Presentation on accounting cycle
- 2. Presentation on: Accounting Cycle By: Hassan Samoon MBA From University of Sindh
- 3. What is Cycle A series of events that are regularly repeated in the same order.
- 4. What is Accounting Accounting is the systematic and comprehensive recording of financial transactions pertaining to a business. Accounting also refers to the process of summarizing, analyzing and reporting 0f business transactions.
- 5. The Accounting Cycle The accounting cycle is the name given to be collective process of recording and processing the accounting events of a company.
- 6. Source Documents Transactions: Every day an event occurs, it is written in a book.
- 7. Transactions 2014 Particulars Amount $ Jan 1st MSDC & Co started business with Cash 400000 Feb 1st Purchase goods for Cash 25000 March 1st Sold goods for Cash 50000 April 1st Purchased goods from Ali 20000 May 1st Sold goods to Ahmed 10000 June 5th Paid to Ali 10000 July 10th Received Cash from Ahmed 7000 Aug 15th Paid Wages 20000 Oct 10th Paid Rent 5000 Dec 31st Paid Salaries 10000
- 9. General Journal The Journal is the point of entry of business transactions into the accounting system.
- 10. Transaction 1 (Cash invested by Owner in Business) 2014 Transaction Amount $ Jan 1st MSDC & Co started business with Cash 400000 Date Description Dr Cr Jan 1st Cash 400000 Capital 400000 Dr Cr A INC DEC L DEC INC C DEC INC E INC DEC R DEC INC
- 11. Transaction 2 (Purchased goods for cash) 2014 Transaction Amount $ Feb 1st Purchased goods far Cash 25000 Date Description Dr Cr Feb 1st Purchases 25000 Cash 25000 Dr Cr A INC DEC L DEC INC C DEC INC E INC DEC R DEC INC
- 12. Transaction 3 (Sold goods by Cash) 2014 Transaction Amount $ March 1st Sold goods for Cash 50000 Date Description Dr Cr March 1st Cash 50000 Sale 50000 Dr Cr A INC DEC L DEC INC C DEC INC E INC DEC R DEC INC
- 13. Transaction 4 (Goods purchased from Ali on credit) 2014 Particulars Amount $ April 1st Purchased goods from Ali 20000 Date Description Dr Cr April 1st Purchases 20000 A/c Payable 20000 Dr Cr A INC DEC L DEC INC C DEC INC E INC DEC R DEC INC
- 14. Transaction 5 (Goods sold to Ahmed on credit) 2014 Transaction Amount $ May 1st Sold goods to Ahmed 10000 Date Description Dr Cr May 1st A/c Receivable 10000 Sale 10000 Dr Cr A INC DEC L DEC INC C DEC INC E INC DEC R DEC INC
- 15. Transaction 6 (Paid Cash to Ali) 2014 Transaction Amount $ June 5th Paid to Ali 10000 Date Description Dr Cr June 5th A/c Payable 10000 Cash 10000 Dr Cr A INC DEC L DEC INC C DEC INC E INC DEC R DEC INC
- 16. Transaction 7 (Cash Received from Ahmed) 2014 Transaction Amount $ July 10th Received Cash from Ahmed 7000 Date Description Dr Cr July 10th Cash 7000 A/c Receivable 7000 Dr Cr A INC DEC L DEC INC C DEC INC E INC DEC R DEC INC
- 17. Transaction 8 (Paid wages by Cash) 2014 Transaction Amount $ Aug 15th Paid Wages 20000 Date Description Dr Cr Aug 15th Wages Expense 20000 Cash 20000 Dr Cr A INC DEC L DEC INC C DEC INC E INC DEC R DEC INC
- 18. Transaction 9 (Paid Rent by Cash) 2014 Transaction Amount $ Oct 10th Paid Rent 5000 Date Description Dr Cr Oct 10th Rent Expense 5000 Cash 5000 Dr Cr A INC DEC L DEC INC C DEC INC E INC DEC R DEC INC
- 19. Transaction 10 (Paid Salaries by Cash) 2014 Transaction Amount $ Dec 31st Paid Salaries 10000 Date Description Dr Cr Dec 31st Salaries Expense 10000 Cash 10000 Dr Cr A INC DEC L DEC INC C DEC INC E INC DEC R DEC INC
- 20. General Ledger A separate page in a Ledger that records increases Or decreases in each balance accounts classified under assets, liabilities or owner equity.
- 21. Cash Account Date Particulars Debit Date Particulars Credit Jan 1st Capital 400000 Feb 1st Purchases 25000 March 1st Sales 50000 June 5th A/C Payable 10000 July 10th A/C Receivable 7000 Aug 15th Wages Exp 20000 Oct 10th Rent Exp 5000 Dec20th Salaries Exp 10000 457000 70000 _ 70000 387000
- 22. Accounts Receivable Date Particulars Debit Date Particulars Credit May 1st Sales 10000 July 10th Cash 7000 _7000 3000
- 23. Accounts Payable Date Particulars Debit Date Particulars Credit June 5th Cash 10000 April 1st Purchases 20000 _10000 10000
- 24. Purchases Account Date Particulars Debit Date Particulars Credit Feb 1st Cash 25000 April 1st Account payable 20000 45000
- 25. Sales Account Date Particulars Debit Date Particulars Credit March 1st Cash 50000 May 1st A/c Receivable 10000 60000
- 26. Capital Account Date Particulars Debit Date Particulars Credit Jan 1st Cash 400000 400000
- 27. Wages Exp Account Date Particulars Debit Date Particulars Credit Aug 15th Cash 20000 20000
- 28. Rent Exp Account Date Particulars Debit Date Particulars Credit Oct 10th Cash 5000 5000
- 29. Salaries Account Date Particulars Debit Date Particulars Credit Dec 31st Cash 10000 10000
- 30. Trial Balance A listing of the accounts in the general ledger along with each account’s balance in the appropriate debit or credit column. The total of the amounts in the debit column should equal the total of the amounts in the credit column.
- 31. S/NO Accounts Debit Credit 01. Cash 387000 02. Accounts Receivable 3000 03. Purchases 45000 04. Wages Expenses 20000 05. Rent Expenses 5000 06. Salaries Expenses 10000 07. Sales 60000 08. Accounts Payable 10000 09. Capital 400000 470000 470000 Trial Balance MSDC & Co 31st Dec 2014
- 32. Financial Statements Include: Income Statement Capital Statement Balance Sheet
- 33. Income Statement The difference b/w revenues and expenses. If revenues exceed expenses, we have a Net Profit Or If expenses exceed revenues, we have a Net Loss.
- 34. s Income Statement MSDC & Co 31st Dec 2014 Sales 60000 Less Purchases 45000 - 45000 Gross Profit 15000 Less Expenses: Wages Expenses 20000 Rent Expenses 5000 Salaries Expenses 10000 (35000) Net Loss -20000
- 35. Capital Statement It’s the document which presents the opening balance of the capital then any kind of the addition in the shape of profit earned during the accounting period and deduct any kind of with drawls .
- 36. Capital Statement/Owner Equity MSDC & Co 31st Dec 2014 Capital 400000 Less Net Loss - 20000 Owner Equity 380000
- 37. Balance Sheet A balance sheet is a final statement that summarizes a company’s assets, liabilities and owner equity at a specific point in time.
- 38. s Assets Amount Liab. & Owner EQ Amount Cash 387000 Liabilities: Accounts Receivable 3000 Accounts Payable 10000 Owner Equity: Owner Equity 380000 Liab + Owner Equity 390000 390000 Balance Sheet MSDC & Co 31st Dec 2014