
      • Take the journal entry.
      • Locate the corresponding account in the ledger.
      • Post the debit and credit amounts to the ledger.
    • Example:
      • Journal Entry: Paid rent of $1,500.
      • Ledger Posting:
        • Debit: Rent Expense Account (+$1,500)
        • Credit: Cash Account (-$1,500)
  3. Preparing Trial Balances:

    • Definition: A trial balance is a list of all general ledger accounts and their balances at a specific point in time. It ensures that debits equal credits.
    • Process:
      • Summarize ledger balances (debit and credit) for each account.
      • List them in a trial balance format.
    • Example:
      • Trial Balance (as of March 31, 2019):
        • Debit Total = Credit Total
        • Example: Cash ($10,000) = Accounts Payable ($370)
  4. Generating Financial Statements:

    • Definition: Financial statements summarize a company’s financial performance and position. The main types are the balance sheet, income statement, and cash flow statement.
    • Process:
      • Use information from the trial balance.
      • Create the following statements:
        • Balance Sheet: Shows assets, liabilities, and equity.
        • Income Statement: Displays revenues, expenses, and profit.
        • Cash Flow Statement: Tracks cash inflows and outflows.
    • Example:
      • Balance Sheet (Apple Inc.):
        • Assets: Cash, Marketable Securities, Accounts Receivable, etc.
        • Liabilities: Long-Term Debt, Accounts Payable, etc.
        • Equity: Shareholders’ Equity
      • Income Statement:
        • Revenues: Sales, Service Revenue, etc.
        • Expenses: Cost of Goods Sold, Operating Expenses, etc.
        • Net Income: Profit or Loss

Remember, these processes are essential for accurate financial reporting and decision-making in any business.

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