The document discusses the accounting cycle and key accounting concepts. It describes the steps of the accounting cycle as general journal, journal ledger, trial balance, adjusting entries, adjusted trial balance, financial statements, and closing entries. It also explains accounting principles such as debit/credit rules, double-entry accounting, recording of assets, liabilities, owner's equity, revenue, expenses and the purpose of the trial balance. To illustrate, it provides an example of Shehriyar investing $40,000 cash for capital stock and purchasing $8,000 of office equipment with cash.

2. ANABA FAROOQUI
SUBASH KUMAR
BAKHTAWAR NOOR
EBADULLAH KHAN

3. THE ACCOUNTING CYCLE

4. Accounting Cycle
● The sequence of accounting procedure used to
record classification and summarize accounting
information.

5. Steps of Accounting Cycle
1. General journal.
2. Journal ledger.
3. Trial balance
4. Adjusting Entries.
5. Adjusted Trial balance
6. Financial statement
7. Closing entries
8. Adjusted Trial balance

6. The Role of Accounting Records
✓ Establish Accountability.
✓ Keep track of routine business activities.
✓ Obtain detail information about a particular
transaction.
✓ To know the performance of the business
✓ Maintain documentary evidence of the company’s
business activities.

7. Debit Credit
● Debit
○ An amount recorded on the
left is debit side of account.
○ Receipts are recorded in debit side.
● Credit
○ An amount recorded on the right side
is credit side of Account.
○ The payments are recorded on credit side.

8. Double-Entry Accounting
● Debit Credit
● Every transaction is recorded by equal dollar
amounts of debit credits.
● The reason for this lies in the relationship of the
debit and credit rules to accounting equation
○ Assets= liabilities + owner equity
● both side have equal effect.

9. Dividends
● Dividends is a distribution of assets by a
corporation to its share holders.
● Dividends reduce both asset and owner equity.
● Dividends are not expense and they are not
deducted from the revenue in the income
statement.
● Dividends are a distribution of profit among
shareholders.

10. General journal
● This is the simply double entry book for recording
day by day transactions of the company.
● Debit credit accounts recorded in journal posted in
the ledger.
Date description debit credit
31/
December
cash 100,000
Capital stock 100,000

11. The Ledger
● An accounting system includes a separate record
for each item that appears in the financial
statements.
● The record used to keep track of the increase and
decrease in financial statement.
● Item is termed as a “ledger Account”.

12. The Ledger
Total BalanceTotal balance
debit credit

13. Recording of Assets
● Increase in assets are recorded In the debt side.
● Decrease in the assets are recorded in credit side.

14. ● For example.
○ Ahsan purchase a land of $30,000 on cash.
Date Description debit credit
14/ may Land 30,000
Cash 30,000

15. Recording of Liabilities
● Increase in liabilities recorded on credit side.
● Decrease in the liabilities recorded in debit side.

16. Examples increase in liabilities
● Mr.Umair purchase building of $40,000 from Mr.
jahanzeb on credit
date description debit credit
1/ may building 40,000
Account payable 40,000

17. Example of decrease in liabilities
● Mr.Umair made payment of its Account payable in
full settlement to Mr. Jahanzeb.
●
Date Description debit credit
10/ may Account payable 40,000
cash 40,000

18. Recording of owner equity
● We record the owner equity same as liabilities.
● Increase in owner equity recorded on credit side.
● Decrease in the owner equity recorded in debit
side.

19. Example of journal and posting
● Asif invested $80,000 cash in exchange for capital stockAnalysis
the asset cash is increase by $80,000 and owner equity
(capital stock) is increase by the same Amount.
Debit
credit
rule
Increase in the Asset (cash) recorded in debit side.
Increase in the owner equity (capital stock recorded in
credit side
Journal
entry
Date Description debit credit
20/ Jan cash $80,000
Capital stock $80,000
ledger

20. Net income and retained earnings
● Net income = Revenue – expenses
○ Net income is the total earning of the company
● Retained Earnings.
○ Retained Earnings represent the total net income of the
corporation over the entire lifetime of the business.
○ Retained earning= income – dividends.

21. Accounting period
● The period with reference to which Accounting
books of any entity are prepared.
● It is the period for which books are balanced and
financial statements are prepared.
● Generally, the Accounting period is consists of 12
months.

22. About revenue
● Revenue
○ Revenue is the price of goods sold and services rendered
during a given Accounting period.
○ Earning revenue increase owner equity.
● The realization principle: when revenue record:
○ Revenue should be record at the time of goods are sold or
services or rendered.
○ When action is performed.

23. About expenses
● Expenses:
○ Expenses are the cost of the goods and services used up in
the process of earning revenue.
● Matching principle: when to record expenses
○ the concept of offsetting expenses against revenue on a
basis of cause and effect in called matching principle.

24. Accrual basis of Accounting
● The policy of recognizing revenue in the accounting
records when it is earned and recognize expense
when related goods are services are used is called
accrual basis of accounting.

25. Debit credit rules for revenue and expenses
● Increase in owner equity are recorded in credit
side.
● Decrease in owner equity recorded in debit side.
● Increase in the expenses are recorded in debit side.
● Decrease in the expenses recorded in credit side.

26. The trial balance
● The proof of equality in debit and credit balance is
called trial balance.
● The sum of all the debit in ledger must be equal to
the sum of all the credit s.
● We transfer ledger Amount of every Account to
trial balance.
● Trial balance have account of every transaction
○ Assets
○ Liabilities
○ Owner equity
○ Expenses

27. Sample Trial balance

28. summary
● Shehriyar invested $40,00o cash in the business in
exchange of capital stock.
● Shehriyar purchased office equipment on cash for
$8000

29. date description debit credit
1/ may cash $40,000
Capital stock $40,000
2/ may Office equipment $8,000
cash $8,ooo
$32,000
$40,000
$8,000
Title of Account Debit credit
cash $32,000
Office equipment $8,000
Capital stock 40,000
Total balance $40,000 $40,000

31. ONE BY ONE ASK QUESTIONS
TRY TO BE SPECIFIC AND RELEVANT